Boeing, United Airlines Dip Premarket as US Grounds 737 Max Jets
Boeing's stock is down 8.43% in premarket trading after the FAA grounded 737 Max 9 jets after a mid-air incident on Friday.
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The US Federal Aviation Administration (FAA) and multiple airlines announced a temporary grounding of the 737 Max 9 jet after one of the planes experienced a mid-air incident on Friday. Boeing’s shares (NYSE: BA) fell over 8.4% in premarket trading Monday.
Regulators, Airlines Ground 737 Max Jets
Shares of Boeing tumbled 8.43% in premarket trading Monday after the Federal Aviation Administration (FAA) ordered a temporary grounding of 171 Boeing 737 Max 9 jets following a mid-flight incident where a piece of the jet ejected during an Alaska Airlines flight on Friday. Images shared on social media platforms showed a hole in the side of the jet and passengers using oxygen masks.
The grounding will likely mainly affect US flights. The FAA also ordered “immediate inspections” of 737 Max 9s. The regulator added that the required investigation would take about four to eight hours per aircraft. The National Transportation Safety Board has also launched a probe into the blowout.
The European Union Aviation Safety Agency (EASA) said it had adopted the FAA’s directive. It also said that no European airline in an EASA member state operated 737 Max 9 in the affected Boeing configuration.
United Airlines, the biggest operator of the affected jet, grounded all 79 of its Max 9 planes. Alaska Airlines grounded all 65 of its 737-9 Max jets, cancelling 160 flights on Saturday. United Airlines (NASDAQ: UAL) shares were down 3.02% at the time of writing, and Alaska Airlines (NYSE: ALK) shares dipped over 4%.
Boeing’s 737 MAX Issues Began in 1997
Large-scale groundings by aviation regulators are uncommon, though they happened multiple times to Boeng’s 737 MAX.
The troubled model has been under scrutiny since facing a worldwide grounding five years ago following two fatal crashes that killed 346 people. In November 2020, the FAA ended the longest-ever grounding of a US airliner. The accidents and grounding cost the plane maker an estimated $20 billion in penalties, compensation, and legal fees. Indirect losses amounted to over $60 billion.
In 2021, four airlines temporarily grounded 737 MAX again due to electrical issues.
According to Quartz, the crisis involving the 737 MAX dates way back to 1997, when Boeing merged with its long-standing plane manufacturer rival, McDonnell Douglas. The report said the takeover resulted in a “clash of corporate cultures,” with the smaller company winning.
Clive Iring, author of “Jumbo: The Making of The Boeing 747,” said while Boeing was supposed to take over Mcdonnel Douglass (the smaller company), “it ended up the other way around.”
Could the latest 737 MAX issue lead to another long-term bearish trend for Boeing’s stock? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
