(Update actions throughout the year) by Joanna Plucinska, Abhijith Ganapavaram and Tim Hepher
Shares of Boeing BA.N fell 8.6% in early U.S. trading Monday and are expected to wipe off nearly $13 billion in market value following the temporary grounding of some of its most expensive 737 MAX jets. sold by the American aviation regulator.
A piece of fuselage broke away from an Alaska Airlines 737 MAX 9 Friday after takeoff from Portland, Oregon, forcing the pilots to turn around. The US Federal Aviation Administration (FAA) subsequently ordered the temporary grounding of 171 narrow-body MAX 9 jets.
Shares of Alaska Air fell 4.5%, while United Airlines UAL.O , the other U.S. carrier that operates the jet, reversed pre-market trend to trade slightly higher high.
Spirit AeroSystems SPR.N , which manufactured and initially installed the fuselage part on the all-new MAX 9 jet in question, was down 13.8%, compounding the gloom around the supplier which recently recovered from a series of quality problems.
Other aerospace suppliers also fell, with General Electric GE.N, which makes engines for the 737 MAX family through a joint venture with France’s Safran SAF.PA, down 1%, and Honeywell HON.O lost 1%.
Wall Street analysts viewed the crash as a temporary setback for Boeing, but some took a dim view of a series of quality problems linked to the 737 MAX family of planes.
“The accident highlights a series of quality problems, particularly at Spirit AeroSystems. Quality loopholes are not acceptable in an industry where a single failure can have serious consequences,” Bernstein analysts said.
Shares of plane maker Airbus AIR.PA rose 2.7% on Monday. The European manufacturer has increased its market share since the two Boeing MAX crashes in 2018 and 2019 which killed nearly 350 people and led to the global grounding of the MAX for 20 months.
Airbus will announce it delivered 735 planes last year, beating Boeing to remain the world’s largest plane maker for the fifth year in a row, industry sources said.
Last week, Reuters reported that the number of planes delivered would reach 730, surpassing the company’s target of 720.
MANUFACTURING OR DESIGN PROBLEM?
Some analysts said the problem appeared to be a unique manufacturing problem, rather than a more expensive design issue to fix. They also noted that the number of aircraft affected was small.
“The previous generation of 737-900ER had the same approach to the gate and there were no incidents on millions of flights,” Bernstein added.
Boeing has delivered 214 of the 737 MAX 9s, or 16 percent of the more than 1,300 MAX planes in service, most of which can still fly, including 737 MAX 9s that have regular doors instead of replacement panels.
“A mass manufacturing issue could require a design or manufacturing change for Boeing or the responsible supplier, but we don’t expect an exorbitant cost,” said Robert Spingarn, an analyst at Melius Research.
However, investors will be eagerly awaiting further action from the FAA and other regulators, particularly in China, where Chinese airlines recently resumed operation of all 737 MAX aircraft after being grounded by the country’s regulatory body.
As for potential airline compensation costs following Friday’s crash, Citi analyst Jason Gursky estimated the daily cost to Boeing at $2.3 million, based on recent problems. of RTX RTX.N engine as a calculation model.
Boeing’s U.S.-listed shares are up 36.8% in 2023.