(Bloomberg) – Pressure on Boeing Co. escalated after China grounded all flights of the US planemaker's newest 737 jet, following the second deadly crash of the best-selling narrow-body in five months. The shares fell in early US trading.
A day after Ethiopian Airlines Flight 302 crashed and killed all 157 people on board, Africa's biggest carrier also decided not to use its 737 Max 8 planes until further notice. China ordered its carriers to ground all 96 of the aircraft by 6 p.m. local time. Elsewhere, Indonesia's air safety regulator said it's discussing the possibility of grounding the Boeing planes and South Korea began a special inspection of the aircraft.
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Second Boeing 737 Max crash within months kills 157 in Ethiopia
For Boeing, the latest disaster soon drew comparisons to a Lion Air crash in Indonesia that killed 189 people, pushing the Chicago-based planemaker a step closer to a crisis. A blanket grounding of the 737 Max, which generates almost one-third of the company's operating profit, in China also raised the spectre of other countries following suit.
"The B737 Max design is dangerously flawed," said Mohan Ranganathan, a former commercial pilot and an aviation safety consultant based in the southern India city of Chennai. "There is a definite similarity between Lion Air and Ethiopian Airlines Max crashes."
Shares of Boeing sank 8.8% to $385.50 in early US trading. Should the decline carry through to the end of New York trading, it would be the biggest drop since January 2016. Safran SA, which makes engines for the Max in the CFM International venture with General Electric Co., was down 1.3% at €117.95 as of 9:53am in Paris.
Chinese airlines accounted for about 20% of 737 Max deliveries worldwide through January, according to Boeing's website, and further purchases of the Chicago-based planemaker's aircraft are said to have been touted as a possible component of a trade deal with the US.
China Southern Airlines Co. has 16 of the aircraft, with another 34 on order, according to data through January on Boeing's website. China Eastern Airlines Corp. has 13, while Air China Ltd. has 14, Boeing says. Other Chinese airlines that have bought the Max include Hainan Airlines Holdings Co. and Shandong Airlines Co., the data show.
The single-aisle 737 Max is poised to generate about $30bn in annual revenue as factory output rises to a 57-jet monthly pace this year, according to Bloomberg Intelligence estimates.
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The disaster in Ethiopia followed the crash of Lion Air's 737 Max off the coast of Indonesia on Oct. 29. A preliminary report into that disaster indicated that pilots struggled to maintain control following an equipment malfunction.
The doomed Ethiopian jetliner left Addis Ababa at 8:38am local time, and contact was lost six minutes later, the company said in a statement. There were people from 35 nations on board, including 32 Kenyans, 18 Canadians, nine Ethiopians and eight Americans. The United Nations, which is hosting an environmental conference this week in Nairobi, said it lost 19 staff members in the crash.
The pilot of the ET302 reported problems shortly after takeoff and was cleared to return to the airport, said the airline's chief executive officer, Tewolde GebreMariam. The 737 Max 8 hadn't had any apparent mechanical issues on an earlier flight from Johannesburg, he said.
Ethiopian Airlines had five of the planes in operation as of the end of January and orders for a further 25, according to Boeing's website.
Indonesia's transportation safety committee said Monday it offered to help with the Ethiopian Airlines crash investigation and will discuss the possibility of grounding Boeing 737 Max jets operated by the nation's airlines. Jet Airways India Ltd. and SpiceJet Ltd., two Indian airlines that use the 737 Max jet, and the country's regulators have asked Boeing for information following the Ethiopia crash.
