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Boeing shares crash on the news of an FAA grounding order

On Monday, Boeing shares crashed to 8.5% both in the US pre-market on the news of a temporary grounding order issued by the U.S. Federal Aviation Administration (FAA) for a number of Boeing 737 MAX 9 jets.

On Friday, a Boeing 737 Max 9 jet experienced an emergency door plug detachment shortly after takeoff from Portland, Oregon, bound for Ontario, California. The aircraft returned and safely landed after the incident. 

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While some passengers received treatment for minor injuries, no fatalities were reported. In response, the Federal Aviation Administration (FAA) issued a temporary grounding order for approximately 171 Boeing jets on Saturday. 

The FAA emphasized that the planes would remain grounded until they are deemed safe to resume operations.

“Boeing’s reputation has been shattered after the incident last Friday involving one of its 737 Max planes flown by Alaska Airlines. It is the latest in a string of problems for the company, which include the grounding of 737 Max plans in 2019 after two crashes and subsequent delivery delays and production issues,”  said AJ Bell Investment director Russ Mould.

“Safety is of paramount importance in the aviation sector and airlines using 737 Max planes will be thinking long and hard about their future aircraft requirements and how Boeing might play a smaller role, or none at all. That might explain why Airbus shares jumped on Monday as investors are betting it could take even more market share from Boeing,” Mould added.

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Airbus shares were up 2.32% at the time of writing on Monday.

“There is no room for error building planes and cutting corners in the production stage could have catastrophic consequences. There are naturally questions being asked about the quality checks and whether Boeing is trying to do too much too fast,” said Russ Mould.

“Boeing’s management will be under considerable pressure from the regulators and customers to explain what’s going on, which means considerable headwinds ahead for the business. It’s no wonder investors have raced to sell the shares as the risks to the investment case have just shot up,” Mould added.

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