Loss of engine cowling

The latest incident happened to a Boeing 737-800. During a takeoff operated by Southwest Airlines (LUV), from Denver to Houston, the engine cowling broke off, striking the liftgate on the plane's wing. The pilots were able to return safely to the Denver airport without injury to the passengers. Southwest Airlines expressed its regret at the incident and confirmed that it had immediately begun inspecting the machine, which is expected to be in service from 2015, according to sources. However, it declined to comment on when the last engine maintenance was carried out.

Investigation

The Federal Aviation Administration (FAA) immediately launched an investigation, which may result in enforcement action or fines. Boeing has already referred questions related to Southwest Airlines operations. Neither party can currently explain why the cowling, which protects the fuel tanks in addition to the engine and serves to reduce drag and provide cooling, fell off. As the Seattle Times reported back in 2022, such incidents are common and have all been caused by maintenance errors during pre-flight inspections in the past.

29 incidents in 3 months

In Boeing's case, that's several dozen incidents since the beginning of the year. In addition to this case, 29 incidents have been reported between the beginning of the year and April 7, according to the National Transportation Safety Board (NTSB). Undoubtedly the most mediatized case was an early January flight to Ontario during which a fuselage panel of a Boeing 737 Max 9 flew off, leaving a large hole in the machine and forcing the plane to make an emergency landing. As luck would have it, the 2 seats next to the panel were empty and so no one suffered fatal injuries. After the accident all Max 9 aircraft were grounded. Investigation proved that loose bolts were the cause of the accident. Following an audit conducted in early March, the FAA issued an opinion identifying safety issues and gave Boeing 90 days to prepare a plan of correction. In early April, Alaskan Airlines, which operated the flight, said it had been paid $160 million in compensation by Boeing. Other problems included an engine fire in Houston, fumes in the cabin in Portland, and a diversion to Los Angeles because of a loose tire that damaged a car. But the problems are not limited to flights operating within the US. In March, more than 50 people were injured on a flight from Australia to New Zealand after the plane plummeted for unknown reasons.

A significant drop in shares

The year 2024 brought a number of safety issues that caused the company's stock to see a 30% drop. By the end of March, the stock was already considered the worst performer in the S&P 500 index. During April 8, 2024, they were trading around $182.37.* As of the same date, the company's market capitalization stood at $111.27 billion, according to Companiesmarketcap.com. Given the issues, it will also be interesting to watch their Q1 2024 results, which are due to be released on April 24.

Boeing's stock performance over the last 5 years (source: Tradingeconomics.com) *

Expiration of the agreement

Fortunately, this year's accidents have been without major injuries, but the same cannot be said for the cases of 2018 and 2019. In a period of only 5 months, 2 737 Max planes crashed, one in Indonesia and the other in Ethiopia. This was due to faulty activation of automated control systems and despite the pilots' best efforts, both flights ended tragically with 346 casualties and the subsequent grounding of all Max aircraft. In 2021, Boeing entered into an agreement with the Department of Justice (DoJ) that resulted in a $2.5 billion financial settlement for concealing documents from the FAA about modifications to aircraft systems that may have been the cause of the improper activation of the control systems. It also imposed conditions on the company in the area of safety regulations. The criminal proceedings were stayed. The agreement expired on January 7, 2024, two days after the January incident on the Alaska Airlines flight. According to Reuters, the DoJ has scheduled meetings with both lawyers and the families of the deceased in April and will investigate whether the company violated the agreement. The DoJ has until July 7, 2024 to submit its findings, and if violations are found, the criminal case will be reopened.

Olivia Lacenova, principal analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results.