Boeing shares have taken a hit after the company disclosed a manufacturing issue affecting its 737 Max planes. The problem involves fittings installed on the rear of the planes, which do not meet the standard requirements. Although the company has assured that this is not an “immediate safety of flight issue,” it could result in delivery delays. A “significant number” of planes in production and storage are impacted, including the Max 7, Max 8, Max 8200 airplanes, and the P-8 Poseidon maritime surveillance aircraft. Boeing is working with regulators to inspect and replace fittings where necessary.
This latest problem adds to the challenges faced by Boeing since two accidents in 2018 and 2019 involving its 737 Max planes that killed 346 people. The accidents were triggered by design flaws in the flight control software, leading to the grounding of the 737 Max for over a year. The company has since been under intense scrutiny and has faced a series of supply issues, including halting deliveries of its 787 Dreamliner due to a problem with data analysis.
Investors are understandably concerned about the recent news, with shares in Boeing falling more than 6% and those in its supplier, Spirit Aerosystems, plunging over 20%. However, Thomas Hayes, chairman and managing member at Great Hill, suggests that investors may be over-reacting to the issue. He adds that while he understands why there is a lack of trust, he believes that the shoot-first-and-ask-questions-later response may not be appropriate.
The new manufacturing issue may lead to delivery delays, which could be a significant problem for airlines that have been trying to upgrade their fleets to meet increased demand for air travel. Southwest Airlines, a major customer of Boeing, expects its orders to be delayed, while American Airlines is still assessing the impact. Meanwhile, United Airlines believes it will not be affected. It remains to be seen how this latest problem will affect Boeing’s reputation and business going forward.
