Updated January 16th, 2024 at 18:22 IST
Boeing shares dip as 737 MAX 9 grounding persists and quality checks mount
Spirit AeroSystems, a key supplier responsible for fuselage of the affected jet, also faced a 5.1% drop in shares on Tuesday, following a 14.1% loss last week.
Boeing shares fall: Boeing witnessed a 2.5 per cent decline in its shares before the opening bell on Tuesday, signaling a potential extension of last week's losses. The ongoing grounding of some 737 MAX 9 jets in the United States, now in its 11th day, has contributed to the setback. The situation worsened after an Alaska Airlines MAX 9 experienced a cabin panel blowout, leading the US Federal Aviation Administration (FAA) to temporarily ground 171 aircraft for safety inspections.
This crisis has fuelled concerns about added costs as Boeing commits to further quality checks. Spirit AeroSystems, a key supplier responsible for the fuselage of the affected jet, also faced a 5.1 per cent drop in shares on Tuesday, following a 14.1 per cent loss last week. US markets were closed on Monday for the Martin Luther King Jr. holiday.
Responding to the escalating situation, the FAA announced on Friday that it would conduct an audit of the MAX 9 production line and suppliers. Additionally, it is considering involving an independent entity in certifying certain safety aspects previously assigned to Boeing. This move has led analysts to anticipate a potential impact on production and delivery.
Wells Fargo analyst Matthew Akers expressed concern about Boeing's production risks, stating, "With the FAA taking a closer look into Boeing's production, we think the risk of production/delivery impact increases significantly." He downgraded Boeing's shares to "equal weight" from "overweight."
In response to criticism and increasing pressure, Boeing announced on Monday that it would implement additional quality inspections for its popular 737 MAX series. The company will deploy a team to Spirit AeroSystems to scrutinise the supplier's work on the door plug involved in the recent accident.
Analyst Jason Gursky from Citi highlighted the potential for higher costs, estimating that an extra 1,000 inspectors might add $250 million in annual costs. The situation has intensified concerns among airlines, the FAA, and investors, with Boeing's share outlook becoming increasingly uncertain.
(With Reuters inputs.)
Published January 16th, 2024 at 18:22 IST