A recent incident involving a Boeing 737 MAX-9 operated by Alaska Air Group has caused quite a stir in the aviation world. During a flight, an “emergency door plug” became detached, resulting in an emergency landing. As news of the incident spread, the stock prices of Alaska Air, Boeing, and Boeing suppliers took a hit.
While Wall Street seems relatively unfazed by the situation, investors are understandably concerned. It will likely take several days, if not weeks, to investigate and understand the full extent of this latest issue with the 737 MAX aircraft.
Amidst the commotion, Boeing’s stock experienced a significant decline of 7.4%, settling at $230.50 during premarket trading. Similarly, S&P 500 and Dow Jones Industrial Average futures dipped by 0.1% and 0.4% respectively.
Investors also reacted swiftly to the news, causing Alaska Air shares to drop by 5.7%. Meanwhile, the fuselage supplier for Boeing, Spirit AeroSystems, saw its stock decrease by approximately 18%. Spirit Aero is responsible for manufacturing the part that failed. On the other hand, General Electric’s stock observed a modest decrease of 0.6%. While not involved in the fuselage, General Electric manufactures all the engines used in 737 MAX jets.
Interestingly, Airbus experienced a positive market response as its stock soared by 2.4% during overseas trading. Although Spirit Aero also produces parts for Airbus aircraft, market sentiment suggests that this recent MAX problem might benefit Airbus’s A320 market share in the long run. The A320 family of jets competes directly with Boeing’s 737 family.
It is crucial to note that the Boeing 737 MAX faced a global grounding from March 2019 to November 2020 after two fatal crashes occurred within a span of five months. These crashes were attributed to a design flaw in the flight control software.
In this particular incident, analysts believe that the problem stems from a manufacturing issue rather than a design flaw. Citi analyst Jason Gursky mentioned this point in a report, but he remains cautious about making a definitive conclusion. He acknowledges the possibility that there could still be design-related concerns.
One interesting aspect mentioned by Gursky is that 737 jets have been equipped with emergency door plugs since the 1990s. While this information provides some context, it raises questions about the nature of an emergency door plug and why it would be necessary to plug an emergency exit in the first place.
Overall, this unexpected turn of events has once again cast a spotlight on the Boeing 737 MAX series. The aviation industry and investors alike eagerly await further investigations and explanations regarding the incident. Only time will tell how this incident will impact Boeing, its suppliers, and the broader market in the long term.
Extra Emergency Doors for Aircrafts
According to a report by Melius Research analyst Robert Spingarn, some aircraft with higher passenger capacity require extra emergency doors. However, airlines like Alaska choose to configure their aircraft with fewer seats for enhanced passenger comfort, eliminating the need for additional doors. For this specific group of customers, it is more efficient to plug the doors rather than building the fuselage without them.
The MAX “dash-nine” models, which have plugged doors, have been in operation since 2015 and have not encountered the same issue as the Alaska Air flight. Gursky, an aviation consultant, shared this information.
Following an incident, the FAA took the decision to ground 171 jets. European safety regulators also grounded the jets, but specified that no European operators have MAX-9 jets in their fleets. Alaska Airlines possesses 65 MAX-9 jets and has completed approximately one-quarter of its inspections without discovering any concerning issues.
Analyst Sheila Kahyaoglu from Jefferies estimates that there are approximately 220 MAX aircrafts in service globally. Boeing has delivered a total of around 1,400 MAX jets. Spingarn’s report predicted that approximately 30 MAX-9 jets will be delivered in 2024 out of a total of 540 737 jets.
Although these factors suggest that Boeing can navigate through its latest MAX issue, it is expected that the company’s shares will experience volatility as investors adopt a wait-and-see approach. Boeing stock began the week at around $249 per share, with shareholders enduring significant fluctuations. In March 2019, just before the second MAX crash, Boeing stock was priced at approximately $446.