Boeing Faces 777 Passenger Ire

Zacks

The Boeing Company (BA) seems to have run out of luck with back-to-back disappointing news hurting its share price. Now, the company is battling with potential legal actions taken by the passengers of a flight that crashed in San Francisco on Jul 6, 2013. The news hurt Boeing’s share price by 1.4% on Jul 16.

A Boeing 777 airliner, operated by Asiana Airlines Inc., crashed while landing at San Francisco International Airport on its way from South Korea. The incident took three lives and injured more than 180. The National Transportation Safety Board is presently scrutinizing the causes of the crash.

A Chicago law firm − Ribbeck Law Chartered − on behalf of the passengers have filed a petition for discovery against the manufacturer of the Boeing 777 in Cook County Circuit Court in Chicago, where Boeing is headquartered. It claimed that the crash might be the result of a mechanical breakdown of Boeing 777's auto throttle.

The law firm will also make similar pleadings in the coming days suing against other companies that include Asiana Airlines and many unnamed manufacturers of component parts. Ribbeck contends that apart from potential problems with the auto throttle, some emergency slides had opened inside the plane making the rescue of passengers difficult.

Meanwhile, Asiana Airlines grounded one of its Boeing 777 airplanes in Los Angeles. The airlines said that a leak was found as the plane was ready for takeoff from Los Angeles International Airport for South Korea's Incheon airport. On Jun 2, another Asiana Airlines-operated Boeing 777 was delayed in San Francisco for an oil leak in one of its engines. Moreover, a Boeing 777 airplane operated by Japan Airlines Co returned to Tokyo on Jul 8 as its crew identified a leak in the hydraulic system that controls its flaps.

Very recently, Boeing’s next-generation 787 Dreamliner operated by Ethiopian Airlines caught fire while it was parked at London's Heathrow Airport.  Another 787 operated by Thomson Airways on way to Orlando, Fla., had to return to Manchester after unspecified malfunctions. Though both these incidents did not cause any injuries, Boeing’s stock price suffered the biggest drop in two years.

Though we cannot gainsay the latest woes at Boeing’s commercial airplanes division with teething problems with the Dreamliner and litigations about safety and maintenance of the 777, this aerospace and defense prime is ahead of its closest rival, Airbus, based on first half 2013 delivery numbers. In fact, Boeing has managed to notch $66 billion worth of agreements for 442 planes. The earlier grounding of the Dreamliner in January has had little impact on the Boeing stock. However, the safety of passengers and crew should be of prime importance for Boeing to maintain its market leading position and integrity as a leading aerospace and defense major.

Boeing presently retains a short-term Zacks Rank #1 (Strong Buy). There are other companies in the sector that also appear promising and are worth accumulating now. These are Zacks Ranked #2 (Buy) Embraer S.A. (ERJ) and Northrop Grumman Corp. (NOC) and Zacks Ranked #1 (Strong Buy) Heico Corp. (HEI).
 

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