Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Boeing Are Down Today

By Lou Whiteman - Sep 8, 2020 at 10:19AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The FAA is looking into Dreamliner manufacturing issues.

What happened

Shares of Boeing (BA 0.89%) lost 5% on Tuesday morning after the U.S. Federal Aviation Administration (FAA) said it was looking into manufacturing flaws in some 787 Dreamliners. The investigation is preliminary, and Boeing believes the issues are limited to a small number of airplanes, but the company can ill afford a fresh round of headlines questioning its manufacturing prowess right now.

So what

In late August, Boeing identified two distinct manufacturing issues in recently built Dreamliners that led to a small number of planes being grounded. The issues could make the planes unable to withstand the maximum stress that an aircraft can experience in flight.

A Boeing 787 Dreamliner in flight

Image source: Boeing.

The FAA over the weekend said it was opening an investigation into the flaws, though it said it is too soon to determine whether new inspections will be required. Boeing said its internal investigation has determined that, while there are some planes that might have one of the two issues, it believes none have both in a way that could cause concerns about structural integrity.

Still, the news comes at a difficult time for Boeing. The company's 737 MAX has been grounded since March 2019 after a pair of fatal accidents, and Boeing's response to the 737 MAX problems has led to questions about the safety culture at the company.

Boeing is also trying to manage through a sharp decline in demand for new planes due to airlines cutting back as a result of the COVID-19 pandemic.

Now what

Based on what we know right now, this appears to be an isolated issue and not something that will impact all of the 900 Dreamliners delivered. If so, it should be a pretty manageable financial issue for the company.

The real risk is reputational. Boeing is a company on the defensive after the 737 MAX debacle and can ill afford travelers reading that another of its signature aircraft models is under added scrutiny. While Boeing, thanks to its global duopoly with Airbus, should win its share of new plane orders in recent years, questions about safety could make it harder for Boeing to establish itself as the preferred choice for flyers and airline buyers.

Boeing shares already faced a multiyear headwind as the company rides out the COVID-19 airline slump and rebuilds its reputation. The new Dreamliner issues just makes the challenge ahead that much harder.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
$168.69 (0.89%) $1.49
Airbus Stock Quote
$27.33 (-0.83%) $0.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.