In the current market environment, It doesn’t take much searching for investors to find a reason to sell. The Boeing Co. (NYSE: BA) is getting a refresher course in the facts of market life Tuesday morning.
The aircraft maker Tuesday morning announced a firm order for 40 of its 737 MAX 8 airplanes with options for 10 more from South Korea’s Jeju Air. The deal, valued at about $5.9 billion at list prices, could not overcome the negative reaction to the company’s decision to cancel a conference call with airlines to discuss the software changes it made to the 737 MAX family and whether or not the company had made the changes clear to its customers and their pilots.
CNBC reported this morning that Boeing had decided to continue one-on-one calls with individual airlines rather than hold a massive conference call with customers for its new single-aisle plane.
The 737 MAX 8 is the same as the Lion Air plane that crashed off the coast of Indonesia earlier this month killing all 189 passengers and crew. The investigation into the crash has been focused on the aircraft’s stall-prevention system that may, under certain unusual circumstances, unexpectedly push the plane’s nose down with such force that the crew cannot pull it back up. Whether or not Boeing adequately documented the system in its operations manual is one issue.
Another is Boeing’s culpability in the Lion Air crash for reportedly telling its customers that pilots would not need to go through additional simulator training, even though earlier versions of the stall-protection systems behaved differently. According to a report last week in The Wall Street Journal, a “high-ranking Boeing official” said that “the company had decided against disclosing more details to cockpit crews due to concerns about inundating average pilots with too much information—and significantly more technical data—than they needed or could digest.”
Questions of liability for the Lion Air crash aside, what about the other 737 MAX 8 aircraft that have been ordered. Boeing said latest orders and deliveries report claims 4,783 orders for the plane including 241 planes delivered. How many of those orders will be canceled if Boeing is forced to add flight simulator training on the stall-prevention system and any other systems that have been modified from prior 737 training? How much will additional simulator training cost and who will pay the bill?
There was once a time–and not so long ago–that a canceled conference call would not have been a blip on the radar, especially with a $6 billion order in hand. For now, those days are past, and Boeing, along with virtually every other publicly traded company, will be held under a microscope as investors strain their eyes looking for any reason to sell.
Boeing’s shares traded down about 2.8% Tuesday morning at $312.30 in a 52-week range of $264.53 to $394.28. Shares were down nearly 5% in premarket trading earlier this morning.
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