Boeing shares dropped the most in more than a year last Monday, plunging 8 per cent after a mid-flight incident in which a door panel blew off one of its 737 Max-9 planes.
Contrarian investors often look to buy into panic following these kind of shock events, but shares remained weak throughout the week.
Investors could be forgiven for their caution, given Boeing’s safety record in recent years. Fatal plane crashes in 2018 and 2019 resulted in 346 deaths, a 20-month grounding for Boeing’s 737 Max fleet, and the company having to pay some $20 billion (€18.3 billion) in fines and compensation. Boeing subsequently fired CEO Dennis Muilenburg, with Dave Calhoun replacing him in January 2020, but safety issues have persisted. Last year brought separate admissions regarding safety problems in April, August and December.
The latest incident further exacerbates Boeing’s reputational hit. As Emirates president and Boeing customer Tim Clark bluntly put it, “they’ve had quality control problems for a long time now”.
[ Irish-based aircraft lessors own some of the grounded Boeing 737 Max-9 jetsOpens in new window ]
[ Boeing's mid-flight drama is a severe blow to a troubled companyOpens in new window ]
This assessment is mirrored in the share price, which has halved from 2019′s peak. In contrast, shares of Boeing’s big rival, French producer Airbus, hit all-time highs last week. Calhoun is contrite. The latest incident left him “shaken to the bone”, and he is promising “complete transparency”. At this stage, sceptical investors will demand nothing less.
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