Boeing stock experienced a decline as the company recently uncovered additional issues with its 737 MAX fuselages, resulting in a delay in delivering 50 planes while necessary work is carried out.
Actions Taken to Address the Problem
Boeing promptly notified investors and provided details on the measures being taken to prevent similar problems in the future.
The latest issue revolves around improperly drilled holes. In a memo published on Boeing's official website, CEO of Boeing Commercial Airplanes, Stan Deal, stated, "This past Thursday, a supplier alerted us about non-conformance in some of our 737 fuselages. Although this potential condition does not pose an immediate flight-safety risk and all 737s can continue to operate safely, we estimate that approximately 50 undelivered airplanes will require rework."
While the specific supplier was not mentioned, it is believed to be Spirit AeroSystems. Spirit AeroSystems is responsible for supplying fuselage sections, including those for the 737 MAX, generating around 60% of its total sales through Boeing.
No Immediate Response from Supplier
At present, neither Spirit AeroSystems nor Boeing has commented on the matter.
Stock Market Reaction
Following the news, Boeing shares fell by 2.1% in premarket trading, which saw Spirit stock also decline by 3.1%. Additionally, S&P 500 futures were down by 0.2%, Dow Jones Industrial Average futures saw a decrease of 0.1%, and Nasdaq Composite futures remained relatively unchanged. As of Monday trading, Boeing shares had already dropped by approximately 20% year to date, while Spirit shares had experienced a 12% decline.
Boeing Faces New Quality Issue
Boeing, one of the major manufacturers of commercial airplanes, has encountered yet another setback with a new quality issue. This comes almost a month after a door plug blew off a 737 MAX 9 plane operated by Alaska Air Group, leading to the grounding of all MAX 9 jets by the Federal Aviation Administration (FAA). After thorough inspections and necessary corrections, these jets were allowed to return to service three weeks later.
The MAX 9 is one of two versions of the MAX jet that has been approved for commercial service, with the MAX 8 being the main version currently operating over 1,200 planes. While Boeing has delivered approximately 200 MAX 9 jets to customers, they are also striving to obtain approval for the MAX 7 and 10 models. However, the increasing oversight by the FAA is expected to prolong the approval process due to the different lengths of these versions.
Tim Clark, the head of Emirates Airline, expressed concerns about Boeing's declining quality standards over the years. In an interview with the Financial Times, he emphasized the need for Boeing to establish an unrivaled "safety culture." According to Clark, this moment presents Boeing with an imperative opportunity to rectify the situation.
Boeing's efforts to improve quality include reducing unfinished work along the assembly line and implementing quality improvement ideas submitted by workers during a recent meeting. Although Boeing's current issues are significant, there are only two major manufacturers of commercial airplanes, leaving airlines like Emirates facing a challenging situation. Meanwhile, rival manufacturer Airbus experienced a slight decline of 0.2% in Paris trading on Monday.