Boeing shares tumble 8% after FAA grounds dozens of 737 Max 9s for urgent safety inspections

An Alaska Airlines plane takes off from Los Angeles International Airport (LAX) on December 4, 2023 in Los Angeles, California. 

Mario Tama | Getty Images News | Getty Images

Shares of Boeing tumbled roughly 8% in premarket trading Monday, as investors digested the news that the Federal Aviation Administration had ordered airlines to ground dozens of Boeing 737 Max 9 aircraft for urgent inspections.

The FAA issued the order on Saturday after a door plug blew out in the middle of an Alaska Airlines flight on Friday when the nearly brand-new aircraft was flying at around 16,000 feet.

The incident again thrusts Boeing back into the spotlight. CEO Dave Calhoun has been trying to assure investors that Boeing is getting back on better footing after a string of problems including two crashes that killed 346 people, pandemic supply-chain havoc and a series of quality defects.

Large-scale groundings by aviation authorities are rare, but the FAA has been scrutinizing Boeing and its best-selling 737 Max since the fatal crashes in 2018 and 2019. Boeing said it agrees with the FAA’s decision to ground the Max 9 planes for inspections. It was working on drafting instructions with federal regulators for airlines to begin instructors.

Friday’s accident occurred just as Boeing has been trying to ramp up output of the Max.

“An escape of this nature makes one question the quality control of the 737 delivery ramp and the impact of inexperienced labor on both Boeing and its supply chain,” Bank of America aerospace analyst Ron Epstein wrote in an analyst note Monday, adding that the plane was delivered just months earlier. “This aircraft still had ‘new airplane’ smell and the sticker price in its window.”

The FAA on Saturday said around 171 planes would be affected by its emergency airworthiness directive, which applies to U.S. airlines and carriers operating in U.S. territory. Alaska Airlines and United Airlines are the largest operators of the 737 Max 9 model, of which around 215 are flying worldwide, according to Cirium.

Of the 171 aircraft grounded under the directive, United Airlines has 79 and Alaska has 65, while the remaining 74 are spread across six other airlines.

The National Transportation Safety Board over the weekend described a harrowing few minutes onboard the Alaska Airlines flight, starting with a loud bang and a force so violent it tore off headrests and seatbacks, and blew open the cockpit door.

A schoolteacher found the door blown-out plane panel in his backyard, the NTSB said late Sunday.

Images shared on social media showed a hole in the side of the aircraft and passengers using oxygen masks. The flight — Alaska Airlines Flight 1282 — returned to Portland, Oregon, shortly after departing for Ontario, California.

Russ Mould, investment director at AJ Bell, noted that Friday’s incident is the latest in a “string of problems for the company,” and suggested airlines using 737 Max planes will be “thinking long and hard about their future aircraft requirements.”

Shares of Boeing’s European rival Airbus gained 1.7% by mid-morning on Monday as investors speculated that it could take market share from the U.S. powerhouse.

“There are naturally questions being asked about the quality checks and whether Boeing is trying to do too much too fast,” Mould said.

“Boeing’s management will be under considerable pressure from the regulators and customers to explain what’s going on, which means considerable headwinds ahead for the business. It’s no wonder investors have raced to sell the shares as the risks to the investment case have just shot up.”

Source: https://www.cnbc.com/2024/01/08/ba-shares-boeing-stock-slide-8percent-in-premarket-trading-after-faa-grounds-737-max-9s.html

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