What Boeing’s Problems Mean for the Market

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Mar 19, 2019

What Boeing’s Problems Mean for the Market

Countries around the world have grounded Boeing’s fastest-selling aircraft following two crashes, and now there’s a federal investigation.

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Problems keep mounting for Boeing, the world’s largest aircraft maker and a giant in the aerospace and defense industry.

The Department of Transportation and federal prosecutors have launched a probe into how Boeing managed to certify the safety of the 737 MAX, according to reports. The 737 MAX has crashed twice in the last six months, killing more than 300 people. The most recent crash, involving an Ethiopian Airlines flight, occurred March 10.

Until recently, the 737 MAX was the fastest-selling plane in Boeing’s history, earning  the company billions of dollars. In response to the two air disasters, however, countries around the world have grounded the aircraft, banning it from their airspace.

Why are Boeing’s problems important?

Boeing is a giant in the aerospace and defense industry. The loss of life related to possible flaws in its plane designs can have enormous consequences for the company, including loss of consumer confidence, brand damage, financial losses, and ongoing criminal investigations.

Its difficulties have also rippled through the stock market. Boeing’s share price has decreased about 12% since the Ethiopian Air crash. Boeing’s falling stock price has also caused a drop in the Dow Jones Industrial Average, where it makes up about 11% of the index.

Boeing and the 737 MAX

  • The 737 MAX is an updated version of Boeing’s popular 737 airliner. It reportedly has a larger engine, mounted higher up and further forward, that makes handling of the craft significantly different from the previous 737.

  • To compensate for engine changes, Boeing created a new anti-stall device to keep the plane level.

  • Pilots were not required by either Boeing or the Federal Aviation Administration to get training on the changes to the aircraft, or how to override the anti-stall system if they needed to.

  • The anti-stall device may have malfunctioned in both crashes, by pushing the nose of the aircraft down when pilots wanted the nose to come up.

More about Boeing

Boeing is the largest aircraft company in the world. In 2018, it delivered nearly 900 planes globally, reporting a record $101 billion in revenue.

It’s also one the largest contractors to the federal government, notching about $23 billion in defense contracts, according to Boeing’s most recent earnings report.

Additional background

The Federal Aviation Authority (FAA),  which regulates the civilian airline industry in the U.S., is typically considered a world leader when it comes to air safety. In this instance, however, many observers criticized its lax oversight of the 737 MAX. The U.S. was the last country to ground the 737 MAX, three days after the Ethiopian Air crash.

Countries around the world, led by China, immediately grounded the 737 MAX until investigators finished examining the black boxes from both flights, which contain critical data about what may have caused the crashes.

China is also flexing its own muscle in the airline industry, with some analysts predicting it will overtake the U.S. in the aviation market by 2024.

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Jeremy Quittner is the editorial director for Stash.


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