Boeing shares tumbled yesterday as the crisis engulfing the plane maker deepened after a huge chunk of a 737 Max aircraft was ripped out mid-flight.
The company’s safety record has been thrust back into the spotlight after a piece of the plane tore off during an Alaska Airlines flight on Friday – leaving terrified passengers starring at a gaping hole in the cabin at 16,000 ft.
None of the 171 passengers were seriously injured in the accident, which happened within the first ten minutes of the brand-new plane’s take-off from Portland, Oregon, in the US.
But the incident has reignited fears over the safety of the Boeing 737 Max jet.
Aviation regulators ordered the grounding of 171 Max planes over the weekend while inspections are carried out.
Terror flight: A huge chunk of a 737 Max aircraft was ripped off during an Alaska Airlines flight – leaving passengers starring at a gaping hole in the cabin at 16,000ft
It is another setback for chief executive Dave Calhoun just a few days into a year that he has indicated is crucial to his plan to stabilise the plane maker after years of upheaval.
Boeing’s share price fell more than 8 per cent yesterday as Wall Street trading resumed for the first time since the accident.
Shares in supplier Spirit AeroSystems, which makes the fuselage that tore on Friday, dropped around 15 per cent.
By contrast, Boeing’s arch rival Airbus rose more than 2 per cent on hopes the incident will help it steal further market share from the American giant.
The Max jet has been plagued by issues and accidents including crashes in 2018 and 2019 that killed nearly 350 people.
Michael Hewson, chief analyst at City Trading firm CMC Markets, said: ‘This most recent incident raises a host of new questions about Boeing’s quality control as well as manufacturing processes, at a time when confidence in the 737-MAX is already wafer thin.’
All of Boeing’s 737 Max planes globally were grounded for 20 months from March 2019.
They were mothballed after a crash in Indonesia, which killed 189, and an accident five months later in Ethiopia, in which 157 died. Investigators found that flawed flight control software caused the deadly accidents.
Former Boeing chief executive Dennis Muilenburg and commercial aeroplanes boss Kevin McAllister were both sacked amid the scandal.
Pressure: Boeing chief exec Dave Calhoun has indicated is crucial to his plan to stabilise the firm after years of upheaval
Russ Mould, investment director at investment platform AJ Bell, said: ‘There is no room for error when building planes, and cutting corners in the production stage could have catastrophic consequences.’
But supply issues and production delays have continued since the crashes.
In January 2020, Boeing stopped manufacturing the 737 Max jets – its biggest assembly-line pause in more than 20 years – before resuming limited production in May that year.
Boeing was forced to halt 737 Max deliveries due to electrical problems in 2021 and due to noncompliant fittings last year. Shares have slumped more than 40 per cent since the 737 Max was first grounded in March 2019.
Grieving: 2018 737 Max Indonesia crash
Airbus has seen the value of its stock climb around 25 per cent in the same period.
Airbus is expected to announce this week that it delivered 735 planes last year, beating Boeing to be crowned the world’s largest plane maker for the fifth year in a row.
Boeing has been under pressure to narrow the gap with France-based Airbus.
The US group had been betting on the success of its newest model, the 737 Max 10, which is still waiting for approval.
Debt laden Boeing has been reluctant to invest in an all-new plane until engine technology matures in the next decade.
Delays to the approval of the Max 10 following last week’s accident could put its strategy under renewed pressure, analysts said.
The New York-listed company had also been hoping to resume 737 Max deliveries to China soon, but the Alaska Airlines incident could delay the process.
‘There are naturally questions being asked about the quality checks and whether Boeing is trying to do too much too fast,’ Mould said.
‘Boeing management will be under considerable pressure from the regulators and customers to explain what’s going on, which means considerable headwinds ahead of the business.
‘It’s no wonder investors have raced to sell the shares as risks to the investment case have just shot up.’
