Boeing has told supplier Spirit AeroSystems to cut production of fuselages and parts for the 737 MAX airliner for the third time this year, according to a filing by Spirit with the US Securities and Exchange Commission.
The cutback underscores collapsing demand for new planes amid the novel coronavirus pandemic. Carriers cut flights and furloughed workers after air travel fell as much as 90 percent at the height of the outbreak.
"Given the substantial production plan reduction, Spirit could breach the financial covenants under its credit agreement in the fourth quarter of 2020 without an amendment or waiver," the company said in the SEC filing.
"Spirit is in communication with its lenders regarding this matter, and intends to work with them expeditiously to obtain appropriate relief from its covenants."
In April, Spirit AeroSystems said it had completed a $1.2 billion debt offering to strengthen its finances.
Boeing said it now needs 37 MAX fuselages for the remainder of 2020, down from the 125 the aircraft builder said it wanted in May. Initially, Boeing ordered 216 fuselages.
Spirit has completed 35 fuselages, and the company announced plans to furlough workers. The plane bodies are built in Wichita, Kansas, and shipped by rail to Boeing's plant near Seattle for final assembly.
About 14,000 jets, or nearly half the world's fleet, have been idled following travel restrictions and weak demand for air travel due to COVID-19. However, airline stocks have rallied recently as investors bet on an economic rebound as restrictions are lifted and the economy restarts.
Boeing temporarily halted production of the MAX in January and resumed production in May. Initially, Boeing planned to build 52 MAXs a month and then boost production to 57 a month.
The MAX, Boeing's best-selling jet, has been grounded worldwide since March 2019 following crashes in Indonesia and Ethiopia that killed a total of 346 passengers and crew.
Boeing had hoped to have the plane back in the air by this summer, but that now appears unlikely.