Boeing, one of the world’s largest aerospace companies, experienced a significant decline in its shares in premarket trade on Monday. The drop in share value followed the news that the Federal Aviation Administration (FAA) had ordered a temporary grounding of dozens of Boeing 737 Max 9 aircraft.
The FAA’s emergency airworthiness directive dictated that approximately 171 planes worldwide would be affected by the temporary grounding. This directive requires airlines to inspect their aircraft before allowing them to fly again. The order applies not only to U.S. airlines but also to carriers operating within U.S. territory. The grounding came as a response to a recent incident in which a piece of a plane blew out during an Alaska Airlines flight. Disturbing images shared on social media showed a significant hole in the aircraft’s side, prompting passengers to utilize oxygen masks. Alaska Airlines Flight 1282, which experienced the blowout, had departed for Ontario, California, but returned to Portland shortly after.
The National Transportation Safety Board (NTSB) has initiated an investigation into the blowout. FAA Administrator Mike Whitaker emphasized the commitment to safety and the agency’s cooperation with the NTSB’s inquiry. Among the 171 grounded aircraft, United Airlines possesses 79, Alaska Airlines has 65, and the remaining 74 are distributed across six other airlines. Notably, the aircraft involved in the blowout incident, with a capacity of 178 seats, was delivered to Alaska Airlines on November 11th.
The FAA’s temporary grounding of the Boeing 737 Max 9 highlights a series of recent issues faced by the company. The aviation industry has been closely watching Boeing’s 737 Max planes since they were globally grounded approximately five years ago following two fatal crashes. Russ Mould, an investment director at AJ Bell, indicated that this incident is yet another problem for Boeing. He further suggested that airlines utilizing 737 Max aircraft will carefully evaluate their future aircraft requirements.
While Boeing faces challenges and its shares fall, its European counterpart, Airbus, experienced a surge in shares. By mid-morning on Monday, Airbus’s shares rose by 1.7% as investors speculated that it could capture market share from Boeing. This development may raise questions about the quality checks conducted by Boeing and whether the company is attempting to accomplish too much too quickly. Mould emphasized that Boeing’s management would face considerable pressure from regulators and customers to clarify the situation, signaling potential difficulties for the business in the near future.
The temporary grounding of Boeing 737 Max 9 aircraft by the FAA has significant implications for Boeing’s operations. Shares of the company experienced a substantial decline, while rival Airbus gained momentum in the market. The incident further raises concerns about the quality and safety checks conducted by Boeing. As investigations into the blowout continue, Boeing will face mounting pressure from regulators and customers to address these concerns and restore confidence in its aircraft.