Boeing (BA) acknowledged for the first time that its software system played a role in two recent deadly 737 MAX 8 accidents, while analysts and UBS lowered their price target on the world’s biggest planemaker amid ongoing investigations into the aircraft’s safety, setting shares up for another active trading session Friday.
Boeing said the preliminary report into the cause of Ethiopian Airlines Flight 302’s fatal crash, which killed all 157 passengers on board on March 11, as well as the Lion Air 610 disaster in Indonesia in early October, which took the lives of 189 people, were caused by activation of the Maneuvering Characteristics Augmentation System, or MCAS, in response to “erroneous angle of attack information” from a broken sensor. Boeing vowed to correct the cause of the tragic incidents while recognizing the “devastation of the families and friends of the loved ones who perished.”
“We’re taking a comprehensive, disciplined approach, and taking the time, to get the software update right,” CEO Dennis Muilenburg said in a statement published late Thursday. “We’re nearing completion and anticipate its certification and implementation on the 737 MAX fleet worldwide in the weeks ahead.”
“This update, along with the associated training and additional educational materials that pilots want in the wake of these accidents, will eliminate the possibility of unintended MCAS activation and prevent an MCAS-related accident from ever happening again,” Muilenburg added.
We at Boeing are sorry for the lives lost in the recent 737 accidents and are relentlessly focused on safety to ensure tragedies like this never happen again.
— Dennis A. Muilenburg (@BoeingCEO) April 4, 2019
Boeing shares closed Friday down 1.01% to $391.93 each, a move that would leave the stock down some 7% from the level it traded at prior to the March 10 ET 302 crash.
UBS analyst Myles Watson, meanwhile, lowered his price target on the planemaker by around 5% to $500 a share, while maintaining a “buy” rating, noting the “greater certainty around both a common contributing source of failure and a likely common solution.”
Ethiopia’s Transport Ministry stopped short of blaming Boeing’s MCAS system, which similar probes in Indonesia have identified as the potential cause of the Lion Air crash but said the planemaker should review and confirm its safety before MAX 8 planes return to normal service.
“The crew performed all the procedures repeatedly provided by the manufacturer but was not able to control the aircraft,” Ethiopia’s Transports Minister Dagmawit Moges told reporters Thursday. “Since repetitive uncommanded aircraft nose-down conditions are noticed … it is recommend that the aircraft control system shall be reviewed by the manufacturer.”
The Federal Aviation Administration said earlier this week that it would conduct a “comprehensive review” of the MCAS system on MAX 8 and MAX 9 aircraft with a formal Joint Authorities Technical Review process.
The FAA said it would “”evaluate aspects of the 737 MAX automated flight control system, including its design and pilots’ interaction with the system, to determine its compliance with all applicable regulations and to identify future enhancements that might be needed.”
The U.S. Transportation Department is looking into the FAA’s certification of the 737 MAX, and reports have suggested the Justice Department is also investigation the Administration’s oversight of both Boeing and aircraft certification processes.
More than 300 of Boeing’s flagship MAX aircraft have been grounded by regulators around the world since the March 10 disaster, with the world’s biggest planemaker facing the potential loss of a a $6 billion order after Indonesia’s national airline moved to cancel or amend a previous agreement for the controversial aircraft.