The latest crash of the Boeing 737 jet with 132 people aboard in China has created a new crisis for Boeing Co. Renewed concerns over the best-selling planes in the Boeing family has sent the share prices of Boeing tumbling.
More on the devastating crash
The narrow-bodied jet, considered the “next generation” workhorse and operated by China Eastern Airlines, crashed on Monday, leading the jetliner to ground all its 737 models in its fleet. The tragedy complicates things for Boeing, who were trying to regain the flyer’s and regulators’ trust after two of its latest 737 Max had crashed in recent years.
The China Eastern Airline crash did not involve the 737 Max model or the software, creating a problem that was the cause of its earlier crashes. Still, it has raised questions on the 737 jet family safety features of the bestselling model, which is Boeing’s primary source of income. In 2019 a total of 346 people were killed in 737 Max crashes resulting in China becoming the first nation to ground them.
The Monday tragedy is a setback for Boeing, which has been trying to re-start the 737 Max deliveries to China after a three-year halt, as per JPMorgan analyst Seth Seifman.
Boeing shares fell by 4.3 % on Monday in New York to $184.51. It had already declined by 4.2 % this year till last Friday’s closing. The Chicago-based Boeing has said that they are working on gathering more information and analyzing the cause of the crash.
China is one of the largest customers for 737 jets, and it purchases one-third of the total narrow-bodied plane manufactured by the Boeing Seattle area factory every year. Last week, Boeing had sent the first 737 Max to its delivery center south of Shanghai in China as signs of thawing its overseas market.
Boeing has already burned more than $20 billion in costs on Max, and its financial turnaround depends on its ability to deliver large volumes of 737 models. They had a target of 500 737 deliveries this year, which is a question mark now after a sluggish start.
Suppliers like Spirit AeroSystems Holdings Inc. will be closely watched for the production pace as they manufacture and supply the airframes for the 737 jets to Boeing.
According to Bloomberg intelligence analyst Matthew Guedner, this crash will now result in the OEM bonds narrowing the discount it trades in the Triple B tier industry. Lowering inventory and generating cash will be crucial to reducing the debt and easing the pressure on the financial risk profile of Boeing.
The 737 jet has created confusion among travelers who now wants to avoid flying Max due to its history of accidents. Isolating the cause of accidents is critical as there could be other factors like Pilot error, sabotage, or maintenance issues more than design or manufacturing defects.
