BA slides 4% after South Korea crash; Is this a buying opportunity?
2min read Boeing's (BA) shares dropped approximately 4% in premarket trading following the tragic crash of a 737-800 operated by South Korea’s Jeju Air. The incident resulted in the loss of 179 lives, adding to a history of aviation tragedies that have often brought scrutiny to Boeing’s designs. While early speculation points to a bird strike or landing gear failure as potential causes, analysts are emphasizing that the age and type of aircraft—a 15-year-old 737-800—differentiate this from Boeing’s more publicized troubles with its newer 737 MAX series. Despite the immediate market reaction, many analysts suggest this event might not significantly affect Boeing’s long-term prospects.
The crash occurred during landing at South Korea’s Muan International Airport. The plane skidded off the runway, collided with a concrete barrier, and burst into flames. Reports from witnesses suggest an issue with the right engine, potentially stemming from a bird strike, which investigators are now focusing on. Jeju Air confirmed that the aircraft had undergone regular maintenance inspections before its flight from Bangkok to Muan, ruling out obvious lapses in upkeep. Importantly, this was not a 737 MAX jet, which had been grounded globally between 2019 and 2020 due to design flaws.
Shares of Jeju Air also saw significant losses, closing nearly 9% lower to hit an all-time low on Monday. As a budget carrier established in 2005, Jeju Air operates a fleet of Boeing 737s, primarily the 737-800 model. The airline expressed its condolences and pledged a thorough response to the tragedy. However, this event puts additional pressure on Jeju, which faces challenges in maintaining consumer trust amid intense competition in the budget airline market.
For Boeing, the timing compounds existing difficulties. The company has been grappling with quality control issues, including a January incident involving the mid-air blowout of a door plug on an Alaska Airlines 737 MAX. These problems, coupled with a protracted machinist strike earlier in the year, have strained the company’s finances and production schedules. Analysts note that Boeing’s ongoing challenges in ramping up production for the 737 MAX could keep the stock under pressure, even as demand for new aircraft remains robust.
From a market perspective, Boeing’s stock reaction aligns with the severity of the headline risk. The 4% drop on Monday follows a broader rally that saw the stock climb from the $137 range to $180 in recent months. Analysts at Wolfe Research maintained their “Outperform” rating with a $195 price target, emphasizing that the crash’s root causes appear unrelated to Boeing’s manufacturing or design quality. The broader narrative highlights how aviation makers face unique risks from infrequent but high-impact events.
Technically, Boeing's stock could see additional selling pressure if it approaches the 200-day moving average around $169. This level might act as a support zone and a potential buying opportunity for investors seeking exposure to the aerospace sector. While the immediate focus is on the crash investigation, market participants will also be monitoring Boeing’s progress in resolving its production and supply chain issues as broader indicators of its recovery trajectory.
Analysts underscore that the 737-800 has a strong safety record relative to older models and competitors’ aircraft. For instance, March 2022 saw another 737-800 crash involving China Eastern Airlines, but subsequent investigations did not identify equipment failure as the root cause. Historical data suggests that such events often result in short-term stock volatility without fundamentally altering the aerospace giant’s long-term prospects.
In conclusion, the tragic Jeju Air crash underscores the inherent risks in the aerospace industry but does not appear tied to systemic issues with Boeing’s manufacturing or design. While the stock reaction reflects heightened sensitivity to aviation safety incidents, analysts remain cautiously optimistic about Boeing’s future, provided it can address ongoing production challenges and maintain confidence in its 737 series’ reliability. Investors are likely to monitor developments closely, particularly if the stock nears technical support levels.
