Boeing shares, down by more than a fifth since a mid-air blowout on an Alaska Airlines flight, are under further pressure after Wells Fargo analysts downgraded the stock on Tuesday.
The Wells Fargo report, entitled ‘FAA audit opens up a whole new can of worms,’ citing the FAA’s plan to review Boeing’s inspections of the 737 MAX 9 planes before allowing them to fly again.
‘Given Boeing’s recent track record, and greater incentive for the FAA to find problems, we think the odds of a clean audit are low,’ the analysts said.
‘The FAA’s audit is limited to Max 9 for now, but it’s feasible that findings could expand the scope to other Max models sharing common parts.’
The FAA said on Wednesday that inspections of an initial group of 40 Boeing 737 MAX 9 airplanes have been completed, a key hurdle to eventually ungrounding the planes.
Shares of Boing closed at $200.52 on Tuesday, down nearly 20 percent from their January 5 closing price prior to the Alaska Airlines incident
The Federal Aviation Administration has announced it will audit Boeing and its suppliers’ production line after the door of an Alaska Airlines aircraft blew off mid-air
Boeing’s production processes have been under scrutiny since a panel tore off the Alaska Airlines jet while in flight near Portland, Oregon on January 5, leaving a hole on the side of the plane.
The incident rekindled worries about Boeing’s MAX jets a few years after a pair of crashes killed nearly 350 people. Investors are also worried about potential delays to aircraft deliveries.
Shares of Boing closed at $200.52 on Tuesday, down nearly 20 percent from their January 5 closing price prior to the Alaska Airlines incident.
The FAA grounded 171 MAX 9 planes on January 6 pending approval of inspections and maintenance requirements.
Alaska Airlines and United Airlines, the two US airlines that use the aircraft involved, have had to cancel hundreds of flights since last week.
On Wednesday, the FAA said all 737-9 MAX aircraft with door plugs will remain grounded pending the agency’s review and final approval of an inspection and maintenance process.
‘The safety of the flying public, not speed, will determine the timeline for returning these aircraft to service,’ the agency said.
The chair of the National Transportation Safety Board (NTSB) and the FAA safety chief will brief senators on the investigation on Wednesday, sources told Reuters.
Boeing on Tuesday named a retired US Navy admiral to advise the planemaker’s CEO on improving quality control.
Kirkland H. Donald will serve as a special adviser to Boeing CEO Dave Calhoun, Boeing said.
Donald will lead a team of outside experts in evaluating quality practices at Boeing Commercial Airplanes and its supply chain and provide recommendations to Calhoun and Boeing’s board of directors.
An emergency exit used as a cabin window blew out of the Alaskan Airlines flight from Portland to California at 16,000 feet
Naming an outside adviser to the quality review is ‘tremendously important’ in order for the findings to have credibility with the public, said Adam Pilarski, senior vice president at consultancy AVITAS, who was previously the chief economist at Douglas Aircraft.
‘Boeing lost a lot of credibility on the MAX, and the FAA lost a lot of credibility on the MAX,’ he said.
Ongoing MAX 9 investigations could ratchet up the pressure for management changes among Boeing’s top executives, analysts said.
‘We would not be surprised to see regulators, investors and customers push for a turnover in the ranks of senior management and the Board of Directors,’ Bank of America’s Ron Epstein said in a Tuesday morning note to investors.