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Boeing later announced an independent consultant to lead a review of the company’s quality controls.
The Wells Fargo report, titled “FAA Audit Opens Up a Whole New Can of Worms,” noted that Boeing’s quality control and engineering problems have persisted for years.
After part of an Alaska Airlines 737 Max 9 fell off the plane mid-flight, it was highly unlikely that the US Federal Aviation Administration would emerge from its investigation without significant findings.
“Given Boeing’s recent track record and the FAA’s greater incentive to find problems, we think the likelihood of a clean audit is low,” the analysts said.
“The FAA audit is currently limited to the Max 9, but the findings may expand the scope to other Max models that share common parts.”
Analysts believe the investigation significantly increases the risk of Boeing suffering production and supply losses, and they downgraded the stock from “overweight” to “equal weight,” the equivalent of a “buy” rating.
Boeing ( BA ) shares fell 8 percent on the report.
The FAA launched an investigation into Boeing’s quality control after the Alaska Airlines incident last week.
The dramatic explosion on Alaska Airlines Flight 1282 “should never have happened and will never happen again,” the regulator said.
The door plug, which was supposed to cover the gap left by the removed emergency exit door on the side of the plane, blew up and left a hole in the side of the plane.
Shortly after takeoff from Portland, Oregon, the plane, with 177 people on board, flew at an altitude of 16,000 feet (4,700 meters) when the explosive decompression force and high-velocity airflow inside the cabin tore off the seats.
Some passengers were injured, but luckily no one was sitting near the door plug and there were no fatalities.
The FAA said the investigation will focus on whether Boeing “failed to ensure that finished products conformed to its approved design and were in a safe operating condition in accordance with FAA regulations.”
Boeing declined to comment today, but said in a statement last Thursday that it would “cooperate fully and transparently with the FAA and NTSB in their investigations.”
Boeing turns to former military leader
In response to these inspections, Boeing is appointing an independent consultant to oversee the quality of its commercial aircraft production lines.
Boeing said today that an external panel of experts led by retired US Navy Admiral Kirkland H. Donald will conduct a detailed assessment of Boeing’s commercial aircraft quality management system.
The company follows suit after announcing last week that it would bring in an outside consultant to help assess its quality controls.
Boeing said Donald and his team will also review the “quality programs and practices” of Boeing factories and Boeing suppliers and report their findings to Boeing’s board of directors.
Boeing CEO David Calhoun said in a statement that the review “provides an independent and comprehensive assessment with actionable recommendations for strengthening quality control at our factories and throughout our extended commercial aircraft production system.”
On Monday, the company will “take a hard look at our quality practices in our factories and our manufacturing system,” said Stan Deal, director of oversight for Boeing’s commercial aircraft division.
Before today’s move, Deal wrote in a memo to employees obtained by CNN that the company would conduct more inspections before each 737 is delivered.
He said Boeing is now closely monitoring the performance of its main supplier, which builds the fuselage of the 737 Max.
Last week, FAA Administrator Mike Whitaker said he was considering requiring an “independent third party to oversee Boeing’s inspections and its quality system.”
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A week ago, Calhoun acknowledged the company’s “mistake” at a company “security meeting,” but he did not specify what the mistake was.
National Transportation Safety Board Chairwoman Jennifer Homendy demanded that Boeing answer for any wrongdoing as part of a safety investigation that is separate from the FAA audit.
While the investigation is ongoing and it remains unclear what caused the plane’s door plug to fly off, the two airlines with the largest number of 737 Max 9s – Alaska Airlines and United Airlines – have the plane loose said that hardware or bolts were found. collecting door plugs on their planes.
United said its discovery points to potential installation problems.
In a letter sent to Boeing last week, the FAA gave the company 10 days to provide any information about the cause of the Alaska Airlines accident.
He also wants to know what steps Boeing has taken to prevent this from happening again.
Analysts at Wells Fargo noted in their report that the FAA’s investigation could take some time to complete, noting that many of its investigations remain “under investigation” months after the initial incidents.
The FAA is idle as it works to approve Boeing’s inspection criteria for airlines to evaluate the safety of all 737 Max 9 aircraft.
The regulator did not say when the planes could return to service.
Alaska and United have canceled more than 100 flights a day as they await full clarification from the FAA.
History of quality control problems
Boeing has faced repeated quality and safety problems with its planes for five years, leading to long-term grounding of some planes and suspension of deliveries of others.
The 737 Max design was found to be responsible for two fatal crashes: one in Indonesia in October 2018 and the other in Ethiopia in March 2019.
Combined, the two crashes killed all 346 people aboard the two flights and grounded the company’s best-selling aircraft for 20 months, costing it more than $31 billion.
According to internal communications released during the grounding of the 737 Max, one employee described the jet as “designed by clowns and in turn piloted by monkeys.”
Late last month, Boeing asked airlines to inspect all 737 Max planes for a loose bolt in the rudder system after discovering a potential problem with a key part of two planes.
Its quality and engineering problems extended beyond the 737.
Boeing has also had to halt deliveries of the 787 Dreamliner twice, for about a year starting in 2021 and again in 2023, due to quality issues cited by the FAA.
Also, a 777 on a United flight crashed after an engine failure spewed engine debris onto houses and the ground.
Two Max variants – Max 7 and Max 10 – are still awaiting approval to start carrying passengers.
Wells Fargo analysts say this latest development complicates that.
“The Max 7 and Max 10 variants… are now more likely to be investigated,” they said.
“This would involve a security waiver that, while perhaps wise, seems politically difficult in light of recent events.”