The most recent crash of a 737 MAX 8, and the cascade of countries who’ve grounded it has undeniably hurt the reputation of Boeing, the plane’s maker.
But whether the company is irreparably damaged depends on the cause of the accident that claimed 157 lives, and if Boeing can come up a remedy to address it, experts say.
“Certainly there is near term damage to both Boeing’s reputation and it’s business,”, says Jim Corridore, director of industrials equity research at CFRA Research. “But how long lasting and how deep this impact is depends on the outcome of the investigation and how Boeing reacts.”
It’s the second crash of a 737 MAX 8 in six months. A Lion Air flight went down in Indonesia in October killing 189 people. Boeing has been working on the automated anti-stall system that is believed to have caused that accident, but the inquiry into what led a second MAX 8 to nosedive on Sunday in Ethiopia is just beginning.
“I believe that whatever the problems are will be temporary in nature provided Boeing acts quickly and decisively once the problems are known,” says Henry Harteveldt, a travel industry analyst with Atmosphere Research Group.
But Boeing still has to work with investigators to come up with the definitive causes of both accidents, Harteveldt says, how they differ or mirror each other “and then determine what can they do . . Is it an engineering problem? Is it a software problem? Is it a training problem?”
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The most recent accident has led several countries and regions including the European Union and the United Kingdom to ground the jet, though the FAA has not issued a similar order in the U.S. And so far, U.S. carriers with the most Max’s in their fleet are saying they plan to keep them in the air.
The 737 Max came on the scene in 2015, and though only 350 of the planes in its different variations are in service right now, more than 4,660 are in the pipeline as it has become Boeing’s most coveted jet.
“I would say it’s the single most important product that Boeing has right now.” Corridore says. “It’s the largest portion of what’s in Boeing’s backlog and on its production schedule . . . Nobody’s ordering 737s any more. It’s all 737 Max 7, 8 or 9.”
Boeing has rebounded from a crisis before. It’s long-awaited Dreamliner, the first commercial jet to be primarily made of lightweight carbon composites instead of aluminum and steel, was grounded in January 2013 after a battery caught fire on one jet, and a smoldering battery forced an emergency landing of another.
But Boeing “found a way to fix the problem and the 787 Dreamliner has continued to fly without incident,” Harteveldt says
Southwest which operates 34 MAX 8 jets in its fleet of over 750 Boeing 737s remains “confident in the safety and airworthiness of the MAX 8,” said spokesman Dan Landson. “We don’t have any changes planned to our MAX 8 operations,”
American said Tuesday that it also continues to fly its 24 MAX 8 jets, and is waiting on the delivery of 16 more this year. Another 20 should be delivered in 2020 and 2021, and 40 are slated to join its fleet in 2024 “and beyond.”
“At this time there are no facts on the cause of the accident other than news reports,” the airline said in a statement, adding that it is staying on top of the investigation into the Ethiopian crash, as it would any airplane accident. “We have full confidence in the aircraft and our crew members.”
United doesn’t fly the 737 MAX 8, but does have 14 737 MAX 9 jets which it says remain in operation.
Still, U.S. lawmakers such as Senator Elizabeth Warren (D- Mass.) and Sen. Richard Blumenthal (D-Conn.) have called on U.S. regulators to halt flights of the MAX 8, ‘”so the pressure on Boeing and on Southwest is going to be immense,’’ Corridore says.
Shares in Boeing were down 6.1 percent to $375.41 a share when markets closed Tuesday. But in after- hours trading, Boeing’s stock price had a slight uptick to $376.20.
Even with its earlier dip, Boeing’s stock price continued to outpace its performance at the end of 2018 when investors were worried about a looming trade war with China.
“The stock was much lower and in fact it’s still up for the year. year to date,,” Corridore said.
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