Boeing’s bestselling passenger jet is facing increased scrutiny after being involved in two deadly crashes in less than five months, a situation that threatens to tarnish the US plane maker’s reputation for safety.
Chinese aviation authorities on Monday told airlines in the country to ground all their Boeing 737 MAX 8 aircraft, citing the need for “strict control of safety risks.” Some individual airlines are taking similar action elsewhere. And Boeing has postponed the debut of its new 777X jetliner, which was scheduled for this week, as it deals with the fallout from Sunday’s disaster in Ethiopia.
The flurry of negative headlines unsettled investors. Boeing shares dropped nearly 9% in premarket trading early Monday in New York.
All 157 people on board a 737 MAX 8 operated by Ethiopian Airlines were killed when the plane crashed shortly after takeoff on Sunday morning. In late October, a 737 MAX 8 flown by Lion Air went down off the coast of Indonesia, killing 189 people.
Both the Ethiopian Airlines and Lion Air planes were brand-new aircraft. And both crashed minutes into flight.
Ethiopian Airlines said Monday that it was grounding its fleet of 737 MAX planes as an “extra safety precaution,” and Cayman Airways, the main carrier of the Cayman Islands, said it would do the same until “more information is received.”
The circumstances of the two crashes remain under investigation, and Boeing has presented no evidence to suggest the two disasters are linked. The similarities may be a coincidence.
“A formal investigation will need to be conducted into this new crash. It’s important not to speculate as to its causes. A final, conclusive report has yet to be issued in the case of the Lion [Air] crash,” said Greg Waldron, Asia managing editor at aviation research firm FlightGlobal.
“That said, having two crashes of a brand new type in a short time is an unprecedented state of events,” he added. “It is inevitable that this will affect perceptions about the 737 MAX family.”
The decision by Chinese authorities to ground 737 MAX 8 planes in the country is a serious blow.
“A suspension in China is very significant, as this is a major market for Boeing,” Waldron said. Chinese airlines have 97 of the 737 MAX aircraft in service, more than a quarter of the total in operation worldwide, according to FlightGlobal.
The single-aisle Boeing 737 has been a workhorse on short- and medium-haul flights for decades. The 737 MAX is the latest version — and the company’s bestselling aircraft by far. Airlines have ordered thousands of them.
The two-year-old 737 MAX 8 model in particular is hugely popular (the MAX 9 only recently went on sale and Boeing has not yet delivered the MAX 10). Last year, 72% of Boeing’s deliveries were 737 planes. Boeing plans to make 59 new 737s each month this year — more than four times the number of 787s, Boeing’s next-best seller.
Southwest Airlines has the largest fleet of 737 MAX 8 airplanes, followed by RyanAir and FlyDubai, according to Boeing. American Airlines and United also fly the MAX 8. Delta does not fly any 737 MAX variants.
FlyDubai said in a statement Monday that it remains “confident in the airworthiness” of its Boeing 737 Max fleet. The United Arab Emirates-based airline, which has 11 Boeing 737 MAX 8s and two 737 MAX 9s in operation, added that it is monitoring the situation and continues to be in touch with Boeing.
American Airlines said it would “closely monitor the investigation in Ethiopia” and continue to collaborate with regulators including the US Federal Aviation Administration. There are 24 737 MAX 8 aircraft in its fleet.
Despite the negative headlines, Richard Aboulafia, an aviation analyst at Teal Group, predicted that the fallout from the Ethiopia crash is unlikely to hurt Boeing’s bottom line too much.
“Relative to the company’s revenue base, this would not be overly burdensome by any means,” he said.
If the Ethiopian Airlines crash was caused by the same issue as the Lion Air crash, Boeing might need to quickly implement a package of modifications to its planes and change the way 737 MAX 8 crews are trained, Aboulafia suggested.
Boeing said in a statement Sunday that it “is deeply saddened to learn of the passing of the passengers and crew on Ethiopian Airlines flight 302, a 737 MAX 8 airplane.”
“We extend our heartfelt sympathies to the families and loved ones of the passengers and crew on board and stand ready to support the Ethiopian Airlines team,” the statement said.
Boeing team heading to crash site
A Boeing technical team will travel to the crash site to provide assistance to the Ethiopia Accident Investigation Bureau and US National Transportation Safety Board.
The Ethiopian plane had flown for only 1,400 hours before it crashed, and Ethiopian Airlines has a good safety record.
October’s Lion Air crash is believed to be caused by faulty data that suggested the nose was tilted higher than it was. The new safety system installed in the 737 MAX 8 plane automatically pulls the plane’s nose down if data suggests it is at risk.
Before the Ethiopia crash, Boeing’s stock had gained 31% this year. It was the best performer in the Dow and the 16th best stock in the S&P 500.
Boeing had its best year ever in 2018, and has said it expects this year to be even better. The company posted sales of more than $100 billion for the first time in its 102-year history because of increases in commercial and military jet deliveries.
The company delivered a record 806 commercial jets last year, up nearly 6% from 2017.