Problems to the MAX: Boeing’s MAX 9 grounding busts previous momentum
- February 1, 2024: Vol. 11, Number 2

Problems to the MAX: Boeing’s MAX 9 grounding busts previous momentum

by McAlinden Research Partners

Prior to Jan. 5, Boeing appeared ready to start the new year on steady footing, building on a wave of momentum it had built up throughout a relatively successful fourth quarter 2023. Deliveries for the month of November reached a five-month high and put the American aviation giant on track to reach full-year targets related to its 737 and 787 jets. Though Boeing’s tally of new orders will certainly lag European rival Airbus’s pace for a fifth straight year, with the former trailing by roughly 800 aircraft through the first 11 months of the year reported, 2023 will still be the best annual period for Boeing’s order book since 2014. All of this helped Boeing shares surge by 39 percent through the fourth quarter.

However, Boeing’s recent run has collided with another round of safety and production issues, following the mid-air blowout of a panel aboard Alaska Airlines Flight 1282 on Jan. 5. A door plug, meant to seal unused exits on certain flight configurations where they’re not in use, apparently fell off of the 737 MAX 9 jet, leaving a gaping hole in the plane’s fuselage. Reuters notes the specific MAX 9 in question entered service just eight weeks ago. Though no passengers or crew were injured in the malfunction and the Alaska Airlines flight landed safely, Boeing’s stock price sunk by more than 8 percent at the start of trading Jan. 8.

The Federal Aviation Administration (FAA) has grounded 171 of the 215 MAX 9 jets currently in service until inspections can be done to assess their airworthiness. With such inspections taking four to eight hours per aircraft, that could mean as many as 1,368 hours of flight time could be affected before the MAX 9 jets can return to U.S. air space. For Alaska Airlines, which operates a fleet of 65 MAX 9s, the grounding meant a fifth of all the carrier’s flights were canceled Jan. 8. United Airlines is the world’s leading operator of MAX 9s, with 79 in service, and was forced to cancel 7 percent of all planned departures that day, according to data from FlightAware.

Though the door plugs are manufactured by key Boeing supplier Spirit AeroSystems, both companies could share the blame for the mid-flight failure of the component. Spirit builds fuselages for 737s with the extra door assembly “semi-rigged,” but Reuters sources have indicated Boeing completes the installation of door plugs and is supposed to conduct testing under pressurization to ensure all pieces of the plane are properly fastened. Though Spirit could potentially be vindicated if it is uncovered that Boeing did not properly undertake the installation of the door plug, a manufacturing issue at Spirit would likely still implicate Boeing because it is responsible for testing the safety of the fuselage and its components.

Despite its growing backlog, the largest portion of Boeing’s order book is comprised of its 737 NG/MAX narrowbody jets. Though the MAX is still the company’s top-selling jet and likely to define Boeing’s product line for many years to come, virtually all of the company’s underperformance since 2019 can be chalked up to issues they’ve had with the design and manufacturing of the MAX model, compounded by negligence and lack of oversight by executives. Over the course of several years, there has been fallout from two disastrous 2019 crashes of Boeing 737 MAX jets within a five-month span, culminating in the death of all 346 passengers and airline crew on board each flight.

At the outset of a global grounding of all 737 MAX jets, Boeing led investors and airlines to believe a fix of the faulty MCAS software present in the jet, along with recertification would come as soon as mid-May 2019. When no progress on recertification was present by that June, some observers expressed skepticism about the simplicity of the repairs needed, noting that, in addition to software problems, almost 150 parts inside the wings of 312 Boeing 737 jets were potentially defective and had to be replaced.

It would take 20 months before the 737 MAX could be recertified in the United States. Total direct costs to Boeing as a result of the MAX disasters were equivalent to more than $20 billion. As of the Jan. 5 market close, the aviation manufacturer’s share price remained more than 27 percent below its price at the start of June 2019. That gap will likely grow in light of its latest problem.

Though Boeing was able to escape more severe SEC scrutiny related to the 737 MAX debacle by paying a $200 million fine to settle civil charges claiming that it misled investors, along with a $2.5 billion Justice Department agreement that saved company executives from prosecution, the company has had to reckon with a myriad of other scandals and aircraft malfunctions — some of which were related to other jet models, including the 787 Dreamliner.

Though Jeffries reports the 737 MAX 9 represents only 2 percent of Boeing’s MAX backlog of 4,500, which is composed of several variants, the malfunction of yet another aircraft component will further damage Boeing’s already faded reputation among investors and raise further alarm among regulators. At the start of January, Boeing had asked the FAA for an exemption from key safety standards on its 737 MAX 7 — a currently uncertified model of the MAX family. Customers such as Southwest Airlines expected the MAX 7 to be given the green light by April, but that timetable will be thrown into question without the requested exemption, which may now be thrown further into question following this latest debacle.

Boeing’s request stems from a preexisting defect in the MAX’s jet engine anti-ice system, which many jets are already flying with. The Seattle Times notes the system is liable to overheat and damage the streamlined casing at the front of the plane. This could eventually cause a breakup of the casing, sending debris through the fuselage, as well as toward the wings or tail of the aircraft. Even with an exemption, the system would need to be overhauled to address the vulnerability by 2026 and then retrofitted to all MAX jets in service at that time. Boeing hopes the required fix can be developed while the MAX 7 begins service, considering other MAX variants using the anti-ice system have continued to carry flights without interruption. This issue is unrelated to the Jan. 5 door bolt flaw, but consistent episodes of Boeing jet malfunctions have continued to raise broader questions about what is happening within company management, procurement, safety testing and production.


This article was reported and written by McAlinden Research Partners, which can be assessed here.

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