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Boeing faces double crises as a result of crash and ground

A tragic crash of an Ethiopian Airlines jet that killed 157 people on Sunday led to the global foundation of its 737 Max jet, the company's most crucial planet.

Now, Boeing has to find out how to fix the rays and how to repair its reputation.

"This is a huge material issue, not just for revenue flow … but for its reputation," Jim Corridore, director of industrial equity research for CFRA Research, told First Move with Julia Chatterley. "It needs to be addressed rather than later."

737 The Max Rays are by far the most important product for the company. It has orders for nearly 5,000 of the jets, enough to keep the production lines operating in the coming years. But none of the 371

aircraft so far delivered can fly until aviation authorities around the world decide they are safe.

Boeing ( BA ) BA After the crash, the flight insisted was safe before it was thought that the jets would be grounded out of "an abundance of caution and to insure the flying public about the aircraft's safety ".

A search for crash causes

] The reason for the Ethiopian airline crash is still unclear. But it was similar to another fatal accident involving 737 Max at the end of October, when a Lion Air flight from Indonesia crashed and killed everything aboard.

A preliminary investigation showed that Lion Air pilots struggled to take control of the plan. An automatic safety measure forced the planet's nose down because it mistakenly thought the plane was in danger of entering a stable. The FAA said Wednesday that the founding was justified when new data showed that the track on the Ethiopian Airlines flight was very similar to the Lion Air flight.

Boeing and the FAA had insisted that with proper training, the pilot could overcome security system problems, and that the aircraft could continue to fly while a software upgrade was completed. The upgrade is expected to be available next month.

But as other aviation authorities around the world grounded the jets from Sunday to Wednesday morning, the FAA and Boeing are pushing to act faster.

How to fix the plane

Most experts believe the program upgrade will stop solving any problems to the satisfaction of different authorities.

"The technology is headache but not insurmountable. Damage to reputation is the biggest challenge for everyone," said Richard Aboulafia, vice president of Analysis at Teal Group.

How long the plan stays on the ground, it is still uncertain, "but we guess is weeks and not months," says Cowen Aerospace Analyst Cai Von Rumohr in a note to investors.

Earlier crises for Boeing

Aboulafia said that Boeing has confused inferior crises earlier.

The halt in air travel that rocked the airline industry after the September 11, 2001 attack was a major threat because it was not. It is not clear whether or when the demand for air travel would return. American airlines all needed bailouts to survive that downturn.

  Crisis 737 Max has dried more than $ 25 billion from Boeing's market value


A lithium battery problem that led to the founding of 787 Dreamliner for three months 2013 was also a bigger problem.

"Here's the headline tragedy, the horror of 300 deaths," Aboulafia said. "But for Boeing, Dreamliner seemed scary because we didn't know how to fix it, and the consequences of not being able to fix it would have been devastating."

Public reaction

News of the week's crash led some passengers to try to avoid flying on a 737 Max. Kayak, a travel booking website, even added a function for customers to send with the aircraft type. But it is not clear that these fears will be delayed when the plans are allowed to fly again.

Von Rumohr said another Boeing plan, 727, had four deadly crashes in seven months between 1965 and 1966, shortly after its introduction.

The problem was a training issue, and not mechanical. Pilots were unfamiliar with the three-engine configuration.

"It seemed it would never regain it. The travel agents told customers to fly anything but a 727. It came back from it to be one of the most successful aircrafts" Von Rumohr told CNN Business.

Boeing's economic health

Boeing is also in the strongest financial position in his history to weather the storm.

The company had record revenues of $ 101 billion last year, and $ 10.6 billion in profits.

It will have to compensate the airlines that own the 737 Max jet and the CEO of Norwegian Air has already said that he will send the Boeing bill for any lost revenue. But Aboulafia believes it will come to hundreds of millions of dollars, not billions.
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The best news for Boeing when it tries to recover is its strong position in a strong market.

There are only two major players – Boeing and Airbus – who can supply airlines with jets of this size. And the demand for air travel continues to grow, especially in China, which is ready to become the first $ 1 billiards market for aircraft.

Airlines with 737 Max orders have little opportunity to cancel and replace it with an Airbus plan. Airbus has a substantial backlog, and the airline would also face costs for spare parts and training pilots on a new aircraft type in its fleet.

"Even if you are checked on Boeing, you have to get over it, because you have to do business with them," says airline consultant Mike Boyd.

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