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Boeing's stock slides after story about pilots' MAX messages

By SCOTT REEVES in New York | China Daily Global | Updated: 2019-10-22 23:30

File photo: Boeing 737 MAX. [Photo/VCG]

Boeing's stock slid 3.76 percent Monday after messages between the company's chief technical pilot for the 737 MAX and a colleague discussed problems they encountered with the plane's anti-stall system while testing it on a flight simulator.

The anti-stall device, called the Maneuvering Characteristics Augmentation System (MACS), has been implicated in the crashes of two Boeing 737 MAX jets that killed 346 people.

Two Wall Street analysts downgraded Boeing's stock on the news, which closed Monday at $331.06 a share, down $12.94, or 3.76 percent. The 52-week high is $446.01.

A 2016 instant-message exchange between pilot Mark Forkner and a colleague appeared to discuss the manufacturer's modification of the MCAS system. Forkner called the anti-stall system's performance on the flight simulator "egregious". He wrote to a colleague, "So I basically lied to the regulators (unknowingly.)"

His pilot colleague, Patrik Gustavsson replied, "It wasn't a lie, no one told us that was the case."

David Gerger, attorney for Forkner, told The Wall Street Journal: "If you read the whole chat, it is obvious that there was no 'lie' and the simulator program was not operating properly. Based on what he was told, Mark thought the plane was safe, and the simulator would be fixed."

In a letter to Boeing on Friday, Steve Dickson, head of the Federal Aviation Administration (FAA), said Boeing discovered the message exchange in February but didn't notify investigators about it until last week. He wanted to know why.

Boeing has updated the anti-stall system's software and hopes MAX jets will return to service in the fourth quarter. But airlines don't expect the plane to resume commercial flights until at least January. The pilots' union for Southwest Airlines said it doesn't expect the plane's return until February.

On Monday, UBS downgraded Boeing's stock to "neutral" from "buy".

"Our working thesis has been that the failures on the 737 MAX development by the company centered on fault intolerant design compounded by poor assumptions of pilot response," the brokerage house said in a research note to investors. "We now have to append that assessment further based on source material provided to Congress and the FAA on Friday that reinforces the perception of and heightens the potential of incomplete disclosure, which inherently puts more money/trust and time at stake."

Credit Suisse downgraded Boeing's stock to "neutral" from "outperform" and cut the price target to $323 a share, down from $416.

"We can no longer defend the shares in light of the latest discoveries, discoveries which significantly increase the risk profile for investors," the brokerage said.

The MAX is Boeing's top-selling plane and accounts for about 40 percent of the company's profit.

MAX jets were grounded in March following crashes on Oct 29, 2018 in Indonesia and March 30 in Ethiopia. China was the first to ground the plane, and the US was the last.

Investigators have focused on the MAX's anti-stall device that may have erroneously pointed the nose of the planes down to gain speed to prevent a mid-air stall and into a fatal plunge.

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