Following the airline giant’s mid-air safety incident earlier this month, investors expected that more regulatory supervision would have a detrimental effect on Boeing’s financial results, which caused the stock to plunge dramatically on Tuesday.
Boeing’s shares dropped over 8%, causing another impact on the Dow. The report from a Wells Fargo equities analyst warned that an FAA probe “opens a whole new can of worms.”
In the incident on January 5, an Alaska Airlines Boeing 737 MAX made an emergency landing when a “door plug” panel broke out in midair. There were no significant injuries or fatalities.
The FAA first launched a safety probe into the incident, the first major in- flight safety issue on a Boeing plane since fatal 2018 and 2019 737 MAX crashes that led to a nearly two-year grounding of the aircraft.
US regulators then grounded 171 737 MAX 9 planes with the same configuration as the jet involved in the incident.
In the end, the FAA said that they would not be allowed to take off or land unless the organization approved a “rigorous and extensive inspection and maintenance process.”
The FAA stated that data from the first 40 inspections of MAX 9 aircraft will be included in the evaluation.
Wells Fargo downgraded Boeing shares based in part on slower anticipated 2024 deliveries of the 737 MAX that will cut $2 billion in free cash flow, compared with a prior analysis.
“Given Boeing’s recent track record, and greater incentive for FAA to find problems, we think the odds of a clean audit are low,” Wells Fargo said.
United Airlines on Tuesday extended its cancelation of service on the MAX 9 jets through January 17.
Meanwhile, Boeing named retired Navy admiral Kirkland Donald as an advisor to Chief Executive David Calhoun, charged with undertaking a “comprehensive” review of Boeing’s quality programs and practices.
