We have all seen the news by now of the Boeing 737-MAX and the accidents that have occurred around the world. It is truly a tragedy when we see accidents in the aviation community and we all are directly impacted when we see these events unfold on the news.
Before anything I just want to take a time to send my condolences to the families who lost loves ones during the Ethiopian Air flight 302 and the Lion Air 610 crash. We lost many innocent individuals on those flights and understanding the problems that were present are essential to understand what went wrong and how we can prevent these accidents from happening again.
Competition at its Worst.
The growing demand for a relatively smaller aircraft capable of reaching long distances while also being incredible fuel efficient is the main goal for many domestic carriers with the U.S. and other sprawling nations such as China, India and South Africa who are now experiencing massive growth in their civil aviation community.
The release of the 737-MAX was brought out in a race for market share are Airbus was also in the market of releasing a new model and they were planning on taking the mid range class aircraft market by replacing many of the older model Boeing aircraft there were no longer up to date with modern technology and efficiency standards.
Both companies race to release a new aircraft Boeing rushes to unveil the 737-MAX in aims to beat its rivals with lower take off thrust required and smaller fan diameter with lighter engines.
The implementation of new computer systems and fail safe systems were designed and introduced onto the aircrafts avionics creating an augmented flying experineces as compared to the natural mechanical flying. The aim of these system lies in being less stressful for the pilot operating by removing tension of manuevering from the pilot.
Who is to Blame?
The greatest debate currently around the systems in place the new 737-MAX involve the system combating the pilots handling in attempts to control the aircraft which in turn brings to pilot to then overcompensate for the desired reaction which then triggers the autopilot to then kick in and take over controls rejecting the pilots inputs which can result in loss of control of the aircraft.
Specialized training has been issued for the handling of the aircraft during specific maneuvers and the conversation now lies in understanding who was at fault here, Boeing for creating the software and aircraft without emphasizing on the changes made to the pilot interface with the aircraft, or the airlines for not effectively and appropriately educating and bringing to attention to changes in the new aircraft which were purchased.
Certainly regardless of who might be held responsible for the damages certainly Boeing is taking the hit in terms of market share. Over the last month since the news release of the second accident the stock has dropped over 18%. This is staggering considering the consistence growth that Boeing has experienced over the last few years. We can expect to see the market continue to react to this due to massive grounding of the aircraft internationally.
As more and more flights continue to be cancelled more pending orders of aircraft are being cancelled as well. Now a great amount of predicted income for the company is being taken back and now there is a considered loss for the company. These factors are going to continue to drive price down lower as we now passengers have a bad taste and reputation for the 737-MAX.
The way that Boeing is having to cover its tracks by proving these updates on software and by having the pressure to produce results after the damage has already been done. In my opinion there are many other ways towards approaching how to handle a difficult situation such as what we have faced in these last months.
When releasing a product into the market such as an aircraft there is not much room for error in my opinion and Boeing failed to conduct sufficient market research not just in terms of what they can make in terms of sales but also in terms of how the user interface of those operating on these aircraft will play out.
Often times more than not I find that aviation industry focus so much on the customer and the clients desires and needs they fail to understand that the individuals operating those areas of the business are going to be using that space on a day to day basis and their well being is just as important as the paying customers. Without having safe and happy staff working together then the goals of the company will not be supported and growth will be difficult to sustain.
If looking for a more current immediate trading strategy understand that Boeing is currently loosing market share quickly and is beginning to gain moment towards the downside. Understanding that there will be some time before trust is regained in the public will bring many to understand the projections to come with this company. Also keeping in mind that now airlines are upset due to the massive cancellations of the flights due to the grounding of the aircraft in various countries around the world.
When trading the market this week stay aware of certain climate changes that can occur suddenly with news break outs. We can certainly expect a bit of calmness as the week starts up as the market closed last week relatively sideways in terms of trend and understanding the fundamentals at play will determine the outcome of this weeks trading outlooks.
Take the time to set up a strong plan for your investment strategy and keep your stop losses tight as there is a lot of tension in the market and with that can bring volatility spikes. Keep a close out on Boeing (BA) and watch to see any signs of retracement to then aim for lower lows as the market is still looking to react to the loss of orders for new aircraft.