The stock of Boeing Company (NYSE: BA) caught the market’s attention due to concerns raised by the US Federal Aviation Administration (FAA). Specifically, the FAA has initiated a scrutiny of the 737 MAX 9 version of Boeing’s aircraft following the detachment of a cabin panel from an Alaska Airlines (ALK.N) flight, necessitating an emergency landing.
The Alaska Airlines flight, with only eight weeks of operational history, faced a critical incident. While flying from Portland, Oregon, at an altitude of 16,000 feet (4,900 m), a panel on the aircraft was torn off, leading the pilots to make a safe return to the departure location. Thankfully, none of the occupants on board experienced significant injuries.
Notably, the FAA has directed the grounding of 171 Boeing (BA.N) jets featuring a similar panel, pending elaborate safety inspections. The majority of these aircraft are operated by Alaska Airlines and United Airlines (UAL.O).
Last week, the FAA, Boeing, and the airlines discussed various matters, including maintenance and inspection instructions from the aircraft manufacturer. The airlines will be allowed to take off only after Boeing’s maintenance guidelines are approved by the FAA.
The FAA opined that the incident involving Alaska Airlines “should not have occurred and must not recur.” Last Wednesday, through an official letter, the agency notified Boeing of the scrutiny aimed at ascertaining whether Boeing adhered to ensuring that finalized products aligned with authorized designs and were in a state deemed safe for operation, as per FAA guidelines. The regulatory agency identified “additional discrepancies” in other 737 MAX 9 aircraft.
In particular, last Monday, both United and Alaska Airlines revealed that they had detected loose components during initial inspections on several grounded aircraft, prompting fresh worries about the manufacturing processes of Boeing’s highly popular jet family. As a precautionary measure, both airlines have canceled a significant number of flights, with United discontinuing approximately 200 and Alaska Air 158.
Boeing’s spokesperson stated that the company will extend its full cooperation and work beyond a shadow of a doubt with the regulator and also the NTSB under their scrutiny.
An increasing number of US legislators conveyed their worries about Boeing and raised queries regarding its overall quality control process. In a letter to Boeing CEO Dave Calhoun, Senators Ed Markey, JD Vance, and Peter Welch stated that “in light of the earlier fatal accidents involving Boeing 737 Max aircraft, there is a profound concern that the presence of loose bolts may reflect a systemic problem within Boeing’s ability to manufacture aircraft with the highest safety standards.”
Boeing considers the conclusions to be quality control problems. A detailed probe has been initiated at both the company’s facilities and those of Spirit AeroSystems (SPR.N), its vendor. Boeing CEO Dave Calhoun revealed that a “quality escape” was a contributing factor to the cabin blowout of the MAX 9 aircraft.
The FAA stressed that Boeing’s manufacturing routines must adhere to top-notch safety norms. Pete Buttigieg, the US Transportation Secretary, refused to provide a timeline for the clearance of Boeing’s 737 MAX 9 aircraft for takeoff.
The MAX aircraft made headlines in 2019 when they were involved in two fatal crashes in Ethiopia and Indonesia, claiming 346 lives. These tragedies were attributed to cockpit software issues. In the aftermath, regulatory authorities worldwide grounded MAX aircraft for approximately 20 months. As an illustration, Panama’s civil aviation authority temporarily suspended operations for 21 737 MAX 9 aircraft operating under the Copa Airlines brand.
The cabin panel detachment issue caused a dent in Boeing’s market share. At the end of last year, the company’s passenger jet market share was below 50%. Notably, for the fifth consecutive year, Airbus (AIR.PA) has pushed Boeing to second place. Specifically, Airbus recorded a new high in yearly jet orders, receiving about 2,100 fresh orders last year, while Boeing received 1,314 new (net) orders.
The FAA scrutiny is expected to keep Boeing’s stock slightly bearish in the near term.
The historical price chart reveals a downturn for Boeing stock, encountering resistance at $235 and signaling a potential support level around $205. Furthermore, the stock is currently trading below its 50-day moving average, and the MACD indicator reflects a negative reading. As a result, we foresee Boeing’s stock price continuing its downtrend in the short term.
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