Boeing Faces Scrutiny After Alaska Airlines Scare

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Boeing’s 737 MAX 9 planes have resumed flights after the January 5 Alaska Airlines incident, but the episode is expected to have financial implications for the aviation giant. Alaska and United Airlines resumed MAX 9 service after a three-week grounding following an emergency landing caused by a panel blowout. Boeing’s fourth-quarter results, scheduled for release on Wednesday, are anticipated to reflect the financial consequences, with expectations of another annual loss and withdrawal of commercial plane production targets.

The Alaska Airlines incident is likely to increase costs, including compensation for airlines, though these may not be immediately visible. Boeing’s stock has fallen nearly 18% since the incident, reflecting concerns about a tougher regulatory environment and potential plane delivery slowdowns. Bank of America analysts downgraded Boeing, citing “materially increased regulatory scrutiny” that could lead to a “forced slowdown.”

The incident has raised questions about Boeing’s leadership, prompting CEO David Calhoun to meet with lawmakers and expectations of public hearings. The National Transportation Safety Board (NTSB) is conducting an ongoing probe into the incident, with an update expected next week. The FAA has criticised Boeing’s quality assurances as “unacceptable,” and analysts are looking for operational changes and details about the company’s manufacturing process in Boeing’s upcoming earnings report. The FAA has frozen Boeing’s production level for the MAX 9 until improvements are demonstrated, impacting the company’s production targets and potential free cash flow.

The crisis has led to speculation about leadership changes at Boeing, but some analysts expect management to remain in place, at least during the ongoing crisis. The incident comes as Boeing recovers from the 737 MAX crashes in 2018 and 2019, which resulted in a lengthy grounding of the model. The current challenges add to the headwinds faced by Boeing, requiring careful management and strategic decisions to regain investor confidence.