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Boeing (BA) Stock Tumbled 25% as 737 MAX 8 Crisis Grows

Today shares of Boeing Co slid for huge 25 percent in early trading as a result of some airlines grounded the world’s biggest planemaker’s new 737 MAX 8 passenger jet following the second deadly crash in just five months.

The share move, if maintained through normal trading hours, would be the biggest fall in Boeing’s stock in nearly two decades, halting a surge that has seen it triple in value in just over three years to a record high of USD 446 last week.

A Nairobi-bound Boeing 737 MAX 8 operated by Ethiopian Airlines crashed minutes after takeoff from Addis Ababa on Sunday, killing all 157 on board. The same model, flown by Lion Air, crashed off the coast of Indonesia in October, killing all 189 on board.

China’s aviation regulator on Monday grounded nearly 100 Boeing 737 MAX 8 aircraft operated by its airlines after the crash. The CAA said it would contact the U.S. Federal Aviation Administration and Boeing regarding the resumption of operations once they are assured that measures have been taken to ensure safety.

Morgan Stanley analyst Rajeev Lalwani said:

“We anticipate heightened volatility in Boeing shares. Though it is early to draw conclusions, there may be concerns of disruption around safety, production, groundings, and/or costs, all of which should be manageable longer-term.”

He also said he was not changing the bank’s positive “overweight” recommendation on Boeing shares for its customers, and that any corrective action the company has to take on its best-selling passenger plane will likely prove a longer-term buying opportunity.

Other major Wall Street brokerages were yet to take a stance on the crash.

Boeing’s shares lost almost 25% in the weeks following the Lion Air crash last year, but have more than recouped those declines. They traded down at $375.41 at the time of writing.

Investors will also be watching shares in some of the company’s big airline customers, which include Dallas-based Southwest Airlines Co, the biggest operator of the MAX 8, and American Airlines Group Inc and Air Canada.

Southwest and American said overnight they remained fully confident in the aircraft and were closely monitoring the investigation.

The 737 MAX 8 uses LEAP-1B engines made by CFM International, a joint venture of General Electric Co and Safran SA. Shares in Safran also fell 0.5 percent at the time of writing.

Shares of rival Airbus SE were up 0.6 percent.

Analysts at Edward Jones downgraded Boeing’s stock to “hold” from “buy” on Monday, writing that two recent accidents involving the 737 Max 8 could result in additional costs and some delayed orders while the company resolves safety concerns. He noted:

“Longer-term, we believe the outlook is balanced by the backlog of other planes (such as the 787), recent defence program wins, and the expansion of the services business.”

President Donald Trump says planes are becoming “far too complex to fly” in response to growing international outcry over the crash of a Boeing 737 MAX jet in Ethiopia. He tweeted:

Airplanes are becoming far too complex to fly. Pilots are no longer needed, but rather computer scientists from MIT. I see it all the time in many products. Always seeking to go one unnecessary step further, when often old and simpler is far better. Split second decisions are….

— Donald J. Trump (@realDonaldTrump) March 12, 2019

He added:

“I don’t know about you, but I don’t want Albert Einstein to be my pilot. I want great flying professionals that are allowed to easily and quickly take control of a plane!”

Regulators in China, Mexico, Indonesia, Australia, and the United Kingdom have all grounded the aircraft. On Tuesday, a regulator in Vietnam said it would not license Boeing 737 Max aircraft in the country, according to Xinhua, a Chinese news agency. Companies in Vietnam had placed orders with Boeing to purchase the aircraft last month during Trump’s summit with North Korean leader Kim Jong Un in Hanoi.

The UAE General Civil Aviation Authority issued a safety decision banning the operation of all Boeing 737 Max models in the UAE airspace with effect from March 13, 2019, 00:01 UTC Time until further notice.

Flydubai is adjusting its schedule to minimize disruption to passengers and will operate flights with its fleet of Next-Generation Boeing 737-800 aircrafts.

Singapore’s aviation regulator has also ordered the temporary suspension of all Boeing 737 MAX aircraft into and out of the country, it said on Tuesday.

Boeing (BA) Stock Tumbled 25% as 737 MAX 8 Crisis Grows

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