Boeing's Suppliers Wait for Answers, Too

The grounding of Boeing Co.’s 737 Max jet will have ripple effects – not all of them bad – across an aviation industry that’s been a steadying force for industrial conglomerates.

The U.S. Federal Aviation Administration on Wednesday followed virtually every other relevant regulator in issuing a precautionary ban of the Max after a combined 346 people died in two fatal crashes over the past five months. On the one hand, with the Boeing best-seller out of commission, carriers such as Southwest Airlines Co. and American Airlines Group Inc. may be forced to turn to older aircraft to maintain capacity, notes Bloomberg Intelligence analyst Douglas Rothacker. Older planes are more apt than newer ones to require maintenance and repair work, which is the biggest profit driver for most suppliers.

The longer the delay drags on, though, the bigger the risk that Boeing has to re-calibrate its target for producing 57 planes a month, potentially hamstringing a top source of revenue growth for parts makers such as Spirit AeroSystems Holdings Inc., United Technologies Corp., Honeywell International Inc. and General Electric Co. House lawmakers briefed by aviation regulators said the grounding may last at least through April. The worst case scenario is a widespread canceling of orders that erodes both Boeing – and its suppliers’ – backlog.