NEW YORK, United States —Shares of Boeing plunged Tuesday on expectations that toughened federal scrutiny following the aviation giant’s mid-air safety problem earlier this month will drag on its financial performance.
Boeing shares sank nearly eight percent, again weighing on the Dow as a Wells Fargo equity analyst report warned a Federal Aviation Administration audit “opens a whole new can of worms.”
In the Jan 5 incident, a Boeing 737 MAX operated by Alaska Airlines executed an emergency landing after a panel known as a “door plug” blew out mid-flight. There were no fatalities or serious injuries.
The FAA first launched a safety probe into the incident, the first major in-flight safety issue on a Boeing plane since fatal 2018 and 2019 737 MAX crashes that led to a nearly two-year grounding of the aircraft.
READ: Mid-air blowout puts Boeing back in the hot seat
US regulators then grounded 171 737 MAX 9 planes with the same configuration as the jet involved in the incident.
The FAA ultimately said they would not be permitted to fly again until the agency approves an “extensive and rigorous inspection and maintenance process.”
The review will include data from an initial round of 40 inspections of MAX 9 planes, the FAA said.
Wells Fargo downgraded Boeing shares based in part on slower anticipated 2024 deliveries of the 737 MAX that will cut $2 billion in free cash flow, compared with a prior analysis.
READ: New Boeing 737 MAX supplier defect to delay aircraft deliveries
“Given Boeing’s recent track record, and greater incentive for FAA to find problems, we think the odds of a clean audit are low,” Wells Fargo said.
United Airlines on Tuesday extended its cancelation of service on the MAX 9 jets through January 17.
Meanwhile, Boeing named retired Navy admiral Kirkland Donald as an advisor to Chief Executive David Calhoun, charged with undertaking a “comprehensive” review of Boeing’s quality programs and practices.