Why Boeing Will Be Perfectly Fine Long Term

It has come as no surprise that Boeing shares have fallen in value in recent weeks. The tragic crash of the Ethiopian Airways flight which resulted in the death of over 150 people has led many countries to ban the 737 MAX aircraft from flying in their airspace. Until the cause of the crash has been determined it is not likely that these bans will be lifted.

The reason that there have been concerns about the safety of the planes is that another aircraft was involved in a near identical crash last October in Indonesia. After this crash there was speculation that a problem with the stall correction systems could have been the cause. It has been suggested that the sensors on the front of the plane may have made the aircraft systems think that the nose was up, when in reality it was level. This would have forced the nose down sharply which may have been enough to send the plane into a dive.

Boeing reacted to the news of the grounding by stating that it would carry out a software update that would make the planes even safer. It would also update the operation manuals and provide additional training to crew members. The statement that it made regarding these changes made it clear that they did not believe their aircraft was unsafe, but these additional measures would make it even safer.

The grounding of these planes will obviously have an effect on Boeing’s financial situation. Not only will their shares be falling in value, but they could also face existing orders that they have on their books being cancelled. The situation is also causing problems for airlines that have a lot of 737s in their fleet. It is not as easy for these airlines to be able to use different aircraft for the flights that they had scheduled for the 737s which will inevitably lead to cancellations.

This is not the first time that Boeing has come under pressure regarding the safety of their planes. The 787 Dreamliners had teething problems with the lithium-ion batteries that burned at a faster rate than anyone expected which led to small fires aboard the planes on two occasions. This issue meant that the whole fleet of Dreamliners that had already been delivered to airlines around the world were grounded for three months. The problem with the battery was rectified and the Dreamliner has gone on to be a huge success for Boeing.

However, even if things look bleak at the moment, there is no reason to assume that there will be any negative effects for Boeing in the long run. There has been no official confirmation yet that it is a safety issue with the planes that was the actual cause of the crash and this could take some time to be determined. No official cause has been given in the Lion Air crash yet either. The speculation about the possibility of sensors sending the wrong information to the systems does not necessarily lay all the blame at Boeing’s feet. If these sensors have been poorly maintained by the airlines then this could also contribute to any issues that have arisen.

The 737 MAX is a very popular aircraft and this popularity did not wane after the Lion Air crash. They appeal to smaller airlines because they do not cost as much to purchase as similar sized planes. The configuration also means that they can fit more passengers in which increases ticket sales. The maintenance costs of the aircraft are also fairly low once they have been purchased.

Boeing has been in a similar situation before with the Dreamliners, although in that case there were no fatalities. They recovered from that situation and the Dreamliner became so popular that it contributed to Airbus’s decision to stop production of the A380 as they could no longer compete.

This being said, Boeing still need to reach out to their shareholders to reassure them that they have the situation under control. It is all well and good for the company to have confidence in themselves but they need to make sure that their shareholders have this confidence as well. Boeing have one of the best reputations for safety in this industry as well as a history of overcoming any problems that they are faced with.


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