(News Bulletin 247) – The American group’s shares fell in pre-opening trading on Monday after several of its 737 MAX-9 aircraft were grounded for inspections. Which further damages the reputation of Boeing’s flagship single-aisle aircraft.

Boeing is likely to experience a nightmare session this Monday. Airbus’ American rival collapsed 9.3% in pre-opening trading on Wall Street around 12 p.m.

“Boeing’s reputation was shaken after last Friday’s incident on one of its 737 Max aircraft operated by Alaska Airlines,” said Russ Mould, investment director at AJ Bell. During the night from Friday to Saturday, an incident on a 737 MAX 9 operated by this company led to the detachment of a “plug” during takeoff.

This “plug” is installed on certain 737 MAX 9 aircraft “for which airlines do not intend to use the additional seat capacity allowed by this exit door”, explains Jefferies.

According to Reuters, this “plug” was fixed and designed by Spirit AeroSystems, an aeronautical equipment manufacturer specializing in aerostructures (fuselage, wings, engine nacelles). Listed on Wall Street, the shares of this company fell by 21.1% in pre-opening trading on Wall Street.

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New setback for the 737 MAX

Following this incident on the Alaska Airlines plane, several companies grounded their 737 MAX 9s for inspections. According to AFP, this is the case of United Airlines, Turkish Airlines, Aeromexico and the Panamanian company Copa Airlines.

The United States aviation regulator, the FAA, as well as its European equivalent, the EASA, published emergency airworthiness directives on Saturday, which provide for grounding. This while awaiting inspections of the 737 MAX 9 presenting “the configuration concerned (that is to say equipped with the “plug”), i.e. 171 of the 200 737 MAX 9 delivered by Boeing, including none in Europe, according to the ‘EASA,’ explains Jefferies.

In terms of costs, these incidents should remain relatively measured on the scale of the American group’s activity. Jefferies estimates that the financial impact could be less than $20 million, and that the technical problem could be resolved quickly.

In addition, “the 737 MAX-9 should represent only 18% of total deliveries of 737 MAX (family which also includes the 737 MAX-7, 737MAX-8 and 737 MAX-10 versions, Editor’s note) from Boeing in 2024, which would constitute a peak, then 9% in 2026”, puts an analyst into perspective. But this oddity is added to a blacklist for the 737 MAX, all of whose aircraft were grounded in 2019, following two crashes that occurred in 2018 and 2019. The aircraft had been grounded for 20 months.

Last year, Boeing had to carry out inspections on the 737 Max 8, following the identification of a quality problem, that is to say poorly drilled holes on the rear pressure bulkhead. Then, in December, the planemaker asked airlines to inspect new 737 MAXs to check that a bolt had not come loose in the control system.

Management under pressure

“All this information suggests that Boeing’s manufacturing quality is lower than that of Airbus,” notes the previously mentioned analyst. “Boeing in particular suffered throughout the weekend from excessively negative publicity,” adds this analyst.

Boeing therefore still appears in a bad light with its 737 MAX, which proves to be very problematic insofar as it is its flagship model in the single-aisle market, much more buoyant than that of wide-body aircraft. And that the confidence of the American group’s customers risks eroding.

“It’s not good for anyone, especially given the history of this plane,” Richard Aboulafia, chief executive of aviation consulting firm AeroDynamic Advisory, told Bloomberg. “In this context, it is imperative to make cultural changes so that the management of the company is more closely associated with the design and manufacturing of aircraft,” he adds.

“There is no room for error in building an aircraft and taking shortcuts at the production stage could have catastrophic consequences. Questions naturally arise about quality controls and whether whether Boeing is trying to do too much, too quickly,” said Russ Mould, investment director at AJ Bell.

“Boeing’s management will be under considerable pressure from regulators and customers to explain what is happening, which means considerable headwinds for the company. It’s no wonder investors have been scrambling to to sell the shares,” he continues.