Business

Boeing Drops Most Since 2001 as Second 737

Crash Grounds Flights
Bloomberg News
March 11, 2019, 7:28 AM GMT+8
Updated on March 11, 2019, 9:48 PM GMT+8

Shares tumble as China, Indonesia to halt 737 Max services

Ethiopian Airlines disaster killed all 157 people on board

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Boeing Co. Chief Executive Officer Dennis Muilenburg faces his biggest crisis yet following the
second deadly crash of a 737 Max jetliner, as some airlines grounded the best-selling plane
and the shares logged their biggest loss since the 9/11 attacks.

China ordered its carriers to ground all 96 of Boeing’s newest 737 model, while Indonesia
said it would also halt flights after Ethiopian Airlines Flight 302 went down in a field shortly
after takeoff Sunday, killing all 157 people on board. While the flight recorders have now been
recovered and must be analyzed, the disaster bore similarities to the doomed Lion Air 737
Max that crashed in October.
Dennis Muilenburg Photographer: Anna Moneymaker/Bloomberg

The 737 Max is the newest version of Boeing’s most important aircraft type, a plane family
that generates almost one-third of the company’s operating profit. The narrow-body jet forms
the backbone of many global airline fleets who use the model and Airbus’s competing A320
line on shorter routes.

Boeing sank 11 percent to $374.31 at 9:37 a.m. in New York after sliding as much as 13 percent
for the biggest intraday decline since Sept. 17, 2001, the first day of trading after the 9/11
attacks.

“Boeing has lost control of the timetable to provide the safe, reliable solution,” said Neil
Hansford, chairman of the Australian consultancy firm Strategic Aviation Solutions. “The
longer it goes, the more chance Boeing has of losing orders.”
Wreckage at the crash site on March 11. Photographer: Michael Tewelde/AFP via Getty Images

The grounding in China, followed by the Indonesian air safety regulator’s order to halt 737
Max flights from Tuesday, raises the specter of other countries following suit. South Korea
began a special inspection of the aircraft, while in Europe, regulators said they’re in contact
with their U.S. counterparts as well as Boeing, but that it’s too soon to take action.

While the groundings in China and elsewhere are important, most nations typically wait to
act until the U.S. and Europe issue findings on aviation matters. The Federal Aviation
Administration and the European Union Aviation Safety Agency oversee the world’s largest
aircraft manufacturers and take the lead in ensuring the safety of their planes.

U.S. carriers such as Southwest Airlines Co., American Airlines Group Inc. and United
Continental Holdings Inc. are still flying the 737 Max.

Max Deliveries
The 737 Max is Boeing’s best-selling narrow-body, with dozens of customers
12 20 18 14
WestJet Airlines Air Canada Norwegian Air Shuttle Air China

12
United 22
Airlines 13
GECAS 11 China Eastern
31 TUI Travel PLC Airlines
Southwest Airlines
14 16
Air Lease China Southern
Corporation 14 Airlines
21 flydubai
American
Airlines
14
No. of delivered Lion Air
planes
30
10
1

Source: Boeing Co.

Investigators have recovered the cockpit voice and flight-data recorders, Ethiopian Airlines
said Monday, a significant step forward in piecing together what happened.
Chinese airlines accounted for about 20 percent of 737 Max deliveries worldwide through
January, and further purchases of the Chicago-based planemaker’s aircraft are said to have
been touted as a possible component of a trade deal with the U.S.

Read More
Second Boeing 737 Max Crash in Months Kills 157 in Ethiopia 
Two Short, Erratic Flights End in Tragedy: Could They Be Linked? 
Fearful Flyers Lose Faith in Boeing 737 Max After Second Crash 
How Boeing’s 737 Max Went From Bestseller to Safety Concern
What Is the Boeing 737 Max and Which Airlines Fly It?: QuickTake
737 Max May Face Global Grounding After Crash: David Fickling

China Southern Airlines Co. has 16 of the aircraft, with another 34 on order, according to data
through January on Boeing’s website. China Eastern Airlines Corp. has 13, while Air China
Ltd. has 14, Boeing says. Other Chinese airlines that have bought the Max include Hainan
Airlines Holdings Co. and Shandong Airlines Co., the data show.

Lion Air, which is based in Indonesia, is one of the biggest customers, having ordered 201
Max planes and taken delivery of 14.

