Boeing Co.: The Boeing Group plunged in the stock market after fresh disappointments with the 737 MAX

(BFM Bourse) – Shares of the American conglomerate fell at the start of the session on Wall Street this Monday after several of its 737 MAX-9 planes were grounded for inspection. This further damages the reputation of Boeing's flagship single-aisle aircraft.

Boeing is likely to experience a dream session this Monday. Airbus's U.S. rival fell 8.24% at the start of the session on Wall Street at 4:10 p.m.

“Boeing's reputation was then shaken The incident happened last Friday Russ Mold, AJ Bell's director of investments, explains one of its 737 Max operated by Alaska Airlines. An incident on a 737 MAX 9 operated by this company during the night from Friday to Saturday, in fact, leads to separation. A “plug” at take off.

This “plug” is installed on certain 737 MAX 9 planes “because airlines don't want to use the extra seat capacity allowed by this exit door,” Jeffries explains.

According to Reuters, this “plug” was repaired and designed by Spirit Aerosystems, an aeronautical equipment manufacturer specializing in aerostructures (spare, wings, engine nacelles). Shares of the Wall Street-listed company fell 12.7% on Wall Street.

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A new setback for the 737 MAX

Following the incident on the Alaska Airlines flight, several airlines grounded their 737 MAX 9 planes for inspection. According to AFP, this is the case for United Airlines, Turkish Airlines, Aeromexico and Panamanian company Copa Airlines.

The United States aviation regulator, the FAA, and its European equivalent, the EASA, issued emergency airworthiness directives on Saturday, which provide for the landing. While awaiting inspections of the 737 MAX 9, “the relevant configuration (so to speak of being equipped with a “plug”), ie 171 of the 200 737 MAX 9s delivered by Boeing, does not exist in Europe,' EASA, Jeffries explains.

In terms of costs, these incidents must be measured relatively to the scale of the US group's operations. Jefferies estimates that the financial impact could be less than $20 million, and that the technical issue could be resolved quickly.

Additionally, “the 737 MAX-9 should represent only 18% of total deliveries from Boeing in 2024 of the 737 MAX (the family that includes the 737 MAX-7, 737MAX-8 and 737 MAX-10 versions, editor's note) in 2024. That will rise to 9% in 2026.” An analyst puts that into perspective. But this oddity led to the blacklisting of the 737 MAX, following two accidents in 2018 and 2019, which grounded all planes in 2019. The plane took 20 months to land.

Last year, Boeing had to carry out tests following the identification of the 737 Max 8. A quality problem, ie poorly drilled holes on the rear pressure bulkhead. Then, in December, the planemaker asked airlines to inspect the new 737 MAX To check that a bolt is not loose In the control system.

Management under pressure

“All of this information suggests that Boeing's manufacturing quality is inferior to that of Airbus,” notes the previously mentioned analyst. “Boeing in particular was hit all weekend by a lot of negative publicity,” this analyst says.

So Boeing still appears in a bad light with its 737 MAX, which is more problematic because it is its flagship model in the single-aisle market and is more dynamic than wide-body planes. And there is a risk that the confidence of the US group's customers will be eroded.

“It's not good for anybody, especially given the history of this plane,” Bloomberg said Richard Aboulafia is managing director of aviation consulting at Aerodynamic Advisory. “In this context, it is imperative to make cultural changes so that the management of the company is more closely related to the design and production of aircraft,” he adds.

“There's no room for error in building an airplane and taking shortcuts in the production phase. Questions naturally arise about quality controls and whether Boeing is trying to do too much too quickly,” said director of investments Russ Molt. In A. J. Bell.

“Boeing's management will come under considerable pressure from regulators and customers to explain what's going on, which could mean significant upside for the company. Not surprisingly, investors are scrambling to sell the stock,” he continues.

“We see the latest incident as shattering the fragile trust built around the 737 MAX franchise. In our view, Boeing should proceed cautiously and cautiously through this potential reputational minefield. Regulators must also exercise a certain vigilance because the FAA is responsible for certifying these planes before they are delivered,” for its part. Bank of America judges.

“At this point, due to the bipolar nature of the industry (a market dominated by Airbus and Boeing, editor's note), we do not believe this will have an impact on orders for either variant of the 737 MAX. However, if the plan continues to suffer, the public may lose confidence in the 737 MAX, which could affect sales. ” Bank of America continues.

Julien Marion – ©2024 BFM Bourse