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Airlines shares cut initial losses after second fatal crash involving Boeing’s 737 Max

By on April 19, 2021 0

Airlines shares cut their initial losses on Monday, as Boeing Co. shares rebounded from their worst levels after a fatal crash involving the aerospace giant’s 737 Max 8 plane in Ethiopia, the second fatal crash involving the plane in six months.

Boeing shares BA,
-0.87%
slipped more than 11% before commercialization but was down around 6.9% in official trade, on news that the plane operated by Ethiopian Airlines crashed shortly after taking off from the capital Addis Ababa, killing all 157 people on board. In October, the same plane, operated by Indonesia Lion Air, crashed into the sea, killing all 189 passengers on board. The Chinese Civil Aviation Authority has ordered all airlines to ground Max 8 planes, while Ethiopian Airlines has grounded its entire fleet of the model.

“It may take weeks for a first report on the causes of the Ethiopian crash, so we are reluctant to draw any conclusions about the possible impact,” wrote JPMorgan analyst Seth Seifman in a first note to clients. “We did not detect any additional disclosures in the Boeing 10-K following the Lion crash.”

UBS analysts agreed it was too early to draw conclusions, but said the similarities between the two crashes were “hard to ignore.” In both cases, the pilots requested clearance to return to their departure airport within minutes of take-off, analysts led by Myles Walton wrote in a note.

Walton noted that the 737 Max’s Maneuver Characteristics Augmentation System (MCAS), a safety feature believed to activate at high angles of attack, was at the heart of the Lion Air crash. This led to an airworthiness directive that drew special attention to the system, he wrote.

“The MCAS system doesn’t activate until the flaps used for take-off are retracted, so in the case of Lion Air, for example, issues seemed to arise around 2-3 minutes. This appears to be a similar timeline to Ethiopian 302. It is not clear whether additional MCAS training was provided to Ethiopian after the Lion Air crash, ”he wrote.

Boeing said it was “deeply saddened to learn of the deaths of the passengers and crew” aboard the Ethiopian Airlines plane. In a statement posted on its website, the company said it plans to send a technical team to the crash site to assist Ethiopian and US investigators.

The United States Federal Aviation Administration (FAA) said he was following developments closely.

“We are in contact with the State Department and plan to join the NTSB in assisting Ethiopian civil aviation authorities to investigate the crash,” the FAA said in a statement.

The 737 is the best-selling airliner of all time, and the Max is a newer version that Boeing says has a more fuel-efficient engine. The aircraft is a key part of Boeing’s efforts to compete with rival Airbus.

See:Best-selling aircraft of all time may not be # 1 any longer

Deliveries of the aircraft total around 350, according to Boeing, and it has been purchased by numerous airlines, including Southwest Airlines Co. LUV,
-0.20%,
American Airlines Group Inc. AAL,
-0.58%
and United Continental Holdings Inc. UAL,
-0.85%.
The company said in December that it has recorded more than 5,000 orders since its launch.

See also: Dow futures drop nearly 200 points as Boeing drops to pre-commercialization after plane crash in Ethiopia

Shares in the Southwest fell 1.6%, even as the carrier expressed confidence in its Boeing jets and said it had no plans to change operations. He also told customers that if they changed their flight plans to avoid flying 737 Max planes, they would be responsible for any fare difference.

“While Southwest operates a fleet of 34 Boeing 737 MAX 8s, we have been in contact with Boeing and will continue to stay close to the investigation as it evolves,” said a spokesperson for Southwest. “We have not anticipated any changes in our operating policies or procedures. “

United Continental said it sends its deepest condolences to the families and loved ones of those aboard the Ethiopian flight. A spokesperson said the airline currently has 14 Max-9 planes, but no Max-8 or Max-10 planes in its fleet.

The stock lost 0.1%.

American said it has 24 Max 8 planes in a fleet of nearly 1,000. The carrier also offered condolences, but warned it was too early to determine the cause of the crash.

“Our flight, flight service, technical operations and safety teams, as well as the Allied Pilots Association (APA) and Professional Flight Attendants Association (APFA), will be closely monitoring the investigation. Ethiopia, which is our standard protocol for any plane crash, ”the company said in a statement.

US stocks rose 0.8%. Jetblue Airways Corp. JBLU share,
-1.09%
JBLU,
-1.09%
increased by 0.4% and Delta Air Lines Inc. DAL,
-1.07%
stocks rose 1.9%. The US Global Jets JETS ETF,
-0.99%
is down 0.1% and the NYSE Arca Airline XAL index,
-1.84%
was up 0.4%.

Boeing’s stock was around 235 points of the Dow Jones Industrial Average DJIA,
+ 0.69%

DJIA,
+ 0.69%
The S&P 500 SPX,
+ 0.33%
was up 0.7%.

Barbara Kollmeyer of MarketWatch contributed to this report from Madrid.

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