Military

How Far Will Boeing's Stock Drop as Its Planes Are Grounded?

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Boeing Co. (NYSE: BA) stock is down close to double digits on a decision by the Federal Aviation Administration (FAA) to ground 171 Boeing 737 Max 9 aircraft worldwide. The decision came after an Alaska Airlines plane lost part of its side while in flight. Images of the damage ended up on social media and spread like wildfire. While it is impossible to forecast how long these planes will be out of circulation, the problem could be costly to Boeing.

A Big Problem?

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The FAA stated the seriousness of the problem. FAA Administrator Mike Whitaker commented: “Safety will continue to drive our decision-making as we assist the NTSB’s investigation into Alaska Airlines Flight 1282.” (See which are North America’s best airlines.)

Boeing management has encountered a similar hurdle before. It should hope that the newest government investigation does not turn into months of investigations and hundreds of millions of dollars in lost sales. In 2018 and 2019, two Boeing 737 Max aircraft crashed, killing 346 people. The Max was an upgrade to the 737. Boeing required fairly minimal training for the pilots of the new planes. The new design made it difficult to control the Max under certain circumstances. The plane was grounded for over two years, and the company faced several lawsuits.

The problems with the 737 Max 9 are almost certainly less serious than those of the Max, but the investigation could continue for some time. During that period, airlines may not have ready replacements for the aircraft, which could hurt them financially. And Boeing could delay production of the plane if the investigation drags on.

What About Boeing Stock?

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What happens to Boeing’s stock price? It fell from $330 in early 2020 to $150 a month later. It has never recovered to the $330 level. Recently, it traded at $250. Investors may be on their way to another roller-coaster ride.

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