Boeing shares down 10% after second 737 MAX crash

Bengaluru — Shares of Boeing slid 10% on Monday after China, Indonesia and Ethiopia ordered airlines to ground their Boeing 737 MAX 8 aircraft following the second deadly crash involving the jet in just five months.

The losses put the stock on course for its biggest daily fall in nearly two decades, halting a surge that has seen Boeing's market value triple in just over three years to a record high of $446 per share.

Spreads on Boeing's bonds were also wider in relatively light trading on Monday morning, according to capital markets publication IFR.

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 was no need to issue new guidance to operators of its 737 MAX 8 aircraft based on the information it had thus far.

"Boeing is the big story when it comes to the Dow industrials," said Randy Frederick, vice-president of trading and derivatives with brokerage Charles Schwab.

"[It is the most expensive stock on the index [and] without any question is going to be the theme for the Dow index today ... but I don't see a spillover to any other indexes except airlines."

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.

It is the best performer in the Dow Jones Industrial Average so far this year, up 31% compared with a 9.1% gain in the index. The decline on Monday was a major factor in pulling the index lower.

Morgan Stanley analyst Rajeev Lalwani said there would be concerns of disruption around safety, production, groundings, and costs, but that those should all be manageable longer-term.

He said he was not changing the bank's positive "overweight" recommendation on Boeing shares, and that any corrective action the company has to take on its best-selling passenger plane will likely prove a longer-term buying opportunity.

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% in the weeks following the Lion Air crash in 2018, but have more than recouped those declines. They were down 9.6% at $381.72 soon after the opening bell, erasing about $32bn from the company's market value.

US-based Southwest Airlines — the biggest operator of the MAX 8 fell just under 2% to $50.81, while American Airlines, which has 24 MAX 8 jets, was up 0.4% at $32.05.

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 0.9% in Paris.

Boeing delivered 806 aircraft in 2018, missing its target by four jets, but still retaining the title of the world's biggest aircraft maker 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 and Safran. Shares in Safran also fell 1.6% on Monday. 

Reuters