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Boeing 737 Crashes in China; Boeing Stocks Fall

Industry: Aerospace
Current: Other Industry Indicators

The China Eastern Airlines' MU5735, a Boeing 737-800 aircraft with 132 onboard, crashed on March 21, 2022
The Boeing 737 series of airlines has the most orders amongst all Boeing commercial aircraft
The Boeing 737 MAX was grounded in the past due to safety concerns

Boeing 737 Crashes in China; Boeing Stocks Fall

On March 21, 2022, China witnessed its first plane crash in 12 years, when the flight MU5735, a Boeing 737-800 plane operated by China Eastern Airlines, crashed into a mountain range in Tengxian, Guangxi, China, with 132 people on board. In the premarket trading on Monday 21 March 2022, the Boeing shares were down by nearly 8%. China Eastern Airlines' stock price was also down by almost 7%.

The aircraft MU5735 took off from the Kunming Changshui International Airport and headed towards Guangzhou Baiyun International Airport. Just over an hour into the flight, the aircraft made a near-vertical dive to crash into the mountains of Tengxian. Ever since the Boeing 737-800 made its first flight on July 31, 1997, the jet-propelled airliner was involved in 23 hull-loss occurrences (destroyed or damaged beyond repair). Boeing has since then assured its airline customers of its support and is prepared to assist the concerned authorities over the investigation of the crash in the US and China. Since the crash, China Eastern Airlines has grounded the Boeing 737-800s.

Boeing: The 737 History and Woes

The 737 series of planes are a narrow-body aircraft manufactured by Boeing and entered service in 1968 with the Boeing 737-100. As time progressed, the 737 airliners were developed further and made into one of the safest aircraft, with the newer advanced aircraft named as per their generations. But Boeing ran into trouble with the 737 series, specifically with its 737-MAX series of planes, when two fatal crashes occurred months apart. The first fatal incident occurred in Indonesia on October 29, 2018, when the Lion Air Flight 610 aircraft crashed into the Java sea. The next crash was five months later, on March 10, 2019, when the Ethiopian Airlines Flight 302 crashed in Ethiopia. Countries perceived these back-to-back crashes as a safety risk. The cause of these crashes traced back to poor electrical bonding; hence, countries worldwide in 2019 grounded the Boeing MAX aircraft fleet, followed by multiple lawsuits against Boeing. Boeing recorded $7.4 billion of liability in estimated payments, concessions, and other in-kind considerations relating to the 737 MAX grounding in 2019.

The combined effect of liabilities due to 737 MAX grounding and the delayed production due to COVID-19 resulted in lower revenues for Boeing since 2019. The year 2022 was set to be the turnaround point, with safety and operational upgrades made on the 737 MAX fleet, regulators in 185 out of 195 countries, including China, Ethiopia, and Indonesia, cleared the 737 MAX and allowed it to resume service within its airspace. The 737 series of planes are a significant source of revenue for Boeing. Thus, with the majority of the countries clearing the aircraft for delivery and flight, Boeing was enroute to clear a backlog of deliveries and grow its revenue. But the fatal 737-800 airplane crash in China will once again raise questions over the safety of the Boeing 737 fleet.

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