Shares of Boeing Co slid 11 per cent in early trading on Monday after China, Indonesia and Ethiopia ordered airlines to ground their Boeing 737 MAX 8 planes, following the second deadly crash involving the jet in just five months.
The losses, if they hold through normal trading hours, would set the stock for its biggest fall in nearly two decades, halting a surge that has seen it triple in value in just over three years to a record high of $446 last week.
A Nairobi-bound Boeing 737 MAX 8 operated by Ethiopian Airlines crashed minutes after takeoff from Addis Ababa on Sunday, killing all 157 on board. The same model, flown by Lion Air, crashed off the coast of Indonesia in October, killing all 189 on board.
Boeing said on Monday the investigation into the Ethiopian Airlines crash is in its early stages and there is no need to issue new guidance to operators of its 737 MAX 8 aircraft based on the information it has so far.
‘We anticipate heightened volatility in Boeing shares,’ Morgan Stanley analyst Rajeev Lalwani said.
‘Though it is early to draw conclusions, there may be concerns of disruption around safety, production, groundings, and/or costs, all of which should be manageable longer-term.’
He said he was not changing the bank’s positive ‘overweight’ recommendation on Boeing shares for its customers, and that any corrective action the company has to take on its best-selling passenger plane will likely prove a longer-term buying opportunity.
Wall Street has been overwhelmingly bullish on Boeing - 19 of the 24 brokerages covering the stock rate it ‘buy’ or higher, while five have a ‘hold’ rating.
Boeing has been the best performer in the Dow Jones Industrial Average Index so far this year, rising 31 pct compared with a 9.1 per cent gain in the index. The decline on Monday was a major factor in pulling Dow futures lower.
Investigators have found the black box from the fatal crash with both the cockpit voice recorder and digital flight data, Ethiopian state TV reported on Monday, which should shed light on the cause of the crash.
Earlier in the day, China’s aviation regulator grounded nearly 100 Boeing 737 MAX 8 aircraft operated by its airlines after the crash.
Boeing’s shares lost 12 per cent in the weeks following the Lion Air crash last year, but have more than recouped those declines. They were down 11.38 per cent at $374.17 in premarket trading.
Dallas-based Southwest Airlines Co - the biggest operator of the MAX 8 fell 2 per cent to $50.75 in premarket trade, while American Airlines Group Inc which has 24 MAX 8 jets was down 1.1 pct at $31.55.
Southwest and American said overnight they remained fully confident in the aircraft and were closely monitoring the investigation.
Shares of rival Airbus SE were up 0.5 pct in Paris.
Boeing delivered 806 aircraft last year, missing its target by four jets, but still retaining the title of the world’s biggest planemaker for the seventh straight year. European rival Airbus delivered 800 planes in 2018.
The 737 MAX 8 uses LEAP-1B engines made by CFM International, a joint venture of General Electric Co and Safran SA. Shares in Safran also fell 1.6 per cent on Monday.
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