Boeing stock experienced a decline on Monday following an emergency landing of an Alaska Air 737 MAX-9 flight on Friday. The stock of MAX fuselage supplier, Spirit AeroSystems, took an even bigger hit.
Wall Street Remains Unfazed
Despite the incident, Wall Street appears relatively unconcerned. The affected version of the MAX aircraft is a low-volume model, and the problem seems to stem from a manufacturing issue.
Stock Performance
Boeing shares saw an 8.4% drop to $228 in premarket trading on Monday. Spirit AeroSystems stock plummeted almost 20% to $25.69. Additionally, Alaska Air witnessed a 4.2% decline to $36.37. Meanwhile, S&P 500 and Dow Jones Industrial Average futures experienced decreases of 0.1% and 0.4% respectively.
Impact on Dow Component
Boeing’s position as a Dow component played a significant role in dragging down the blue-chip index more than the S&P 500.
Temporary Grounding and Flight Cancellations
The mid-air loss of part of the fuselage resulted in the temporary grounding of most 737 MAX-9 jets by the Federal Aviation Administration (FAA). Consequently, Alaska Air had to cancel over 170 flights on Sunday, with further cancellations expected. Among its fleet of 314 jets, Alaska has 65 MAX-9 aircraft, making up roughly 21% of its total.
Spirit AeroSystems as Supplier
Spirit AeroSystems is the supplier responsible for the failed “door plug.” Moreover, Boeing accounts for approximately 60% of Spirit’s total sales, which explains the significant impact on Spirit AeroSystems’ stock. As of now, Spirit Aero has not responded to a request for comment regarding the Alaska Air incident.
Boeing Grounds 737 MAX-9 Jets Following Alaska Air Incident
Boeing, the renowned aircraft manufacturer, has announced its agreement with the FAA’s decision to ground all 737 MAX-9 jets that share the same configuration as the Alaska Air jet involved in the recent incident. The MAX-9 is one of several variants of the MAX series, with the MAX-8 being the most widely used version. Presently, over 1,400 MAX jets have been delivered, out of which Jefferies analyst Sheila Kahyaoglu estimates that approximately 220 are MAX-9 versions.
Kahyaoglu anticipates that the issue at hand can be resolved expeditiously, suggesting that inspections of all MAX-9 jets will be completed within a matter of days. These inspections are projected to take roughly four to eight hours per plane.
The Boeing shares have been rated as ‘Buy’ by Kahyaoglu and assigned a price target of $315 for the stocks. Furthermore, Melius Research analyst Robert Spingarn also rates the shares as ‘Buy’ and has set a price target of $267 for the stock.
Spingarn mentioned in a report that Alaska has conducted inspections on multiple jets and found no concerning issues. However, the news is not favorable for Boeing’s stock. Nevertheless, Spingarn adds that only around 30 MAX-9 variants are scheduled for delivery in 2024. In contrast, Boeing is expected to deliver roughly 540 737s of all types this year.
Citi analyst Jason Gursky added his perspective, stating, “The recent 737 issue appears to be manufacturing-related rather than a design flaw. While we believe this event is tied to a manufacturing issue, any potential design or structural concern would generate unwelcome news due to the associated costs and delivery delays.”
At present, Wall Street does not perceive a long-term problem for Boeing. Nonetheless, investors should be prepared for some temporary repercussions.