Major airline stocks felt the aftershocks Monday of this weekend's Ethiopian Airlines disaster and the subsequent slide in shares of Boeing (BA) , which made the 737 MAX 8 jet that went down shortly after takeoff Sunday in Africa, killing all aboard. It's the second time in six months that the 737 MAX 8 crashed and killed on the flight, raising questions about whether there are design problems with Boeing's newest major model.
Southwest Airlines (LUV) , Alaska Air Group (ALK) , and United Continental Holding (UAL) -- which all own significant numbers of Boeing planes in their fleets -- fell slightly in the accident's wake. The crash also impacted shares of non-U.S. low-cost carriers like Norwegian Air Shuttle (NWARF) amid worries about passenger fears and slowed jet deliveries from Boeing. The four carriers all fell, with NWARF leading the pack with a 5.8% loss on the session.
The stocks slid as airlines or aviation authorities in China, Vietnam, South Africa, Indonesia and Ethiopia ground their 737 MAX aircraft, calling into question the airworthiness of one of Boeing's keystone planes. "The 737-MAX is Boeing's most important cash generating new platform, and therefore, a second fatal crash in such a short time frame is concerning," Seaport Global analyst Josh Sullivan wrote in a note to clients.
The crashes come at a time when Boeing has a nearly 5,000-plane backlog for 737 MAX 8. Carriers that have ordered the plane have staked a great deal of their business outlooks on the model, meaning it's vital for both Boeing and its customers that deliveries go forward with few interruptions.
For example, Southwest has been eyeing expanding its routes to Hawaii later this year using the MAX 8 -- a major business goal for the carrier. LUV also plans to use the plane to extending its footprint of flights to Denver and other cities. But if the MAX 8 has problems, Southwest might have to revisit all of those plans.
To be sure, the concern over the MAX 8 could be overstated, with airlines and regulators grounding the plane Monday before there's evidence as to what caused this weekend's crash. And the Chinese Civil Aviation Administration's motivation for grounding the plane is arguably even more complicated, given that the crackdown comes amid Washington and Beijing's ongoing trade tensions.
Analysts aren't expecting a similar reaction from Western regulators and airlines. "Most other current operators of the 737 MAX 8 have indicated confidence in the 737 MAX 8 aircraft's airworthiness, which has been in service since mid-2017," Raymond James analyst Savanthi Syth wrote in a note. "Thus, we do not expect an immediate ground-stop in the United States, Latin America or the EU to alter operations for carriers under coverage, [but instead] expect operating carriers will fully comply with learnings from the crash."
But whether that's what ultimately happens will come down to what those investigating the Ethiopian crash find, particularly from the plane's black-box flight recorders, which authorities have recovered. For now, the uncertainty could cloud the skies for a number of these stocks.