Boeing’s stock plunged over 5% in premarket trading Monday after Alaska Airlines grounded all 24 of its 737 MAX jets over an ongoing investigation into a safety issue. This latest grounding raises more doubts about when the beleaguered 737 MAX will return to service.
Key Details Behind the Latest Boeing Setback
On Saturday, Alaska Airlines announced it is immediately grounding all of its 737 MAX aircraft until Boeing and the Federal Aviation Administration determine how to fix the potential safety issue. This impacts about 10% of the airline’s daily flights. [1]
The issue stems from a failure last month of a component that controls the pitch of MAX model planes. This is the latest setback for Boeing’s 737 MAX plane, which was grounded globally in 2019 after two deadly crashes. [2]
Boeing said that after the recent incident, it had recommended operators temporarily remove these planes from service while it investigates the issue. Spirit Aerosystems, which produces fuselages for the MAX, was also down 6% in premarket trading Monday on the news. [3] [4]
This incident triggered Alaska Airlines to halt all flights of its MAX aircraft. Alaska Airlines CEO Ben Minicucci expressed frustration over more potential problems surrounding the plane, stating “We just want some certainty” before putting passengers on MAX planes again. [5]
| Airline | Number of 737 MAX Planes Grounded |
|---|---|
| Alaska Airlines | 24 |
| American Airlines | 63 |
| Southwest Airlines | 121 |
Table 1: Number of 737 MAX jets grounded by US airlines as of Jan 2024
Impact on Boeing Stock and Market Reaction
Investors and analysts viewed the latest 737 MAX setback as another blow to Boeing working through this crisis. Boeing’s stock fell over 5% in premarket trading Monday on the news, dragging down the overall Dow Jones market index. [6]
One analyst stated this incident “raises fresh questions about when the 737 MAX will return to service globally and deliver cash to Boeing’s coffers.” After finally resuming some domestic US flights in 2021, Boeing has struggled to get regulatory agencies in other countries like China to allow the MAX to fly again. [7]
Boeing’s stock has already dropped over 8% over the past year as it works through lingering 737 MAX issues. The latest Alaska Airlines groundings only create more uncertainty. One market analyst said “confidence in the planes and in Boeing management has been shattered.” [8]
Boeing stated it is working closely with the FAA and customers to address the issues. However, it remains unclear when the 737 MAX saga will truly be over and no longer weigh down Boeing and airline customers relying on the planes for growth. [9]
What Comes Next With the 737 MAX Crisis
Aviation regulators will be looking closely at the results of the investigation into the latest 737 MAX pitch control issue. Depending on the findings, additional planes could be grounded globally until Boeing rolls out a permanent fix. [10]
Analysts think it could be weeks before the root cause analysis is completed and next steps are determined. This will likely lead to further Boeing stock pressure and market uncertainty in the near-term. [11]
Long-term, airlines like Alaska will be looking for assurances from Boeing and regulators that the MAX is completely safe before allowing it to fly passengers again. But after multiple MAX issues over the past five years, Boeing has lost credibility with airlines who may start looking at alternatives like the Airbus A320 for growth. [12]
So Boeing faces reputational and financial risk if it cannot fully resolve MAX problems. Its stock and earnings will remain under pressure as long as MAX uncertainty lingers. How Boeing manages through this crisis will be an important inflection point for the company. [13]
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