Boeing‘s (BA -8.03%) 737 MAX is making headlines again for all the wrong reasons, and investors are heading for the exits as a result. Shares of Boeing opened down about 9% Monday after a frightening weekend incident that has left part of the MAX fleet grounded.
The troubled 737 MAX is in the spotlight again
Boeing’s 737 MAX was once expected to be the top-selling airframe of all time, a modernized version of the company’s single-aisle workhorse that offered more seating flexibility and better fuel economy. But the MAX has had its share of troubles, most notably a pair of fatal accidents that led to an 18-month grounding beginning in 2019.
Over the weekend, an Alaska Air Group MAX 9 variant of the 737 experienced an in-flight depressurization issue shortly after takeoff when a panel that plugs an emergency exit ripped away at 16,000 feet. The Federal Aviation Administration (FAA) responded Saturday by ordering airlines to ground about 171 MAX 9 planes for inspection.
The door plugs are installed by Boeing subcontractor Spirit AeroSystems as part of the manufacture of the airframe and checked by Boeing on the final assembly line. Shares of Spirit opened down 13%.
The check required by the FAA is expected to take about one day per airframe, meaning that the inspections should be completed in a matter of days.
Is Boeing stock too risky after this latest 737 MAX mishap?
The National Transportation Safety Board is currently conducting an investigation into the incident, but it appears possible that this is a one-off issue with a relatively new plane (delivered in October) and not an indication of a design or manufacturing flaw. If so, the remedy will likely be pretty straightforward and might not crimp Boeing’s manufacturing and delivery plans for the year.
Still, the incident is yet another black eye for a company that desperately needs to prove it can fly straight. Boeing shares are down nearly 50% from where they traded five years ago, before the MAX incidents and the pandemic. The company has taken on a lot of debt in the years since to make sure it is able to fly through the issues. This was supposed to be the year that deliveries ramp up and Boeing is able to use the added cash flow to repay some of those borrowings.
Boeing appears to be headed in the right direction, but even in the best-case scenario it will take time to rebuild its balance sheet and normalize operations. The issue for investors is that every time it has appeared things have stabilized, a new incident tends to pop up. Whatever credibility Boeing had with Wall Street heading into 2024 has taken a fresh blow.
For investors interested in the industry, there are better, lower-risk aerospace stocks to buy while Boeing proves its troubled past is behind it.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Alaska Air Group. The Motley Fool has a disclosure policy.
