Boeing Shares Plunge Amidst New Federal Safety Investigation Concerns

Boeing's already strained circumstances took a downturn as a new Wall Street report on Tuesday triggered a plunge in its shares. The well-regarded financial institution, Wells Fargo, issued a report that casts doubt on Boeing's ability to successfully complete a new federal safety audit, hinting at more trouble ahead for the aerospace giant.

Ominous Signs from Wells Fargo

Titled 'FAA audit opens up a whole new can of worms,' the report from Wells Fargo signals Boeing is far from resolving its longstanding issues with quality control and engineering. This prognosis sprung from a recent event where an Alaska Airlines Boeing 737 Max 9 jet lost part of its structure during flight. Such an incident has raised the probability of the US Federal Aviation Administration (FAA) uncovering considerable problems in its investigation.

Analysts aren't optimistic about Boeing's results in the impending audit, stating, 'Given Boeing’s recent track record, and greater incentive for the FAA to find problems, we think the odds of a clean audit are low.' The focus is currently on the Max 9 fleet, but there is a potential for investigations to broaden to other Max models with similar components.

Due to heightened risks regarding Boeing's production and deliveries, Wells Fargo downgraded the company's stock to 'overweight,' a category indicating a strong recommendation to sell the shares. Following the report, Boeing's stock price fell by 7%.

FAA's Probe into Boeing's Quality Control

The FAA has already initiated an inquiry into Boeing's quality oversight following the in-flight incident with the Alaska Airlines jet. The seriousness of the event is underscored by the FAA's stance that its occurrence was unacceptable and must be prevented in the future.

The episode involved the detachment of a door plug mid-flight, resulting in a large hole in the aircraft and causing decompression within the cabin, which ripped out seat headrests. Even though no fatalities resulted, passengers were injured. Boeing was directed to provide information regarding this failure and preventive measures to the FAA within ten days.

Enduring Challenges for Boeing

Over the past five years, Boeing has grappled with numerous safety and quality issues across its fleet models, causing groundings and delivery halts. Specifically, the 737 Max's design faults led to two devastating crashes in 2018 and 2019, claiming 346 lives and grounding the model for 20 months, costing the company over $21 billion.

An additional worry comes from the ongoing snag with the 737 Max's 7 and 10 variants, which are still awaiting regulatory approval to re-enter service. The latest safety questions only amplify the scrutiny these models will face.

The consequences of these quality issues span beyond the 737 Max—Boeing also had to pause deliveries of its 787 Dreamliner due to quality control doubts, and the 777 fleet suffered after an engine failure incident.

Boeing, stock, investigation