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Max 8 crisis wipes more than $25 billion off Boeing’s market value

Caesar Abangirah by Caesar Abangirah
6 years ago
in Business, CEOs & Entrepreneurs,, World News
3 1
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The latest bad news for Boeing arrived on Wednesday afternoon. The United States joined other countries and grounded its 737 Max planes.

Shares of Boeing (BA) fell three per cent immediately after President Donald Trump announced the move from the White House.

The shares then rebounded in a sign that the grounding had been largely priced in to Boeing’s stock. But even after ending Wednesday slightly higher, the stock is still down more than 10 per cent since the crash, wiping more than $25 billion off the company’s market value.

The US grounding comes after two fatal crashes in the last five months involving the 737 Max 8 jet. A Lion Air flight crashed in Indonesia in October, and an Ethiopian Airlines plane crashed on Sunday. Neither of the crashes left any survivors.

Investigators are still looking into the cause of both crashes.

A preliminary investigation shows that pilots in the Lion Air crash struggled to get control of the plane after the nose was forced down by an automatic safety feature. The CEO of Ethiopian Airlines said his pilots also were reporting problems controlling the plane before the crash.

Aviation authorities around the world have been ordering the planes to be grounded for the last three days. The United States was essentially the last country allowing the planes to fly.

Boeing said it remains confident in the safety of the jets, but that it recommended the shutdown itself “out of an abundance of caution and in order to reassure the flying public of the aircraft’s safety,” according to a statement from the company.

“We are supporting this proactive step,” CEO Dennis Muilenburg said in the statement. “We are doing everything we can to understand the cause of the accidents in partnership with the investigators, deploy safety enhancements and help ensure this does not happen again.”

He again expressed the company’s sympathy to the families of victims of the crash and said that the company has no greater priority than the safety of its aircraft.

Shares of the three US airlines that had been using the planes – American Airlines, Southwest and United – saw their shares briefly shoot lower on the news, and then quickly rebound to positive territory. It is very possible that Boeing will compensate the three carriers for lost revenue. There are 67 737 Max planes that operate between them.

The airlines all said they would work to accommodate passengers affected by the grounding. But the planes make up small portion of their overall fleets — Boeing Max jets account for less than three per cent of the capacity of each of the airlines.

Boeing has a history of paying airlines if planes they own are grounded because of safety orders. It did so after a three-month grounding of the 787 Dreamliner jet in 2013.

Earlier Wednesday, the CEO of European discount carrier Norwegian Air said it would bill Boeing for lost revenue from the grounding of 18 737 Max 8 jets.

CNN Business


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