Air India crash is first involving Boeing’s 787 Dreamliner

An Air India crash involving a Boeing 787 Dreamliner, the first fatal incident for this model, is under investigation, potentially focusing on pilot actions, airline maintenance, and Boeing's role. This event occurs as Boeing continues to address fallout from the 737 Max disasters and recent manufacturing concerns, with regulatory scrutiny intensifying, despite the 787's generally strong safety record and its importance to airlines' long-haul operations.

Analysis

The fatal crash of an Air India Boeing 787 Dreamliner marks the first such incident for this aircraft model, introduced in 2011, immediately intensifying scrutiny on Boeing. The investigation is expected to examine pilot actions, airline operations, maintenance, and Boeing's manufacturing processes, particularly significant as the company is still navigating the repercussions of the two 737 Max disasters in 2018 and 2019 which killed 346 people and were linked to design flaws. While the 787 has a generally strong safety record, having carried 1 billion passengers with over 1,100 aircraft in service and a backlog of 889, this crash revives concerns. A 2013 battery fire on a 787, also attributed to design issues, was noted in a 2020 U.S. lawmakers' report as foreshadowing manufacturing problems that contributed to the 737 Max crashes. Recent manufacturing issues with the 787's carbon-fiber composite structure, including whistleblower claims of improper fastening, were already under FAA investigation, though Boeing asserted no safety risk. The FAA has pledged to act swiftly on any identified safety problems from this latest crash, and the NTSB is assisting Indian authorities. This incident occurs amid Boeing's efforts to rebuild trust under new CEO Kelly Ortberg and follows a recent settlement related to the 737 Max crashes where Boeing admitted to misconduct. For Air India, now under Tata Sons ownership, this crash challenges its ongoing efforts to upgrade training and maintenance, despite its generally good prior safety record. The negative sentiment (-0.7 for BA) reflects the market's immediate concern, given Boeing's recent history and the critical role of the 787, described by analyst Henry Harteveldt as a 'workhorse' for long-haul operations.

Key Decisions for Investors

• Investors should closely monitor the Air India crash investigation for findings related to Boeing's 787 design or manufacturing, as adverse outcomes could lead to further regulatory actions, operational disruptions, and a significant impact on Boeing's stock (BA).
• Given Boeing's persistent challenges with quality control, regulatory scrutiny, and the severe repercussions of the 737 Max incidents, this 787 crash significantly elevates the risk profile; thus, a cautious stance is warranted, pending clarity on the cause and any systemic issues.
• Evaluate potential impacts on Boeing's 787 order book and delivery schedules, as concerns over the aircraft's safety, despite its prior record and existing backlog of 889 units, could affect airline confidence and future sales if the investigation reveals flaws attributable to Boeing.