NEW YORK, April 5 (Reuters) - Shares of B/E Aerospace Inc and Zodiac Aerospace SA fell sharply on Tuesday after Boeing Co said it would buy seats directly from a new supplier for its top-selling 737, a step that could cut into the sales of the two biggest makers of airplane seats.
While the actual sales loss might initially be small, analysts and investors said Boeing’s move underscored its frustration with the failure of some suppliers to deliver seats on time, which can snarl aircraft production. They also saw potential for Boeing’s direct purchases from the new supplier, privately held LIFT by EnCore, to increase.
“It seems like a savvy move by Boeing,” said a U.S.-based aerospace fund manager. “They wouldn’t be doing this if they didn’t think it could grow.”
Shares of Zodiac fell 3.9 percent on Tuesday and were trading at 17.145 euros ($19.50), down 2.2 percent in late afternoon trading in Paris. Shares of B/E Aerospace fell 5.2 percent in early trading in New York. In late morning trading, the stock was down 2.6 percent at $44.92.
Boeing stock was up 1.1 percent at $127.71.
“This could be very disruptive to the extent that Boeing decides to really push economy seats as seller-furnished equipment,” said Ken Herbert, an analyst at Canaccord Genuity, referring to seats purchased by Boeing for airlines.
But he said many airlines may still buy seats from suppliers directly, especially “larger airlines that want commonality, and feel like they can negotiate better pricing on their own.”
Boeing has 11 other suppliers whose seats are configured for its planes. But Boeing said on Monday the LIFT seats will be “optimized” to fit in the 737 interior with maximum width.
EnCore, started in 2011, is run by two seat-and-interior veterans who sold a previous company to Zodiac in 2005. LIFT is due to deliver seats to Boeing in mid-2017 from its new, well-equipped factory in Huntington Beach, California.
Zodiac declined to comment. But a spokesman for B/E Aerospace, Boeing’s largest seat supplier, said LIFT was not a threat and Boeing needed capacity that the new company could not provide at the moment.
“We have over 700 ship sets under firm contract for our Meridian seat, all for the 737 MAX, and we delivered the first to launch customer Southwest today,” the spokesman told Reuters at the Aircraft Interiors Expo in Hamburg. ($1 = 0.8794 euro) (Reporting by Alwyn Scott, additional reporting by Victoria Bryan in Hamburg and Tim Hepher in Paris; editing by G Crosse)