Boeing shares tumbled in premarket trade on Monday after a panel blew out of an Alaska Airlines 737-9 Max, leading the Federal Aviation Administration to temporarily ground 171 of those planes.
Boeing shares
BA,
fell 8%, having gained 19% over the last 52 weeks.
The move in Boeing shares was set to have a big impact on the Dow Jones Industrial Average
DJIA,
given the aerospace company’s presence in the index. Dow futures
YM00,
fell by 188 points.
Fuselage maker Spirit AeroSystems Holdings
SPR,
tumbled 20%.
Also read: Alaska Airlines and United ground their Boeing 737 Max 9 jetliners after in-flight blowout
Alaska Air Group
ALK,
stock fell 4% and United Airlines
UAL,
fell 3%, the two U.S. operators of the Max 9. Copa Holdings
CPA,
and Aeromexico also are dealing with the fallout.
Boeing has come under major scrutiny in recent years after a total of 346 people were killed in two separate plane crashes involving its Boeing 737-8 MAX planes in 2018 and 2019. Those Boeing planes were grounded by the FAA for 20 months.
JPMorgan analyst Seth Seifman said the incident is not helpful to Boeing’s task of ramping up production over the next two years, though the range of financial outcomes are unclear. He cited the publication Air Current as noting there are two quality assurance tests for the section that blew out, one performed by Spirit, and one by Boeing. “One thing we can say, however, is that it is imperative for Spirit and Boeing to shore up the quality of production,” he said.
Jason Gursky, an analyst at Citi, said he expected only a limited financial impact on Boeing.
“The newness of the aircraft (2 mos. old), the fact that the -9 has been flying with plugged doors since the late 1990s, and the fact that the MAX has been in service since 2015 without a similar event, points to a manufacturing issue with this particular aircraft vs. a broader design problem,” he said in a note to clients.
He said investors can look out the financial fallout from Raython’s geared turbofan troubles for a roadmap — right now, it’s paying roughly $13,500 per day per grounded aircraft, which is the estimated lease cost for an Airbus A320. “Applying math to the grounded 737-9 MAX fleet yields a daily cost of $2.3 [million] for BA (170 affected aircraft x $13,500).”
Sheila Kahyaoglu, an analyst at Jefferies, said there’s a potentially quick turnaround, with required inspections taking about four-to-eight hours per aircraft. A pause of one week could lead to a cost of about $18 million, the analyst said.
Shares of rival Airbus
AIR,
rose 1% in Paris.
Major backlogs at both Boeing and Airbus will likely hinder any significant push by the world’s top airlines to switch away from using Boeing’s planes. Airbus currently has a backlog of more than 8,000 orders, company figures from Nov. 2023 show. Boeing’s backlog sits at 5,324, according to company figures from Nov. 2023.
