Concerns About New Plane Ground Boeing Stock Rise - NBC Connecticut

Concerns About New Plane Ground Boeing Stock Rise

Boeing shares were down more than 11 percent this week through Thursday, and had lost about $29 billion in market value

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    Boeing Promises Software Fix for Grounded 737 Max Planes

    Boeing has promised an urgent fix to flight control software in its grounded 737 Max planes, days after the crash of an Ethiopian Airlines 737 Max killed all 157 people on board. American pilots made at least five complaints last fall about autopilot issues causing the planes to make a sudden nosedive during takeoff. (Published Thursday, March 14, 2019)

    Boeing soared early in 2019 and lifted the Dow Jones Industrial Average with it. Now concerns about the safety of the newest version of its flagship airplane have halted the momentum.

    Shares rose 36 percent in January and February thanks to steady orders for Boeing jetliners, including its popular 737. Then came Sunday's deadly crash of a 737 Max 8 in Ethiopia, just months after the crash of a Lion Air Max 8 in the Java Sea. Now, aviation authorities from the U.S. to Britain to China have ordered the planes grounded, with U.S. regulators saying new information showed some similarities between the two incidents.

    Boeing shares were down more than 11 percent this week through Thursday, and had lost about $29 billion in market value. The shares still have outpaced the market in 2019, and account for 14 percent of the Dow's increase so far.

    The immediate question for Boeing investors is whether the grounding of the planes and crash investigations will have just a short-term effect on Boeing shares and finances, or have a longer-term impact.

    Trump Orders Boeing 737 Max Aircraft Grounded

    [NATL] Trump Orders Boeing 737 Max Aircraft Grounded

    President Trump announced Wednesday all Boeing 737 Max aircraft would be grounded "effective immediately" in the wake of a crash in Ethiopia where 157 people were killed. A software issue may cause the plane to dive suddenly if the aircraft appears to stall out. Many pilots have stated that they were unaware of the potential issue.

    (Published Wednesday, March 13, 2019)

    "We think an investment in Boeing stock should take into account its long history of safe flight, a strong book of business and strong demand dynamics," said Jim Corridore, an equity analyst at CFRA.

    Canaccord Genuity analyst Ken Herbert said Boeing has likely been working on a software fix for the new 737s since the Lion Air crash last year and much of the cost has already been factored into its guidance for the year. But other risks remain. Plane delivery delays are now a concern along with costs for compensating airlines for service disruptions.

    "We still see some uncertainty around the timing of the grounding and risk around the root cause analysis," he said.

    The Max 8 is the latest version of the single-aisle 737, which is the world's most common passenger jet. Boeing has taken orders for more than 5,000 of the Max planes from scores of airlines and delivered 376 of them.

    The company set a record for commercial plane deliveries in 2018 while increasing its margins. It expects to set another record this year, but the crashes could put a dent in orders and deliveries.

    "The airlines are the customers of Boeing. If they stop buying the planes, if they start canceling orders, that would have a cascading domino effect," said Paul Hudson, president of flyersrights.org, a group representing passengers. "They're on thin ice when they've had two crashes," he said. "I think one more strike and you're out. Boeing cannot afford another crash like this in the near-term."

    Rival Airbus gave Boeing a boost in February when it announced it would stop making the iconic A380 plane, which is a competitor to Boeing's 747. Boeing is rolling out the new 737 models also with rival Airbus' A320 model in mind.

    "We continue to feel very strong about the marketplace," said CEO Dennix A. Muilenburg at a recent investor's conference. "We see a world that needs about 43,000 new airplanes over the next 20 years. We're seeing continued healthy passenger volume growth around the world."

    Commercial airplanes are by far the biggest contributor to Boeing's bottom line. Revenue from that unit jumped 5 percent to $60.72 billion in 2018. The company's defense and security business saw revenue rise 13 percent to $23.2 billion last year.

    Reporter Tom Krisher contributed to this report.