Boeing MAX 9 Grounding Extended by US FAA for Additional Safety Checks: What This Means for Investors

The Federal Aviation Administration (FAA) has extended the grounding of Boeing 737 MAX 9 airplanes indefinitely for additional safety checks. This announcement comes after a cabin panel broke off a new jet mid-flight, prompting the FAA to tighten its oversight of Boeing. United Airlines and Alaska Airlines, the two U.S. airlines using the aircraft in question, have canceled flights through Tuesday.

The FAA stated that it would require another round of inspections before considering putting the jets back into service. The regulator plans to audit the Boeing 737 MAX 9 production line and suppliers, and may consider having an independent entity take over some safety certification aspects previously assigned to Boeing. The FAA emphasized that the continued grounding of 171 planes with the same configuration as the one involved in the incident was for the "safety of American travelers."

This latest development has added to the crisis engulfing Boeing, leading to a 2.2% drop in shares on Friday and a total decline of nearly 12% since the Jan. 5 incident. This is another blow to Boeing's reputation, which has been marred by two MAX 8 crashes in 2018 and 2019 that resulted in 346 fatalities and led to sweeping congressional reforms for new airplane certifications.

FAA Administrator Mike Whitaker views the MAX 9 problems as a manufacturing issue rather than a design flaw. He noted that despite years of production problems at Boeing, the issues persist, necessitating an extensive review. The FAA is keen to identify potential breakdown points in the manufacturing process, such as insufficient quality control checks or problematic assembly sequences.

Boeing has pledged full cooperation with the regulator and is committed to taking actions to enhance quality and safety across its production system. Spirit AeroSystems, a Boeing supplier, has also expressed commitment to supporting the FAA's audit of production and manufacturing processes.

Whitaker has suggested reevaluating the FAA's long-standing practice of delegating critical safety tasks to Boeing. He proposed the possibility of third-party involvement for certain critical inspections, providing a higher level of confidence and more direct oversight.

Alaska and United have reported finding loose parts on multiple grounded aircraft during preliminary checks. Captain Ed Sicher, president of the Allied Pilots Association, stated that tighter FAA control was “inevitable” given Boeing’s problems. He also noted an increased level of skepticism and scrutiny towards what was once a highly regarded brand.

Boeing CEO Dave Calhoun acknowledged a "quality" issue in allowing the MAX 9 to fly with the problem that caused the blowout. Critics have argued that strained FAA budgets have led to the delegation of too much responsibility to Boeing. However, since 2019, the agency has been reducing this practice.

The question remains whether the FAA has the staffing capacity to maintain increased oversight in the long term. Aviation safety expert John Cox stated that creating a third-party entity for oversight would be "highly unusual." In 2021, Boeing agreed to pay $6.6 million in penalties for failing