Boeing has just announced the first sales of the 737 Max since the highly publicized crashes earlier this year.
Boeing has had a rollercoaster of a year, beginning with a fast boom due to its new contracts, and eventually culminating in a catastrophic slide amidst safety concerns. Yet, the sale of 200 new 737 Max planes could be the start of the company’s recovery.
From Booming Stock to Sudden Crash
Following multiple contracts with the U.S. federal government, Boeing started off the year heavily positive. From January to late February, Boeing stock was a clear buy. Stock prices rose from $323.81 to peak at $440.62 on March 1st. And then, the crashes came — and Boeing’s stock crashed with it.
Boeing’s crashes illustrated some important quality control issues within the company, and stalled out the company’s growth. And, of course, public sentiment tanked: airplane crashes scare people, and can impact the consumer travel market as a whole.
A total of two crashes occurred, both of which pointed to faulty software. Blame was placed on an automated system within Boeing’s planes that were intended to keep them from stalling. After investigations, it did appear as though it was a software fault within the plane itself.
With larger engines, the 737 Max was more prone to stalling than prior models. To mitigate this, Boeing programmed in a system that would push the plane’s nose down in order to stabilize it. Unfortunately, many pilots weren’t trained as to the existence of this system, and consequently did not know how to react to this behavior. When planes began to operate unpredictably, pilots attempted to compensate — and destabilized the planes even further.
These crashes were devastating to Boeing, which had hinged most of its future plans on the Boeing 737 Max — an exceptionally popular and versatile plane.
The Future of Boeing and the 737 Max
Boeing has been hard at work to address the issues that have come to light during the crashes. Not only does it have to update its software system, but it also needs to work more closely with the FAA and with the public to recapture trust.
Notably, Boeing appears to be rebranding the 737 Max, and starting to use its internal name: 737-8. This rebranding may be to escape public perception and ready the brand for sales, though analysts have also been quick to mention that this was always the internal name that the 737 Max used.
Despite the sales, however, Boeing remains grounded, and it’s unknown when regulators will be willing to let the planes fly again. Before the 737 Max can take to the air, it’s going to need to reassure regulators that it’s fully safe.
It’s not just that Boeing needs to renew its software, but it also needs to create a culture of safety. The fail safes that should have been in place to prevent this (such as better training) did not exist, and inspectors who should have caught the issues did not.
Boeing Stock is Still Going Strong
Despite the precipitous crash, Boeing stock remained higher than it started at the beginning of the year. The stock itself is still strong, as is the company — and it’s likely that it will eventually recover. In fact, it’s particularly meaningful that even the crashes of the 737 Max couldn’t bring the stock to its knees. The stock has been rising again since May.
Boeing is a remarkably resilient company, and its ability to draw in government contracts is going to maintain its value moving forward. However, there are things that could still injure the company and damage its ability to recover. Additional crashes, or a failure to address the safety concerns of the 737 Max, could be incredibly destructive.
Moving forward, Boeing is likely to continue rebadging the 737 Max, and working with the FAA to get its planes back in the air. Additional contracts may be upcoming, as Boeing appears willing to negotiate with its purchasers — it may be a good time for companies to get a substantial deal.
Regards,
Ethan Warrick
Editor
Wealth Authority
