Last week’s tragic, fatal Boeing airplane crash in Ethiopia is the 2nd time in 6 months that a Boeing 737 MAX 8 has crashed — an unheard-of failure rate for a new aircraft.
Since the crash, 34 countries (not including the US and Canada) and dozens of airlines have banned the 737s from takeoff. As the investigation into the crash’s cause continues, the grounded planes will cause pains for Boeing — and the Dow Jones Industrial Average it props up on its wings.
Boeing could lose a competitive edge
Boeing had hoped that the 737 MAX 8 — a new, lighter, more efficient version of its most popular aircraft — could help the company win back market share from Airbus in the single-aisle jet market.
If the MAX 8 remains on the ground for long, Boeing will lose one of its major sources of revenue: The company currently has 4.7k orders for the $121m MAX 8, representing ⅔ of Boeing’s future deliveries and 40% of its expected profits.
One crash causes another… and another
The grounding is bad for Boeing’s business — and the rest of the economy. Since the Dow Jones is a price-weighted index that averages 30 important companies based on their share price, companies with high shares have the biggest impacts on the average.
Boeing’s share price is the highest of the entire bunch, meaning that Boeing’s stock could cause the whole index to decline.
Yesterday, Boeing’s stock closed down more than 6%, enough to pull the Dow into the red even though both other indexes posted gains.