Boeing shares in trouble as planes are grounded: plane makers' reputation in tatters after windows burst

Boeing shares tumbled yesterday as the crisis engulfing the planemaker deepened after a large part of a 737 Max plane was ripped off mid-flight.

The company's safety record has been thrust into the spotlight again after a piece of the plane was torn off during an Alaska Airlines flight on Friday, leaving terrified passengers staring at a gaping hole in the cabin at 16,000 feet.

None of the 171 passengers were seriously injured in the accident, which happened within the first ten minutes of the brand new plane taking off from Portland, Oregon, in the US.

But the incident has reignited fears about the safety of the Boeing 737 Max plane.

Aviation regulators this weekend ordered the grounding of 171 Max planes while inspections are conducted.

It's another setback for CEO Dave Calhoun, coming just a few days into a year that he has signaled is crucial to his plan to stabilize the planemaker after years of turmoil.

Boeing's share price fell more than 8 percent yesterday as trading on Wall Street resumed for the first time since the accident.

Shares in supplier Spirit AeroSystems, which tore the fuselage on Friday, fell about 15 percent.

In contrast, Boeing's arch-rival Airbus rose more than 2 percent on hopes that the incident would help the company steal further market share from the American giant.

The Max plane has been plagued by problems and accidents, including crashes in 2018 and 2019 that killed nearly 350 people.

Michael Hewson, principal analyst at City Trading firm CMC Markets, said: 'This latest incident raises a host of new questions about Boeing's quality control and manufacturing processes, at a time when confidence in the 737-MAX is already razor thin. '

All of Boeing's 737 Max aircraft worldwide were grounded for 20 months from March 2019.

They were shut down after a crash in Indonesia that killed 189 people, and an accident five months later in Ethiopia that killed 157 people. Investigators found that faulty flight control software caused the fatal accidents.

Former Boeing CEO Dennis Muilenburg and commercial aircraft boss Kevin McAllister were both fired over the scandal.

Pressure: Boeing CEO Dave Calhoun has indicated this is crucial to his plan to stabilize the company after years of turmoil

Russ Mould, investment director at investment platform AJ Bell, said: 'There is no room for error when building aircraft, and cuts in the production phase can have catastrophic consequences.'

But since the crashes, supply problems and production delays have continued.

In January 2020, Boeing halted production of the 737 Max jets – the biggest pause on the assembly line in more than two decades – before resuming limited production in May of that year.

Boeing was forced to halt 737 Max deliveries due to electrical problems in 2021 and non-compliant equipment last year. Shares have fallen more than 40 percent since the 737 Max was first grounded in March 2019.

Mourning: crash of the 737 Max Indonesia in 2018

Airbus has seen the value of its shares rise by around 25 percent over the same period.

Airbus is expected to announce this week that it delivered 735 planes last year, beating Boeing to be crowned the world's largest aircraft maker for the fifth year in a row.

Boeing is under pressure to narrow the gap with France's Airbus.

The American group had been betting on the success of its latest model, the 737 Max 10, which is still awaiting approval.

Debt-laden Boeing is reluctant to invest in an entirely new aircraft until its engine technology matures over the next decade.

Delays in approval of the Max 10 after last week's accident could put new pressure on the strategy, analysts said.

The New York-listed company had also hoped to resume 737 Max deliveries to China soon, but the Alaska Airlines incident could delay the process.

“Questions are obviously being asked about quality controls and whether Boeing is trying to do too much, too fast,” Mold said.

“Boeing management will be under significant pressure from regulators and customers to explain what is going on, which means significant headwinds for the company.

“It's no wonder investors are rushing to sell the shares as the risks to the investment case have just increased.”