Boeing 737 crash will test investor confidence

The crash of a Boeing jet in China sent the company’s shares down 5.6% at one point Monday, signaling a test of investor confidence just as the plane maker was starting to put a number of crises in its past.

Driving the news: A Boeing 737-800 plane carrying 132 people for China Eastern Airlines crashed in the mountains of southern China's Guangxi region on Monday.

• Shares ultimately closed down 3.6%.

Context: Details about the crash in China are pending, but analysts say they’d be surprised if it was the result of a fault with Boeing’s aircraft.

• The 737-800 has one of the best safety records for any plane, according to aviation consultancy Cirium, via Bloomberg. It precedes the 737 Max, which experienced an extended grounding following multiple fatal crashes that exposed deception in the aircraft’s development.
• “Given the excellent long-term safety record… we would be surprised if this crash is determined to be caused by a design or manufacturing defect,” CFRA Research analyst Colin Scarola wrote.
• “Operator or maintenance issues” are typically far more likely in situations like this, which “suggests there won’t be any long-term impact to Boeing from the crash,” Scarola continued.

Yes, but: “Until we find out exactly what happened we won’t be surprised to see sentiment materially worsen for Boeing shares,” Scarola said.

What they’re saying: “Our thoughts are with the passengers and crew of China Eastern Airlines Flight MU 5735,” Boeing said in a statement Monday afternoon. “Boeing is in contact with the U.S. National Transportation Safety Board and our technical experts are prepared to assist with the investigation led by the Civil Aviation Administration of China.”

What we’re watching: Whether China retaliates against Boeing. China has a vested interest in bolstering its own narrow-body plane, the Comac C919, a competitor for the 737-MAX, which is still awaiting recertification in China.

• All of China Eastern’s 737-800 planes were ordered grounded following the Monday crash, Chinese state media reported, according to the AP.
• “Any excuse to further delay the MAX could be opportunistically used by the Chinese regulator,” Scarola said. “China likely wouldn’t admit this is what they’re doing. But we certainly think it could happen.”
• 737-MAX airplanes are fixed and back in the air in the U.S.

Our thought bubble: Boeing has come a long way from the safety crisis that erupted surrounding the 737 Max and the financial crisis stemming from the early months of the pandemic. But a tussle with China could regenerate problems at a time when the company was hoping for brighter days.