Everything We Know About The Boeing 737 MAX Crash

Boeing Co BA shares were down 13 percent Monday morning after its fastest-selling model, the 737 MAX 8, suffered its second deadly crash in five months. An Ethiopian Airlines jet plummeted Sunday within minutes of takeoff, killing all 157 on board.

The fuel-efficient version of the Boeing 737 has been in flight for less than two years, but its brief life has been too eventful. In October, a Lion Air crash in Indonesia killed 189 people.

The causes of both crashes are yet undetermined. Both planes took off under clear skies, lost contact with controllers and dropped shortly after takeoff.

The Lion Air plane had reported problems before falling, and investigators discovered maintenance problems leading up to the flight, including issues with an anti-stall system. In Ethiopia, the four-month-old aircraft showed instability as it gained altitude, and the flight’s experienced pilot had been cleared to return to the airport.

Backlash Begins

Before the crash, Boeing traded up 31 percent year to date as the Dow Jones Industrial Average top gainer. By Monday, its steepest decline in nearly 20 years cost the Dow about 250 points.

“Though it is early to draw conclusions, there may be concerns of disruption around safety, production, groundings, and/or costs, all of which should be manageable longer-term,” Morgan Stanley analysts wrote in a note.

The 737 MAX 8 is a critical piece of Boeing’s commercial air business, which claimed about 60 percent of the firm’s record $101.1 billion sales in 2018. Management delivered 350 jets in January and have 4,661 on order.

Southwest Airlines Co LUV, American Airlines Group Inc AAL and United Continental Holdings Inc UAL all include the model in their fleets, but fortunately for Boeing, each reaffirmed confidence in their planes after the Sunday crash.

Not all customers were as confident.

Temporary Grounding

Chinese officials ordered a temporary grounding of all Boeing 737 MAX 8 flights by domestic airlines. Before clearing flights, they await confirmation of the model’s safety from Boeing and the Federal Aviation Administration.

"Given that two accidents both involved newly delivered Boeing 737-8 planes and happened during take-off phase, they have some degree of similarity," the Civil Aviation Administration of China said in a statement.

Indonesia and Ethiopia also grounded their 737 MAX 8 fleets for inspection, and Cayman Airways grounded two of its models until the formal investigation provides clarity. India announced that it would review the model’s safety and issue instructions for operators by Tuesday.

The Association of Flight Attendants formally requested an FAA investigation of the plane.

The Dow is down 200 points simply because one stock -- Boeing -- is down nearly 13%. Remember that Dow is price-weighted, not market cap weighted like S&P 500. And Boeing has the highest price. The S&P 500 is up 0.4% because $BA is not nearly as important to it.

— Paul R. La Monica (@LaMonicaBuzz) March 11, 2019

What’s Next

Boeing has prepared a team to assist in the crash investigation. General Electric Company GE, which manufactured the jet’s CFM LEAP-1B engines, also plans to contribute.

Morgan Stanley anticipates continued volatility in Boeing’s stock as new information about the incident comes to light.

“The accident could disrupt opportunities for guide raises and order activity in the very near-term since the 737 covers 70 percent-plus of commercial production,” the analysts wrote. They nonetheless expect multi-year cash-flow growth.

Boeing's stock traded at $377.60 per share at time of publication, down 10.6 percent.

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Photo credit: pjs2005 from Hampshire