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Boeing Investors Pull Back As More Countries Ground 737 Max

Boeing Investors Pull Back As More Countries Ground 737 Max

Pressure increased Tuesday on aircraft maker Boeing Co. (NYSE: BA) and the airlines that fly its planes as several regulatory agencies around the globe grounded its 737 Max 8 in the wake of an Ethiopian Airlines crash that killed 157 people. 

Investors in the world’s largest plane manufacturer were also feeling the pressure, and shares were down 7.32 percent at the time of publication Tuesday following the jittery regulatory reaction to the second Max crash in six months.

Consumer Reports issued a statement midday Tuesday that said the nonprofit is calling on airlines to halt 737 Max 8 flights until a thorough safety investigation is complete.

"If the airlines will not ground the planes, CR says the Federal Aviation Administration should," the publication said. 

Sell-Side Reaction

Flight data and cockpit voice recorders from Ethiopian Flight 302 — a 737 Max 8 which crashed shortly after takeoff Sunday in Addis Ababa — were quickly recovered, so investigators should be able to figure out the cause and fix it, Bank of America Merrill Lynch analyst Ronald Epstein said in a Monday note. 

“While it is too early to know the impacts of the incident on Boeing, we recognize that the company has the financial wherewithal (through a strong balance sheet and cash flow) to weather and fix any potential issues or liability that may arise,” the analyst said. 

The Federal Aviation Administration has declared the 737 Max, Boeing’s best-selling aircraft, as safe to be flown, Epstein said. 

That FAA declaration of the Max 8’s airworthiness makes Boeing stock still worth having, Tigress Financial analyst Ivan Feinseth said in a note to investors, calling the weakness in the stock a buying opportunity.

Boeing shares had dropped 13 percent on Monday, but gained much of that back before the second day of calls for grounding its planes caused new pressure on the stock Tuesday.

Boeing didn’t see canceled orders for the plane after the first crash involving an Indonesian Lion Air jet last year, Feinseth said. 

“Boeing currently has a 20-year backlog for plane demand that continues to grow driven by the global demand for commercial and cargo aircraft,” the analyst said. “I believe the shares will recover and continue to make new highs and view yesterday’s weakness as a buying opportunity.”

Boeing: Full Confidence in Safety of Max

“Safety is Boeing’s No. 1 priority and we have full confidence in the safety of the MAX,” the company said in a statement Tuesday.

While reiterating that the FAA hasn’t grounded the plane, Boeing officials said in the statement that they understand some countries’ regulatory authorities and some airlines “have made decisions that they believe are most appropriate for their home markets.

“We’ll continue to engage with all of them to ensure they have all the information they need to have the confidence they need to safely continue to operate their fleets or return them to service,” Boeing said. 

The biggest regulatory moves came in the United Kingdom, France, China and Germany. The countries all closed their airspace to the 737 Max pending the investigation results. Germany’s transport minister said his country’s airspace would be closed to the planes “until all doubts are cleared up.”

Britain’s civil aviation authority had earlier instructed airlines to stop commercial passenger flights using the planes from arriving, departing or flying over UK airspace.

Ireland and Australia are also among the more than a dozen countries that have halted, at least temporarily, the planes from flying. Some airlines have also made the decision on their own, including Brazil’s Gol Airlines, which has 121 of the jets in service.

The Ethiopian Airlines flight crashed a few minutes after take-off from its African hub of Addis Ababa en route to Nairobi, Kenya. All 157 people on board were killed. The crash was preceded by the crash of the Lion Air jet just five months earlier. It plunged into the Java Sea after take-off from Jakarta, Indonesia on a domestic flight in October, killing 189.

Related Links:

Everything We Know About The Boeing 737 MAX Crash 

Argus Ups Boeing Target Price On Positive Industry Trends 

Photo by Acefitt/Wikimedia. 


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