Boeing Suffers Historic Stock Rout in Global Uproar Over 737 Max
(Bloomberg) -- Boeing Co. staggered into a deepening global crisis as governments around the world grounded the company’s best-selling jet over safety concerns after a second deadly crash.
The shares posted the biggest two-day drop in almost a decade as the European Union and India suspended 737 Max flights while investigators probe why an Ethiopian Airlines aircraft plunged to the ground near Addis Ababa. The March 10 crash, in which 157 people died, occurred less than five months after a Lion Air 737 Max 8 plunged into the Java Sea off the coast of Indonesia.
The global rush to halt flights is leaving Boeing and the U.S. Federal Aviation Administration isolated a day after they expressed confidence in the jetliner’s airworthiness. Jurisdictions including China, Australia and Singapore had already grounded the Max, as had airlines from Latin America to Africa and the Middle East. But the spread of the ban to Europe deals another big blow to Boeing as it grapples with the aftermath of the African tragedy.
“I’m watching this unfold with an element of astonishment and bemusement,” said Sandy Morris, an analyst at Jefferies in London. “What we’re looking at here is almost a rebellion against the FAA. You’re now looking at American and Southwest and asking, can you really still operate this aircraft?”
Boeing fell 6.1 percent to $375.41 at the close in New York, bringing the two-day drop to 11 percent. The company has lost almost $27 billion in market value this week.
In the U.S., Southwest Airlines Co. and American Airlines Group Inc. are still flying the 737 Max 8, the model that crashed March 10 in Ethiopia just minutes after takeoff. United Continental Holdings Inc. flies the Max 9.
While Air Canada said it remains confident in the safety of its 737 Max planes and is still flying them, the carrier canceled two flights to London because of the ban in Europe. Canadian Transport Minister Marc Garneau said the country was “considering all potential actions” in regard to the plane but wouldn’t “make any premature decisions.”
Investigators are working to retrieve information from the Ethiopian Airlines jet’s black-box flight recorders, which have been recovered. Pilots at the carrier got additional training on the 737 Max after the Lion Air crash, Tewolde GebreMariam, chief executive officer of Ethiopian Airlines, told reporters in a broadcast on state-controlled ETV.
So far, the FAA said, there isn’t evidence to link the loss of that aircraft to the Lion Air crash, in which 189 people died.
In the Indonesian accident, anti-stall software baffled pilots by pitching the plane’s nose down dozens of times before it crashed. The system was activated by a reading from a single faulty sensor, without any pilot input, and didn’t respond as the flight crew desperately tried to halt the dive.
Boeing and the FAA announced changes late Monday to the plane’s anti-stall software and faulty sensor readings linked to the Lion Air accident.
The updates are aimed at preventing a malfunctioning sensor like the one on the Lion Air jet from activating the Maneuvering Characteristics Augmentation System and pushing down a plane’s nose when it’s not needed.
The enhancements, to be rolled out in the coming weeks, limit the number of times the system kicks in and the magnitude of force it exerts. Boeing plans to use inputs from two sensors that measure a plane’s profile against oncoming wind, instead of relying on a single one, to assess the threat of an aerodynamic stall.
The manufacturer also plans to make standard on pilot displays an indicator showing when the two sensors have conflicting data.
Despite FAA support, the 737 Max drew criticism in the U.S. from the White House to airline unions.
President Donald Trump weighed into the controversy, tweeting that planes “are becoming far too complex to fly.” He also spoke with Boeing CEO Dennis Muilenburg after the tweet. Muilenburg reiterated his confidence in the safety of the aircraft, said a person familiar with the matter who asked not to be identified discussing a private conversation.
White House Press Secretary Sarah Sanders later elaborated on the president’s statement, telling Fox News, “We know that a lot of people in the industry have started to voice concerns about the amount of technology, taking the power out of the hands of the pilot.”
The flight attendants’ union at American Airlines urged CEO Doug Parker to “strongly consider” grounding the company’s fleet of 24 Max 8 planes.
Utah Senator Mitt Romney said he’s been in touch with Senator Roger Wicker, chairman of the Commerce, Science and Transportation Committee, about setting up an FAA briefing “to make sure we have all the information that we need” on Boeing’s 737 Max aircraft.
Romney, a Republican, and Democratic Senator Elizabeth Warren of Massachusetts called for the aircraft to be grounded until the crashes are investigated. Senator Ted Cruz, a Texas Republican, echoed their view and said he intended to hold a hearing on the two recent crashes as chairman of the Subcommittee on Aviation and Space.
Senator Richard Blumenthal, Democrat of Connecticut, wrote to the chiefs of Southwest, American and United to urge them to voluntarily ground the planes.
“The common sense step now -- until we have answers -- is to ground these planes,” Blumenthal wrote.
©2019 Bloomberg L.P.