Shareholders Were The Real Loser In The Boeing 737 MAX Incident

On January 5, an Alaska Airlines Boeing 737 MAX 9 lost a door plug off of its fuselage in mid-air and rapidly depressurized. Fortunately there was no one seated beside the door that fell off. An iPhone fell from the sky and still worked. A shirt flew out of the cabin as well. And passengers on board were given $1,500 apiece.

Those passengers weren’t the real victims, though. And neither was Alaska Airlines, which says it lost $150 million as a result of the incident and the grounding of more than a quarter of its mainline fleet of planes. No, apparently it was Boeing’s shareholders.

Everything is securities fraud so telling investors that you’re trying to build safe aircraft and then building one whose door flies off after forgetting to install bolts is securities fraud, as national treasure Matt Levin reminds us.

Rhode Island’s general treasurer filed a class action lawsuit against The Boeing Company on Tuesday, alleging it betrayed the trust of the state’s pensioners. …The suit alleges Boeing issued false and misleading statements to the market about its safety lapses.

The suit alleges Boeing assured investors it was focused on safety after Max plane crashes in 2018 and 2019 killed 346 people.

Specifically, the claim is that since October 2019 Boeing has claimed to be “making steady progress” on the safe return of the Boeing 737 MAX (8) which was its “top priority.” They’ve claimed to be “laser-focused on…safety, quality and transparency.” They claimed not to make “trade-offs” between safety and profit, and also that safety has “always been the priority and that will continue to be.” Except the 737 MAX production line appears to have an enormous volume of defects and at least some of this seems to come from outsourcing which was designed to make Boeing “run like a business rather than a great engineering firm.”

  • Boeing made false claims about safety
  • Investors were misled
  • And they lost money when the stock fell

The Alaska Airlines incident occurred after market close on Friday. By the time markets opened on Monday, the value of Boeing stock had fallen by $12 billion. As Matt Levine observes, the cost to shareholders was far greater than to passengers on the Alaska flight:

There were 177 passengers on the flight, and they each got $1,500 of compensation for the trauma and inconvenience of being on a plane whose door flew off in midair. I suppose some might sue for more. If they all sue and get $50 million each of damages, which seems unlikely, that adds up to like $8.9 billion, still less than Boeing’s shareholders lost on the news. Boeing’s shareholders are the real victims here, or that is the conclusion of “everything is securities fraud” anyway.

You see, the real problem at Boeing isn’t engineering, it’s securities fraud!

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Well I snapped up a good bit of BA stock after the incident when it has overreacted and expect a very nice payback down the road. If you have cash to invest it is often easy to see when markets go to extremes then either buy if lower than the anticipated value or sell short if above a reasonable range. Has made me a lot of money over the years.

  2. Inaccurate to say that everything is securities fraud when nothing that is not relied upon by shareholders or is immaterial to their purchase or sale of securities is securities fraud, nor are statements or representations which deal with forward looking events securities fraud. In fact, very little is securities fraud and there are half as many securities fraud cases filed in the USA now than there were 5 years ago.

    However, if Boeing represented to purchasers of it’s shares that it’s products were safe, while knowing that they were not, and induced those people to actually buy shares on that basis, and those people sustained damages when the truth of the matter became known, that would certainly be securities fraud.

  3. The Pyramids and Gothic Cathedrals had architects , and the steam locomotives had mechanical engineers . Surgeons have vision and dexterity . Natural forces must be considered .

  4. I don’t agree about securities fraud from Boeing. Even the exalted Airbus had an airplane go down in the Atlantic, killing all onboard after the experienced pilots didn’t know how to handle a minor failure. The shareholders at Boeing deserve to lose because they collectively put in the CEO and the management team, if not directly at least by proxy.

  5. Fines don’t work.

    Stock price drops don’t work.

    Want unwavering quality? There is no substitute for management perp walks and meaningful prison time.

  6. Get woke go broke.

    Hire DEI employees get stuck with DEI results.

    Won’t be long before an incident happens with the DEi ATC system.

  7. The passengers weren’t real victims?!?

    Imagine the potentially debilitating trauma and lifelong fear that incident would impose on you and your loved ones, and then rethink that statement.

    And there is no evidence that DEI had anything to do with this. Based on the evidence we’ve seen so far, this is a matter of a culture of engineering excellence being replaced by a culture of profit before anything.

  8. So the owners of the company (BA shareholders) shouldn’t bear some of the pain associated with an incident where one of their brand new planes starts falling apart in the sky?

  9. No doubt resident brainwashed FoxNews viewer Andys is too uneducated to do any of the jobs he is whining about.

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