Barclays Downgrades Boeing After Survey Shows Long Road To Regaining Passenger Confidence

Large numbers of fliers told Barclays in a survey that it would be a year or more before they’ll again be comfortable flying on Boeing Co BA’s 737 MAX planes, leading the firm to downgrade the jet manufacturer's stock. 

The plane, Boeing’s signature commercial aircraft, is grounded in Europe, the United States and elsewhere after two crashes in five months — one in Ethiopia and the other off the coast of Indonesia — that killed a total of 346 people.

The Analyst

David Strauss downgraded Boeing from Overweight to Equal Weight and lowered the price target from $417 to $367.

The Thesis

Barclays now expects it to take longer for Boeing to get back to normal with 737 MAX production, based in part on a survey that indicates large numbers of fliers will likely try to avoid the plane “for an extended period” beyond when the plane is allowed to start flying again, Strauss said in the Tuesday downgrade note. (See the analyst's track record here.) 

In the Barclays survey of potential passengers in North America and Europe, more than half said that if given the choice they’d choose another plane. About half of Europeans said they’d like to wait a year or more before flying on a 737 MAX. In North America, about four in 10 said they’d prefer to wait a year or more before again boarding Boeing’s signature aircraft.

Much of the public discussion of the investigation into the two crashes has focused on Boeing’s Maneuvering Characteristics Augmentation System, or MCAS, which is a stall-prevention system that may have malfunctioned, causing the planes to nose-dive.

What Did Boeing Know?

Boeing was also dealing with media reports Monday that Boeing officials knew that a safety alert system in the cockpit related to the nose pitch issue wasn’t working correctly — but didn’t tell regulators or airlines until after the first crash.

Price Action

Boeing stock was down 2.62 percent at $362.22 at the time of publication Tuesday. 

Related Links:

WSJ: Boeing Failed To Disclose Known Safety Alert Problem

Boeing CEO Grilled By Shareholders On 737 Max Issues

Photo by pjs2005/Wikimedia.