Boeing Co. continues to grapple with challenges in 2024, as analysts and a major customer express worries about the potential impact of increased scrutiny on the company’s manufacturing processes. Shares of Boeing plummeted by as much as 8.4% in New York trading on Tuesday, while Spirit AeroSystems Holdings Inc., the primary builder of the 737 Max frame, saw a decline of up to 7.5%. This decline has extended Boeing’s year-to-date slide to approximately 23%, making it the most significant drop among the 30-member Dow Jones Industrial Average.
Amid these concerns, Boeing announced that retired Admiral Kirkland Donald has been appointed as a special adviser to Boeing CEO Dave Calhoun, effective immediately. Donald will lead a comprehensive assessment of Boeing’s quality management system for commercial airplanes, particularly in response to the alarming incident involving Alaska Airlines Flight 1282 on January 5.
Investors have erased late-2023 gains in Boeing shares as apprehensions mount regarding the potential long-term consequences of the Alaska Airlines mid-air structural failure. Wells Fargo analysts downgraded Boeing to equal-weight from overweight, highlighting an increased risk that regulatory checks into the company’s manufacturing quality may impede deliveries, especially for the inventory of already-built Max aircraft.
Similar concerns were expressed by Ryanair Holdings Plc CEO Michael O’Leary, one of the prominent customers for the 737 Max, at an event in London. O’Leary emphasized the risk of further delivery delays and potential distractions for Boeing management, echoing concerns raised by analysts.
The Federal Aviation Administration (FAA) has grounded most Max 9 jets, and an investigation into manufacturing practices at Boeing is underway following the Alaska Airlines incident. The FAA plans to enhance monitoring of “in-service events” on the Max 9 and conduct audits of Boeing’s production line and its suppliers.
The intense scrutiny into quality controls at Boeing and Spirit could impact production increases planned for the Max this year, according to Ron Epstein, an analyst with Bank of America. This may impact cash margins on a jet family crucial for profit. Boeing is responding by intensifying internal inspections and providing customers with increased access to its factories.
As concerns persist, Boeing’s stock faces downward pressure, prompting the company to bring in external experts for a thorough review of its quality controls. The appointment of Admiral Kirkland Donald to lead this review marks a strategic move to address the challenges Boeing is currently facing and regain confidence in its manufacturing capabilities.
