What happened
A Boeing (BA 1.54%) 737-800 with 132 people on board reportedly crashed overnight in China. Shares of the aerospace giant opened Monday's session down by 6% as investors attempted to digest what had happened and what it might mean for the already-troubled airplane manufacturer.
So what
China Eastern Airlines flight 5735, en route from Kunming to Guangzhou, crashed in the mountainous Guangxi region, according to multiple reports. Surveillance camera footage from a site near the crash was obtained by Chinese state media; the video showed the jet coming down at a steep angle and crashing.
Image source: Boeing.
When tragic events occur, one's first thoughts always are, and should be, with the victims and their families -- not the financial implications. But the crash is moving Boeing's stock. The company has had a difficult few years in terms of safety, as the Boeing 737 MAX was grounded for 18 months after a pair of crashes, and the production of other airplanes was curtailed to allow for additional safety checks and modifications.
It's important to note that the 737-800 is a separate model from the MAX, and does not make use of the technologies that were found to have caused those earlier crashes. Various 737 models are among the most popular aircraft used by airlines around the globe, and the 737 for the most part has a strong safety record. But investors fear uncertainty, and a new crash raises significant questions that Boeing and safety regulators will have to address in the weeks to come.
Now what
Investors would be well-advised to sit tight and resist the urge to trade on this news. It is still way too early to know exactly what happened, and given the 737-800's long track record, there is no reason to jump to the conclusion that the crash was caused by a design or structural flaw.
That said, there haven't been a lot of reasons for investors to get excited about Boeing recently. The company saw sales fall first due to the 737 MAX issues and later because of the pandemic, which caused airlines to dramatically scale back flying. Boeing and the airline industry have both tried to mount comebacks as COVID-related restrictions and concerns have eased, but with airlines' balance sheets bruised and international travel demand slow to recover, the market for new planes is far from robust.
If nothing else, it seems likely that this crash will further complicate Boeing's already shaky relationship with Chinese regulators, which have not yet cleared the MAX to fly in China again.
For long-term-minded investors, there are good reasons to believe that over time, travel demand will rebound, and with the continued growth of the global middle class, the international market for new planes will continue to expand. But that recovery is still a ways off, and this latest crash has added new questions for Boeing to deal with. Investors would be best served to watch this story play out from the sidelines.
