Boeing loses $13 billion in market value after grounding of “rushed” MAX 9 fleet

A lost cabin door mid-flight that grounded Boeing’s entire U.S. MAX 9 fleet has led to the airline’s (BA.N) shares plummeting 8.6% on Monday morning, losing nearly $13 billion in market value.

The critical safety incident occurred on an Alaska Airlines flight out of Portland, Oregon on Friday. Carrying 171 passengers and six crew, the plane reached over 16,000 feet but instead of flying on to Ontario, CA as planned, the pilots requested an emergency descent and return to Portland after a “plugged” cabin door blew out, leaving a “refrigerator-sized” hole in the narrowbody aircraft and causing depressurisation and oxygen masks to kick in. No one was injured.

Now, following the FAA notice grounding the US MAX 9 fleet for safety inspections, Boeing is not the only company to see immediate financial fallout. Alaska Airlines, whose pilots reported pressurisation warnings prior to the flight in question, saw its shares also drop 4.5%. And MAX 9 manufacturer and installer, Spirit AeroSystems, which has been dogged by quality and delivery issues, saw a 15% fall.

In contrast, Boeing’s main European competitor, Airbus, has seen a 2.5% hike in share value.

“Quality escape problem” at Spirit?

The cabin door blow-out has been dubbed a “quality escape” issue, which Bernstein analysts have said Spirit AeroSystems has a history of, essentially an internal quality control failure. “Quality escapes are not acceptable in an industry in which single failures can have serious consequences,” Bernstein said.

The emergency follows the deaths of 346 people in a Lion Air crash in Indonesia in 2018, and an Ethiopian Airlines crash in 2019, both of which involved Boeing’s MAX 8 and resulted in worldwide regulators grounding the aircraft for nearly two years due to an automated flight control issue. 

More recently, the FAA warned pilots about the risk of engine inlets breaking away and hitting the plane. And in December, Boeing itself warned of the need for inspections due to a loose bolt in the rudder-control system.

“A rush to produce airplanes”

While some commentators have said the cabin door looks like a one-off issue rather than a costly design flaw, a former Boeing employee, turned whistleblower, disagrees.

Ed Pierson, Executive Director for the Foundation for Aviation Safety, said the MAX 9’s cabin door problem was not a surprise and was indicative of a wider safety culture problem. Speaking to CNBC, Pierson noted: “After two fatal crashes and 346 people died, and a criminal investigation . . . the company is still requesting engineering exemptions for flight-safety-related systems.”

Pierson blamed part of the problem on “a rush to produce airplanes. Inside the factories, there’s a phrase ‘schedule is king’”, he said, adding that this has resulted in “thousands” of quality control systems being removed, something that the FAA was unaware of until recent action by employees and unions.