Boeing Falls as Missing Malaysian Plane Adds to 787 WingsThomas Black and Julie Johnsson
Boeing Co. fell after the company said it would inspect wings for cracks on undelivered 787s, and investigators searched for a Malaysian Airline System Bhd. 777 jetliner that vanished three days ago.
“News of the wing and inspections likely lower first quarter deliveries, plus the 777 aircraft incident in Asia will likely weigh on the Boeing stock this week,” said Peter Arment, an analyst at Sterne, Agee & Leach Inc.
Boeing declined 1.3 percent to $126.89 at the close in New York. The shares have risen 56 percent in the past year, compared with a 21 percent increase in the Standard & Poor’s 500 Index.
Boeing is inspecting 43 Dreamliners for hairline cracks after it was notified by supplier Mitsubishi Heavy Industries Ltd. that a manufacturing change may have caused structural damage to the jets’ composite wings. Inspection and repairs may take as much as two weeks per aircraft, Arment said, reducing Boeing’s first-quarter jet delivery tally and revenues.
The issue, discovered in mid-February, doesn’t affect planes already in service and should prove a short-term hiccup for the world’s largest planemaker, Cai von Rumohr, an aerospace analyst with Cowen & Co., said in a note to clients today. After delivering just four Dreamliners in February, Boeing should regain some momentum in March, he said, while probably falling short of the 20 he anticipated for the first quarter.
“While a disappointing surprise, the 787 wing issue announced last Friday looks like a minor speed bump that should be fully resolved by mid-year with negligible impact on full-year results,” said von Rumohr, who rates Boeing the equivalent of a buy and lists the stock as one of his top three picks.
None of the 30 analysts surveyed by Bloomberg have a sell rating on the stock and 22 recommend buying the shares while eight say hold.
Boeing is getting a handle on production snarls at a second 787 assembly line North Charleston, South Carolina, that have also slowed deliveries to a crawl, Dennis Muilenburg, president and chief operating officer of the Chicago-based planemaker, said today at a conference sponsored by JP Morgan Chase & Co.
Boeing handed off a total of eight 787s during the first two months of 2014, below its new 10-per-month goal. The planemaker is seeing progress after hiring 300 workers to tackle issues with slow and unfinished work on center fuselages at the factory, Muilenburg said.
“Any way you want to measure factory operations -- jobs behind schedule, unit cost, part shortages -- all of those are trending in the right direction,” Muilenburg said. “So I think we have our arms well around that interruption and we expect to see Charleston operating very efficiently going forward.”
Nine countries are investigating the disappearance of a Boeing 777-200 on March 8 that was flying from Kuala Lumpur to Beijing with 227 passengers and 12 crew members. A Boeing team is providing technical assistance to U.S. accident investigators in the region, the company said today.
The 777 has one of the best safety records of any plane. In its 19-year history, it has had only one fatal accident, that of an Asiana Airlines Inc. plane that crashed while landing in San Francisco last year, killing three people. In that case, investigators have focused on pilot error.
“This 777 is arguably one of the most reliable airplanes ever built and its record proves it,” said John Goglia, a former member of the U.S. National Transportation Safety Board, in an interview on Bloomberg Television’s “First Up.” “This airplane has a very, very secure and robust platform so that would be the last place that I would think” to look for a cause for a crash.
The plane that disappeared this weekend shattered a wing tip after colliding with another aircraft at Shanghai Pudong International Airport on August 9, 2012, NBC News reported, citing a report by the Bureau d’Enquetes et d’Analyses pour la securite de l’aviation civile (BEA).
“The aircraft had a clipped wing tip,” Malaysian Air Chief Executive Officer Ahmad Jauhari Yahya said in response to the reported incident. “It was repaired by Boeing, cleared by Boeing. It was safe to fly.”
While there is no indication a wing issue contributed to the disappearance, aircraft structural repairs have failed before and caused accidents. After a Taiwanese China Airlines Ltd. 747 crashed into the Taiwan Strait on May 25, 2002, investigators found that a repair on the plane’s tail had failed, causing it to break apart, according to the Taiwan Aviation Safety Council. All 225 people aboard the Taipei-to-Hong Kong flight died.