The single-aisle 737 Max is poised to generate about $30 billion in annual revenue as factory
output rises to a 57-jet monthly pace this year, according to Bloomberg Intelligence estimates.
The disaster in Ethiopia followed the crash of Lion Air’s 737 Max off the coast of Indonesia on
Oct. 29. A preliminary report into that flight indicated that pilots struggled to maintain
control following an equipment malfunction. The U.S. Federal Aviation Administration is
working with Boeing on a possible software change to reduce the chances that such a failure
could cause an accident in the future.

Boeing responded to the earlier crash by advising pilots that the Max’s so-called angle-of-
attack sensor can provide false readings, causing the plane’s computers to erroneously detect
a mid-flight stall in airflow. That in turn can cause the aircraft to abruptly dive to regain the
speed the computer has calculated it needs to keep flying. Pilots could counteract the sudden
downward tilt by following a checklist in their training manual, the planemaker said.

What Bloomberg Intelligence Says

“The crash may show insufficient training for the new stall prevention systems on the 737
Max. It’s unlikely due to design flaws, and the plane is likely to stay in service.”
-- George Ferguson, global aviation analyst
Click here to view the research.

The doomed Ethiopian jetliner left Addis Ababa at 8:38 a.m. local time, and contact was lost
six minutes later, the company said in a statement. There were people from 35 nations on
board, including 32 Kenyans, 18 Canadians, nine Ethiopians and eight Americans. The United
Nations, which is hosting an environmental conference this week in Nairobi, said it lost 19
staff members in the crash.

The pilot of the ET302 reported problems shortly after takeoff and was cleared to return to
the airport, said the airline’s chief executive officer, Tewolde GebreMariam. The 737 Max 8
hadn’t had any apparent mechanical issues on an earlier flight from Johannesburg, he said
.
The wreckage of an engine from flight JT610. Photographer: Ulet Ifansasti/Getty Images

Ethiopian Airlines had five of the planes in operation as of the end of January and orders for a
further 25, according to Boeing’s website. Boeing has dispatched a technical team to assist the
investigation into the Ethiopian Airlines plane, which was delivered new in November to
Africa’s biggest carrier, while the FAA, which originally certified the 737 Max and U.S.
National Transportation Safety Board have also joined the probe.

Jet Airways India Ltd. and SpiceJet Ltd., two Indian airlines that use the 737 Max jet, and the
country’s regulators have asked Boeing for information following the Ethiopia crash.

Industry Reactions

Airline or Action
Authority

Southwest Says it’s “confident in the safety of our fleet” including its 34 737 Max 8 planes
Airlines

American Will closely monitor the investigation via Boeing and NTSB
Airlines

Singapore Monitoring the situation; the 737 Max 8 flights operated by SilkAir are flying as
Airlines scheduled

Icelandair Says it’s had no issues with its three 737 Max 8s

Korean Air Due to receive its first Max in April, is monitoring the situation

Cayman Grounds both its Boeing 737 Max 8 aircraft

Airways

Thailand Says it currently has no plans to ground Boeing 737 Max jets

China Grounds entire fleet of Boeing 737 Max 8 jets. China Eastern to talk  with
Boeing about losses caused by grounding.
Flydubai Says it’s monitoring situation and in touch with Boeing

A U.S.-ordered grounding of an entire model of aircraft is extremely rare and in the past has
typically not occurred so soon during an investigation when few details are known. The last
time the agency did so was in January 2013 as a result of overheating lithium-ion batteries on
Boeing’s 787 model. The agency only acted after the second such incident occurred.

The Boeing 737 MAX airplane. Photographer: David Ryder/Bloomberg

Muilenburg, 55, was running Boeing’s defense business during the Dreamliner’s grounding.
Since he took the reins as CEO in July 2015, Boeing has dramatically expanded cash flow and
the shares have tripled. That has boosted the company’s market value by $140 billion and
made Boeing the biggest U.S. industrial company.

— With assistance by Haze Fan, Kyunghee Park, Anurag Kotoky, Alan Levin, Dong Lyu, Sarah
Jacob, Zhe Huang, Fathiya Dahrul, David Malingha Doya, Angus Whitley, Ville Heiskanen, and
Julie Johnsson

In this article
BA
BOEING CO/THE
375.41 USD -24.60 -6.15%

753
AIR CHINA LTD H
8.05 HKD +0.13 +1.64%

UAL
UNITED CONTINENT
79.85 USD -2.53 -3.07%

AIR
AIRBUS SE
114.58 EUR +1.62 +1.43%

LUV
SOUTHWEST AIR
50.40 USD -1.21 -2.34%

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