This post has been updated.
The US has grounded Boeing’s 737 Max 8 planes. Boeing has said it will provide a software upgrade for the problematic flight control system that many pilots found difficult to use. The fix is roll out in the next 10 days according to a report by the AFP.
While the Federal Aviation Authority has yet to make such a decision, other countries have pulled the model from their fleets after reports indicating that the Max 8 aircraft model was involved in two separate but similar fatal crashes — all within the span of less than six months.
“The economic impact on Boeing is just absolutely devastating if they don't fix this immediately,” Soberman & Rosenberg partner Arthur Rosenberg — who specializes in aviation liability — told Yahoo Finance.
Aerospace and defense giant Boeing (BA) is one of the most iconic American manufacturers today and a key component of the Dow Jones Industrial Average (DJIA).
The company came under pressure early this week after one of its best-selling jets — the Boeing 737 Max 8 plane — was involved in a deadly crash in Ethiopia on Sunday. The stock fell more than 10% in early trading.
The 737 aircraft is Boeing’s best-seller by a massive margin dominating around 70% of the company’s total deliveries for commercial airplanes, based on the company’s most recent 10-K filing. American Airlines and Southwest Airlines are among the carriers with Boeing 737 Max 8 aircrafts in their fleets.
Boeing has come a long way since its namesake founder started the company in 1916, eventually evolving into a business with more than $100 billion in revenue in 2018.
William Boeing’s plane company
Before it became the world’s largest aircraft manufacturer and arms producer, Boeing was a small, Seattle-based shipyard created by founder William E. Boeing in the early 1900s.
In 1916, together with his friend U.S. Navy Lt. Conrad Westervelt, William Boeing created the B&W Seaplane — the first Boeing airplane and named after the duo. The aircraft was 26 feet long and flew for 900 feet on the first flight.
Boeing and Westervelt subsequently tried to sell the plane to the U.S. Navy but failed to secure a deal. (The New Zealand Flying School bought the plane in 1918.)
William Boeing incorporated the company under the name ‘Pacific Aero Products Co.’ for $100,000 in July of 1916. Westervelt helped secure some key government contracts with the Navy that laid the foundation for the company’s relationship with the armed forces.
In 1917 William Boeing changed the company name to Boeing Airplane Co. and began supplying seaplane trainers to the Navy.
The company then began making regular deliveries to the Navy as well as international buyers.
Boeing weathers major world events
Soon after the Great Depression hit and the stock market crashed, William Boeing resigned as board chairman.
But the company continued to make great strides in the testing, manufacturing, and sale of aircrafts — particularly to the armed forces.
World War II brought a lot of business to Boeing, which made various aircrafts — from experimental long-range bombers to the Kaydet, a two-seater biplane used by the U.S. Navy and Army Air Corps. The Vietnam war brought more business decades later.
From small town company to stock market bellwether
In 1987, Boeing was inducted into the DJIA alongside Coca-Cola.
At the time, a Boeing spokesperson told the Washington Post that he was surprised but happy at the inclusion: "I think our people look upon it as something very positive, good recognition for the work the company does.”
Today, Boeing stock BA represents 11% of the DJIA index, which is price-weighted — and is also currently the best-performing stock, according to DataTrek co-founder Nicholas Colas. The stock was up nearly 30% in 2019 going into Monday.
The company made over $100 billion after sales rose 8% in 2018, and more than half its business comes from overseas.
“It is hard to imagine a company more levered to long-term global economic trends than Boeing,” Colas added.
Boeing 737 Max 8 ‘very popular’ with airlines
Boeing recently secured deals with Vietnamese carriers VietJet and Bamboo Airways to sell 110 planes for more than $15 billion, including 100 737 MAX planes — the same ones involved in the crash — ordered by VietJet.
The Civil Aviation Authority of Vietnam said on Monday morning that it was considering not granting licenses to the use of the aircraft “until the causes for the crashes are identified and the US Federal Aviation Administration takes proper remedying measures.”
While the company is not likely not suffer from adverse reputational damage from the incident, if it is confirmed that “both the Lion Air and Ethiopian 737-8 Max suffered from the same aircraft design flaw then Yes, it could develop into a sizable problem for Boeing,” University of Sydney Business School Professor and Chair in Transport and Supply Chain Management Rico Merkert told Yahoo Finance.
Merkert added that the aircraft had been “very popular with many orders,” which could be at risk if a flaw is found.
Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.
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