Boeing Co shares dropped on Tuesday after United Continental Holdings said it will convert orders for 61 Boeing 737 jetliners, worth nearly $5 billion at list prices, into newer 737 MAX models for delivery in later years.
The decision called into question Boeing's plans to increase production of one of its biggest moneymakers over the next two years, and its ability to generate more cash for investors.
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Boeing said United's decision would not affect its plan to increase production rates of 737s, and stressed that it continues to have orders for more 737s than it can produce.
United's orders "will switch over to MAXs on the order book when (the order is) finalized," Boeing spokesman Doug Alder told Reuters in an email. Boeing's 737 order backlog of 4,321 airplanes "gives us the flexibility to meet those needs."
United is converting its 737s to newer models, "so it will not impact backlog at all," he added.
Some analysts said United's decision would only reduce the amount of oversold jets, with no impact on output.
But some worried that canceling 61 current-generation planes and ordering MAXs for an uncertain date could delay Boeing's planned production increases and its cash generation.
"737 output is their only realistic way to increase cash flow," said Richard Aboulafia, an aerospace analyst at the Teal Group in Virginia. Boeing is already cutting production of the 777, its other cash cow, and 787 output is due to remain steady.
"Now it looks like 737 output will not grow as planned," he said.
Boeing shares were down 1.3 percent at $148.98 in afternoon trading on the New York Stock Exchange. They fell as low as $147.31 earlier in the day.
Boeing plans to increase 737 production to 57 a month in 2019, up from 42 a month currently, with interim step-ups to 47 and 52 a month along the way.
On Oct. 26, Boeing Chief Executive Dennis Muilenburg said the company was on track to raise 737 output as planned and signaled demand remained strong for the jet even at higher production rates. "Importantly," he said, "even at the 57 per month rate, we continue to be over sold."
In addition to shifting orders for 61 Boeing 737-700 planes originally due in the next two years to 737 MAX planes United will convert orders for four other 737-700s to larger 737-800s due for delivery in 2017, United said.
(Reporting by Alwyn Scott; Editing by Meredith Mazzilli and Tom Brown)