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Luke A. Reiner | lpr5062@psu.edu | March 12th, 2019
Over the past weekend, Ethiopian Airlines experienced a Boeing 737 Max 8 plane crash. The crash, which killed 157 people, occurred five months after a Lion Air flight crashed into the Java Sea. The same plane was used and resulted in 189 deaths. These two recent crashese initiated concerns about the safety of 737 Max 8 planes.
Many airlines and countries ordered all 737 Max 8 planes to be grounded, such as in large aviation markets like European and Asian countries, stretching to Singapore and Australia. Although, the U.S Federal Aviation Administration has not banned the plane’s use potentially risking lives and the reputation of the U.S. aviation industry. On the flipside, the investigation on the Ethiopian crash is still in its early stages so it is too early to tell whether the plane itself is to blame.
Boeing’s stock has taken a beating Monday and Tuesday, dropping over 11%, knocking $26B off the market value of the world’s largest planemaker. But airlines are also taking a hit. Indexes such as the NYSE Arca Airline (XAL) and Dow Jones Transportation Average (DJT) dipped on the news and planes being grounded. More specifically, American Airlines (AAL) dropped 2.1%, Southwest Airlines (LUV) lost 2.3%, United Continental Holdings (UAL) slide 2.6%, and Alaska Air (ALK) shed 2.3% after news on grounding 737 Max 8 planes. It has also put pressure on airlines’ future bookings. At this time of the year, airlines experience peak travel season which is vital to second and third quarter profitability results.
Boeing and other airline stocks are showing signs of recovering from the hit late Tuesday evening. Many airlines and regulators are taking action, whether it is too soon to conclude 737’s are the issue or not. Boeing also mentioned they are making an extensive change to the flight-control system, which was in the works prior to the most recent crash in Africa. The change targets how Boeing initially designed a stall-prevention feature in the aircraft. The feature was added on the 737 Max aircraft due to the larger engines that are used. The update will use feeds from multiple sensors in the stall-prevention system, not just one. The apparent reason for only using one sensor was to allow pilots to have control of the plane, which aligned with the company long-held philosophy. Using one sensor was a simpler approach for overall control, but now multiple will be utilized for a more enhanced feature on the planes.
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