Boeing Faces 'Reputational Minefield' After Midair Door Blowout: 4 Analysts On Collateral Damage From 737 MAX 9 Grounding

Aircraft manufacturer Boeing Co BA is facing regulatory scrutiny following a significant midair breach. Authorities are currently investigating the incident where a door plug dislodged from the side of an Alaska Air Group, Inc. ALK-operated 737 MAX 9 aircraft carrying 171 passengers this past Friday.

The U.S. airline regulator, the Federal Aviation Administration (FAA), ordered the grounding of some Boeing 737 Max 9 jets after the incident.

Jim Hall, previously the chairman of the National Transportation Safety Board, expressed worry, telling CNBC: “The fact that it was a practically brand-new aircraft is a cause for concern.”

The aircraft had been received by Alaska Airlines from Boeing less than three months ago.

Also Read: Boeing 737 Max 9 Groundings Trigger Stock Turbulence For Carriers As Regulators Order Safety Checks

Boeing has been striving to reestablish stability for its 737 Max program following two tragic accidents, disruptions in the supply chain due to the COVID-19 pandemic and a string of minor yet concerning quality problems in recent times.

Wall Street analysts are weighing in on the potential repercussions of this event on Boeing’s operations:

Goldman Sachs maintained its Buy rating and $280 price target on Boeing, saying: "Any quality control issues introduce risk to the production and delivery cadence; but there is also a scenario where this is isolated and has limited impact beyond the near-term."

Bank of America also maintained a Buy rating and $275 price target, but warned: "This latest incident erodes the fragile confidence that has been built around the 737 MAX franchise. In our view, Boeing needs to tread carefully and cautiously through this potential reputational minefield."

RBC Capital Markets maintained an Outperform rating and $300 price target on the stock, saying: “While the issue is currently not looking like a “one-off,” we see very little risk that Boeing would slow supplier MAX production rates. We continue to believe BA will guide to 500-550 2024 MAX deliveries, but the plug door issue is likely to pressure 1Q24 deliveries.

“We believe the impact is likely to cause more reputational damage as compared to having a significant financial impact for BA. However, BA is facing fresh credibility issues, and the grounding of the MAX 9 could extend until the root cause is better understood. It is important now for the FAA to do all it can to ensure that public trust in the MAX is restored as part of the ungrounding process.”

JPMorgan analysts shed light on an interesting aspect: China is one of the most influential foreign regulators and authorities in China have not yet permitted airlines to recommence 737 MAX deliveries.

Despite this, China had its entire fleet of almost 100 MAX aircraft operating by the end of last year, according to the Wall Street firm.

Boeing appeared to be nearing the resumption of deliveries to China, with promising indicators in recent months, as reported by Reuters.

Yet the incident on Friday might potentially postpone this progression, although it’s worth noting that Chinese carriers do not operate MAX 9s and there’s no information suggesting they have placed orders for these specific models, according to JPMorgan.

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Photo: Boeing 737 MAX 9, Paul Weatherman photo via Boeing