Paper Example on Decline in Boeing Sales and Share Price

Introduction

Boeing sales and share price has been on the decline since the Ethiopian Airways crash due to the growth of the Boeing 737 Max planes safety. The recent decline in sales and share price has significantly affected Boeing operations because it resulted in the grounding of all the Boeing 737 Max planes by all airlines and the cancellation of orders of the plane model that has been issued to the company (Isidore, 2019). Boeing lost the federal approval on safety with the recent crashes being linked to a defective automatic safety feature. Although the company has continued to build the 737 Max planes, the demand, and also the production is low compared to a similar time in 2018 (Topham, 2019). This incidence shows the importance of safety in aviation and how a single product can significantly affect the overall business performance of a company.

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Causes of Boeing Decline in Sales and Share Price

The decline in Boeing sales and share price shows the general nature of business in which the safety of products is directly linked to the success of the business. Boeing is one of the significant plane makers in the world and has dominated the manufacture of passenger planes for many decades only being rivaled by the European's Airbus. The beginning of safety complaints facing Boeing after the plane crash in Indonesia and shortly in Ethiopia sparked a boycott by airlines and pilots citing the safety of the Boeing 737 Max planes (Topham, 2019). This led to the grounding of the entire global fleet of Boeing 737 Max and the ensuing gap in passenger transportation was easily filled by Airbus, a rival company that also produces large passenger planes with an excellent safety history (Isidore, 2019). The decline of sales and the negative market image of Boeing due to the 737 Max affected all other Boeing product sales due to safety fears with many airliners instead of seeking Airbus planes as an alternative. However, the most necessary element in the decline of Boeing sales is the continued denial of the company on the safety issue and passing the blame to the pilots and the individual airlines.

The Boeing anti-stall systems which the company had delayed to update in 737 Max has directly implicated the aircraft manufacturer in the accidents. As such, the company has lost favor with its customers and the regulators, which has led to fewer aircraft orders (Isidore, 2019). This is projected to be the situation until Boeing is cleared by the regulators to fly again. In the current financial quarter Boeing delivered 50 fewer 737 Max aircraft which is a lower number than the previously projected number which has led to the decline in revenue with more than $1 billion for the commercial planes segment (Hsu, 2019). The resulting panic due to the crash of the Ethiopian Airlines jet in March 2018 has led to the plunge of the company's stock prices by $3.75 per share as the company continues to address the safety and reputation issue the sales will continue to be low (Hsu, 2019). The reason behind the decline in sales is because the 737 Max program was the most priced aircraft for Boeing based on the demand of the plane model by airlines. The loss of consumer confidence on Boeing has reduced both the sales and the share value of the company, which is expected to continue until the company regains certification.

The lack of Boeing partnership with its consumers who complained that the company did not provide the software package and counseling the individual airlines on the safety is also a major significant problem that has contributed to the problem. Boeing should have maintained a close relationship with the airlines and responded to the complaints by the pilots who had complained of difficulties in controlling the plane and operating its new software could have averted the accidents (Isidore, 2019). Therefore, in significant part, the negligence of the airline management and safety department is the primary cause of the accidents. This means that Boeing should undertake the sole responsibility for the compensation of the victims.

Conclusion

The decline of Boeing is a significant economic event that will significantly affect the American economy and employment industry. The company revenue has decreased by $1billion and the share value of the company has reduced by $3.75 with the most significant cause being the consumer loss of confidence in Boeing planes due to the crash of two 737 Max which is entirely due to the company anti-stall system which led to the grounding of the entire global fleet of 737 Max. The company will need more than a strategy for a comeback by satisfying all the safety issues and acquiring a green light from the regulators. Most travelers are likely to boycott 737 Max planes until the company gives them enough assurances on their safety. This will significantly affect Boeing financial projections in the long term due to the decreased demand for planes in one of its most successful and promising commercial planes program. Besides, Airbus, which is the European aircraft manufacturer and a major competitor, is likely to benefit highly by tapping most of Boeing former customers due to their safety records.

References

Hsu, T. (2019). Boeing Reports Slide in Earnings and Admits Future Is Hazy. The New York Times. Retrieved from https://www.nytimes.com/2019/04/24/business/boeing-stock-earnings.html

Isidore, C. (2019). Boeing Reports No Orders For Second Straight Month. CNN Business. Retrieved from https://edition.cnn.com/2019/06/11/business/boeing-orders/index.html

Topham, G. (2019). Anti-stall system was 'in play' on Ethiopian's Boeing 737 Max This article is more than 2 months old MCAS feature also highlighted by an investigation into the earlier crash of Lion Air plane. The Guardian. Retrieved from https://www.theguardian.com/world/2019/mar/25/anti-stall-system-was-in-play-on-ethiopians-boeing-737-max