The Washington PostDemocracy Dies in Darkness

Boeing’s banner run put at risk by renewed questions about safety of its profit-driving 737 Max 8 jet

One of Boeing’s most important profit drivers, the 737 Max 8 jet, is facing renewed questions about its safety and reliability. (Video: Luis Velarde/The Washington Post)

Even after the Lion Air crash of its state-of-the-art Max 8 in October, Boeing was predicting another banner year in 2019. Orders of its 737 Max 8 aircraft were up. It had notched three major Pentagon contracts. And its stock was flying sky high.

But now, after another of the aviation giant’s jets crashed, this time in Ethiopia, killing all 157 people on board, it’s facing renewed questions about its safety and reliability as investors knocked back its share price more than 12 percent in early trading Monday.

Boeing, which last year carried the Dow Jones industrial average to record highs, dragged it down on Monday morning, as the blue-chip measure opened in the red.

China, Indonesia and Ethiopia have grounded the 737 Max 8, which was involved in both crashes, and other carriers have signaled they may follow suit.

In a statement Monday, Boeing said no new safety guidance is planned as of now: " The investigation is in its early stages, but at this point, based on the information available, we do not have any basis to issue new guidance."

The Chicago-based U.S. aerospace giant, with more than $100 billion in revenue and 153,000 employees, is one of the most heavily weighted of the Dow’s 30 components. It has been one of the drivers of the 10-year-old bull market; its stock had been up more than 30 percent, year to date, as of Friday’s close.

The "decline is weighing heavily on the Dow because the stock has much more to surrender than other Dow components,” said Sam Stovall of CFRA Research.

The Standard & Poor’s 500-stock index and the Nasdaq composite index showed slight gains in early trading Monday. Europe and Asia markets were also up, despite growing concerns over global growth spurred by a disappointing U.S. jobs report on Friday.

Ethiopia, China, other countries ground Boeing aircraft after devastating crash

The crash comes as the aerospace giant has been having a stellar year. Its commercial business has been surging. It pulled in those three major military contracts worth more than $18 billion to build training jets, replacement helicopters and drones that can refuel fighter jets in midair. Boeing is also building the next Air Force One, a spacecraft to ferry astronauts to the International Space Station and a monster rocket that NASA says will again take them to the moon.

In 2016, it celebrated its 100-year anniversary, a legacy that marches in lockstep with the history of American aviation, from dawn of commercial air travel in the years following the Wright brothers to the bombers that helped to allies win World War II, to the F-18 Hornets and 747s in use today.

But now that investigators are probing two crashes that have killed a total of 346 people, the company is facing a crisis involving its core business and a threat to the reputation it has built up after decades.

One of Boeing chief executive Dennis Muilenburg’s goals for the company has been to better integrate its three major business units—commercial jets, defense and space—under a strategy he has called “One Boeing.”

Its commercial airliner business, however, has long been the driver, and international orders for Boeing’s commercial jets continued to climb, even after the crash in October. With a backlog of 5,900 airplane orders, valued at $412 billion, it predicted steady growth in 2019.

It is not clear what caused Sunday’s crash of Ethio­pian Airlines Flight 302 six minutes after takeoff. on Sunday. Data show the plane ascending, then descending. It then began another ascent, this time while accelerating at faster-than-usual takeoff speeds. The pilot asked to return to Addis Ababa because he was experiencing difficulties, authorities said.

In October, an Indonesian Lion Air flight plunged into the Java Sea shortly after takeoff from Jakarta, Indonesia, killing all 189 passengers and crew members. Investigators blamed a faulty sensor and automatic feature for pointing its nose down while pilots struggled to lift the plane up.

Though the investigation is still in the early stages, the similarities between the two crashes have prompted carriers around the world to take added precautions. China’s Civil Aviation Administration said it asked domestic carriers to temporarily ground all 737 Max 8 jets, potentially affecting hundreds of flights. Ethi­o­pian Airlines said its fleet would be grounded as a precaution, as did carriers in Indonesia and India.

Boeing said it was working with investigators in Ethiopia to understand the cause of the crash.

With Ethiopian crash, another new Boeing MAX jet goes down

The 737 Max 8 has been an important profit driver for Boeing since it was introduced in 2017. It is crucial to Boeing’s broader international ambitions as it competes with Airbus, its European rival in the commercial airline business.

Boeing has delivered 354 of the jets globally and has 2,912 on order, according to market estimates maintained by Boyd Group International. The jet that crashed Sunday was one of five 737 Max 8 planes operated by Ethiopian Airlines, which has 25 more on order.

In the United States, Southwest Airlines and American Airlines have 59 between their two fleets, with 304 on order. Southwest said it has been in touch with Boeing and plans to follow the investigation. It had not made any changes to its operations or inspection protocol as of Sunday, the airline said. American Airlines said it was monitoring the investigation but remained confident in the safety of its aircraft.

While Boeing’s commercial business has long driven the company’s revenues and stock price, it has also focused on transforming its defense business under the leadership of Leanne Caret, who was brought in to lead the division in 2016. She was brought in after a Boeing and Lockheed Martin team had lost a high-stakes contract to Northrop Grumman to build a new stealth bomber for the Pentagon.

But since then, the company has had some notable successes, such as the Pentagon contract wins, which came over rivals such as Lockheed Martin. The company was criticized as bidding too low in an effort to unseat competitors, but executives said in late October that those three combined opportunities would eventually rake in up to $60 billion over the next several decades.

“Think of these as investments that enable a production run that begins in the early 2020s and will extend literally for decades,” Muilenburg, Boeing’s CEO, told investors at the time.