Boeing Stock Sinks On Re-certification Delays Dragging Down Airline ETFs

After repeated delays in the validation of the problematic 737 Max aircraft, Boeing is once again prolonging the time frame for when it anticipates the planes will be re-certified for flight as the coronavirus pandemic stymies progress.

Boeing stock slipped over $8 today, or more than 6% on the news.

Sources familiar with the latest expectations for repairs say the plane isn’t likely to get Federal Aviation Administration to resume flights until August or beyond, a small, but a key shift from Boeing’s earlier plan to have the plagued plane cleared by the Federal Aviation Administration by early summer.

The coronavirus has been taking a toll on the companies finances as well recently, as last month the CEO mentioned the economic impact in a letter to employees.

“On top of the work of safely returning the 737 MAX to service and the financial impact of the pause in MAX production, we’re now facing a global economic disruption generated by the COVID-19 coronavirus,” Boeing’s CEO Dave Calhoun and CFO Greg Smith wrote in a note to employees in March.

The aerospace giant has yet to finish two software updates and overcome a number of other obstacles, including a re-certification flight before the Max can be authorized to begin commercial service once again. While Boeing has completed much of the process to get the plane flying again, the company says the coronavirus is hampering the work required to repair the Max.

“The Covid-19 crisis is complicating the process, but we’re making good progress and focused on managing scheduling risks as they arise. All of course, subject to ongoing regulator oversight,” a Boeing spokesperson told CNBC.

Boeing (BA) further jarred investors with reports that it is also anticipated to pull back on 787 Dreamliner production again when it reports first-quarter earnings next week.

Meanwhile, the $4.2 billion Boeing-Embraer deal reportedly encountered an implementation issue in the manner in which their joint-venture is set up, sources told Reuters. The two sides have a deadline of 11 p.m. ET to reach an agreement. The European Union’s regulator also stated that said it will not have completed a necessary anti-trust investigation until August.

Boeing is scheduled to hold its annual shareholder meeting Monday and report earnings on Wednesday.

The iShares U.S. Aerospace & Defense ETF (ITA), which has more than 11.57% of the plane manufacturer in its holdings, slipped 0.6% amid the news, while the Invesco Aerospace & Defense ETF (PPA), which has a 6% allocation of Boeing remained relatively stable.

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