Boeing stock plummets after report warns Boeing investigation ‘opens up a whole new can of worms’

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As if Boeing needed any more bad news, a scathing report from Wall Street on Tuesday sent Boeing’s stock price plummeting. The report called into question Boeing’s ability to pass a new federal safety audit.

Wells Fargo’s report, titled “FAA Audit Opens a Whole New Can of Worms,” ​​cited long-standing quality control and engineering problems at Boeing. Alaska Airlines]After part of a 737 Max 9 jet crashed mid-flight, it was highly unlikely that the U.S. Federal Aviation Administration would conclude its investigation without significant findings.

“Given Boeing’s recent performance and the FAA’s strong incentive to find problems, we believe a clean audit is unlikely,” the analysts said. “While the FAA’s audit is currently limited to the Max 9, the findings could potentially expand its scope to other Max models that share common parts.”

Analysts believe the investigation significantly increases the risk that Boeing will suffer a hit to production or deliveries, and lowered their ratings on the stock from “overweight,” the equivalent of “buy,” to “equal weight.” Ta.

Boeing (BA) stock fell 7% on the news.

The FAA launched an investigation into Boeing’s quality control last week in response to the Alaska Airlines incident. Regulators say the dramatic explosion on board Alaska Airlines Flight 1282 “never should have happened and will never happen again.”

The door plug, which was supposed to close the space left on the side of the plane when the emergency exit door was removed, was blown off the plane, leaving a large hole in the side of the plane. Shortly after taking off from Portland, Oregon, with 177 people on board, the plane was flying at 16,000 feet when the force of the explosive decompression and subsequent high-velocity airflow ripped the head restraints from the seats.

Several passengers were injured, but by an extraordinary stroke of luck, no one was sitting next to the door plug and no one was killed.

The FAA said the investigation will focus on whether Boeing’s “finished products comply with approved designs and are safe to operate in accordance with FAA regulations.”

Boeing said in a statement last Thursday that it will “fully and transparently cooperate with the FAA and NTSB investigations.”

A week ago, Boeing CEO David Calhoun acknowledged the company’s “mistake” at an all-employee safety meeting, but did not say what the mistake was. National Transportation Safety Board Chair Jennifer Homendy called for answers about Boeing’s mistakes as part of a safety investigation separate from the FAA audit.

The investigation is ongoing and it remains unclear what caused the plane’s door plug to blow off, but two airlines that operate large numbers of 737 Max 9s, Alaska Airlines and United Airlines, have said they believe the fitting may have been loose. announced that they had discovered one of the bolts. Assembly of aircraft door plugs. United Airlines says the discovery points to a possible installation problem.

In a letter to Boeing last week, the FAA gave Boeing 10 days to provide information about the cause of the Alaska Airlines crash. They also want to know what measures Boeing has taken to prevent it from happening again.

Wells Fargo analysts noted in a report that many FAA investigations remain “investigative” months after the initial incident, and FAA investigations take time to complete. He pointed out that there is a possibility.

All 737 Max 9 planes remain grounded as the FAA works to approve Boeing’s inspection standards for airlines to assess the safety of their aircraft. Regulators have not said when the planes will return to service. Alaska Airlines and United Airlines are canceling more than 100 flights a day pending full approval from the FAA.

Over the past five years, Boeing has faced repeated quality and safety problems with its aircraft, leading to long-term groundings of some jets and halted deliveries of others.

The design of the 737 MAX was found to be the cause of two fatal accidents. One occurred in Indonesia in October 2018 and the other in Ethiopia in March 2019. Together, the two crashes killed all 346 people on board the two flights and led to a 20-month grounding. The company’s best-selling jets have sold for more than $21 billion.

Internal communications released during the 737 Max grounding show one employee describing the plane as “designed by clowns and overseen by clowns by monkeys.”

Late last month, Boeing asked airlines to inspect all 737 Max jets for loose bolts in the rudder system after airlines discovered potential problems with two key parts on the plane. .

Its quality and engineering problems extend beyond the 737. Boeing also had to halt deliveries of the 787 Dreamliner for about a year starting in 2021 and twice in 2023 due to quality concerns cited by the FAA. A United Airlines 777 was also grounded after an engine failure sent pieces of the engine flying into houses and onto the ground below.

Two variants of the Max, Max 7 and Max 10, are still awaiting approval to return to the skies. Wells Fargo analysts said the incident further complicates that.

“The Max 7 and Max 10 variants will likely come under increased scrutiny in the future,” they said. “This includes necessary security exemptions that, while perhaps reasonable, would be difficult to grant politically given recent events.”

CNN’s Pete Muntean, Chris Isidore and Ramishah Maruf contributed to this report.