Boeing Shares Fall 10% As Hundreds Of 737s Grounded Following 2nd Deadly Crash
Boeing ADRs traded on Germany's Tradegate exchange in Stuttgart slumped more than 9% early Monday as Chinese and Ethiopian airlines grounded their fleets of Boeing 737 MAX 8s as experts question the plane's safety after an unprecedented series of crashes. Meanwhile, Boeing opened more than 10% lower in the US premarket, weighing heavily on Dow futures, which were off by triple digits.
While some airlines opted not to ground their fleets following Sunday's devastating crash, where an Ethiopian Airlines flight dropped out of the sky six minutes after takeoff, killing everyone on board - including nearly 160 passengers and crew (including 8 Americans) - the fact that the Ethiopian Air crash happened so soon after a similar crash involving a 737 operated by Indonesia's Lion Air has raised questions about the model's safety.
On Monday (local time, late Sunday in New York), China's Civil Aviation Administration of China said all Chinese airlines must suspend their use of the 737 MAX 8 by 10 am London Time.
The CAAC said flights would not resume until Boeing had proven that no design flaw contributed to the crashes. China's regulator said it would notify airlines as to when flights could resume, after it has heard back from Boeing and the FAA.
"Given that two accidents both involved newly delivered Boeing 737-8 planes and happened during take-off phase, they have some degree of similarity," the CAAC said. It added that it has a "zero tolerance" policy for safety risks.
Chinese airlines have a total of 96 737 MAX 8 jets in service, the state company regulator said on Weibo, including Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines.
Meanwhile, after initially insisting that its fleet of 737s would remain in the air, Ethiopian Airlines backtracked on Monday and grounded its 737s until further notice as an “extra safety precaution." The investigation into Sunday's crash is just getting started, while the probe into the Lion Air crash has yet to produce a conclusive finding.
Cayman Airlines, the British overseas carrier, said it would ground its 737s, though most of the major airlines around the world have not grounded their planes.
Flight ET302, the Ethiopian Airlines flight that crashed on Sunday, was the second 737 MAX 8 to suddenly crash, killing everybody on board, within five months. In late October, the crew of a Lion Air flight reported technical problems with the plane before it suddenly dropped into the Java Sea off the coast of Indonesia. The two crashes were eerily similar, in that both occurred just minutes after taking off.
The 737 line is Boeing's cash cow, and the aerospace company has roughly 5,000 737s on back order - so making material redesigns for safety purposes could be hugely problematic for the company's production, and possibly lead to a flurry of cancelled orders. Already, 350 of the planes are in service around the world.