If you’re an investor in airlines or airplane manufacturers, this is not the type of headline you want to wake up to. Unfortunately for Boeing and several others, the news is not great. So let’s dig into it. 👇
Saturday afternoon, the passengers of an Alaskan Airlines flight saw a door plug blow out of the middle of their nearly brand-new aircraft when it was flying at around 16,000 feet. The incident injured several passengers and blew many objects out, forcing an emergency landing.
The Federal Aviation Administration (FAA) has since ordered airlines to ground dozens of Boeing 737 Max 9 aircraft for urgent inspections. While that’s a key step to resuming flights, it’s unclear how widespread of an issue this is and how long it’ll take to be fixed and approved by regulators to resume flying. 🛑
Boeing has been under FAA scrutiny since 2018 and 2019, when its 737 Max planes were involved in fatal crashes. Recently, the stock has recovered due to a lack of incidents and the feeling that the company was heading in the right direction. However, its plans to ramp up output of the Max are likely on hold now until this is resolved. 🕵️♂️
Around 171 planes are impacted by its emergency airworthiness directive, with Alaska Airlines and United Airlines impacted most as the largest operators of the 737 Max 9 model. United already found loose bolts during its 737 Max 9 fleet inspections but won’t say how many were impacted. 😬
Spirit AeroSystems, which makes fuselages for the 737 Max, also fell sharply on the news.
Besides putting Boeing back in the spotlight, critics also question the airline and regulators over their judgment. The Boeing plane involved in the incident had been prevented from making long-haul flights over water due to pressurization warnings in the days before Friday’s incident. Some say more should have been done than simply shortening the flight length. ⚠️
In the days and weeks ahead, the airlines, manufacturers, and regulators will work together to identify what happened and how to move forward. That leaves a lot of unknown risks for investors in the related companies, likely increasing volatility in their shares for the foreseeable future.
As for any winners coming out of this situation, Boeing’s competitor, Airbus, is a primary benefactor. Apple may also be one, given two of the iPhones that fell 16,000 feet out of the plane were intact and working on the ground. How’s that for durability?
All kidding aside, we’ll keep a close eye on this story and continue to update you as it develops. 👀