(Bloomberg) — U.S. regulators reversed course Wednesday and announced they will ground Boeing Co.’s top-selling 737 Max family of airliners amid safety concerns after a crash Sunday in Ethiopia — five months after a similar tragedy off Indonesia.
“The safety of the American people and all people is our paramount concern,” President Donald Trump said Wednesday at the White House. “Hopefully they will very quickly come up with the answer but until they do the planes are grounded.”
The move is a major blow to Boeing, which has lost billions of dollars in value this week as nation after nation announced they were barring the aircraft from flying. The single-aisle Max family is the Chicago-based planemaker’s largest seller and accounts for almost one-third of the company’s operating profit.
Boeing dropped as much as 3.2 percent after Trump’s announcement but recovered much of the days loss by 3:17 p.m. in New York.
Affected planes will be grounded immediately upon reaching their destinations. The impact on travelers should be limited because there are only 67 Boeing 737 Max aircraft at three U.S. carriers: American Airlines Group Inc. Southwest Airlines Co. and United Continental Holdings Inc.
More than 40 nations had announced the grounding of the jet — and in some cases a ban on flyovers of the plane — in recent days despite reassurances from the U.S. Federal Aviation Administration.
The FAA made its decision as a result of unspecified “new evidence collected at the site and analyzed today,” the agency said in a tweet. It also reviewed satellite data it obtained earlier in the day.
“The grounding will remain in effect pending further investigation, including examination of information from the aircraft’s flight data recorders and cockpit voice recorders,” the agency said.
The Chicago-based manufacturer issued a statement saying it still has “full confidence” in the plane.
“We are supporting this proactive step out of an abundance of caution,” Boeing Chief Executive Dennis Muilenburg said in a statement. “We are doing everything we can to understand the cause of the accidents in partnership with the investigators, deploy safety enhancements and help ensure this does not happen again.”
The U.S. action followed Canada’s decision to halt Max flights earlier Wednesday.
Canada Transport Minister Marc Garneau said in Ottawa that satellites tracked the Ethiopian Airlines flight and suggest possible “similarities” with a Lion Air crash on Oct 29. A Lion Air Max 8 crashed off the coast of Indonesia, killing all 189 people aboard, following a malfunction of a software feature on the plane that repeatedly forced it into a dive.
The FAA and other aviation regulators around the world took several steps after the Indonesia crash to notify pilots of the Maneuvering Characteristics Augmentation System, or MCAS, and to remind them how to overcome it in the event of a malfunction. However, a more formal fix to redesign it won’t be mandated until April, the FAA said Monday.
All 157 people aboard the Ethiopian Airlines 737 Max 8 died when it plunged into the ground at high speed about six minutes after takeoff near Addis Ababa. Investigators have released no information about what caused the crash.
Trump told reporters that he had spoken with Transportation Secretary Elaine Chao, Acting FAA Administrator Daniel Elwell and Muilenburg before making the call to ground 737 Max 8 and Max 9 model planes in the U.S.
“Any plane currently in the air will go to its destination and thereafter be grounded until further notice,” Trump said. “So planes that are in the air will be grounded — if they are the 737 Max, will be grounded upon landing at the destination.”
“Our hearts go out to all of those who lost loved ones, to their friends, to families, in both Ethiopian and Lion Airlines crashes that involved the 737 Max aircraft,” Trump said. “It’s a terrible, terrible thing. Boeing is an incredible company. They are working very, very hard right now, and hopefully they will very quickly come up with the answer but until they do the planes are grounded and you will be hearing from the FAA directly in a little while.”
Southwest has 34 Max 8 aircraft among its more than 750 planes. In contrast, its fleet includes more than 500 of the older 737-700 model. The Dallas-based airline and United fly the Max across their route networks.
A significant impact will be felt in Miami, where American has concentrated its initial Max deliveries for service to the Caribbean and to New York’s LaGuardia airport. The carrier has 24 Max 8 jets in its fleet of more than 1,550 planes.
The last fleet-wide grounding by the FAA occurred on Jan. 17, 2013, when it ordered a halt to revenue flights by Boeing’s then-new model, the mostly composite 787, after a lithium-ion batteries on the plane overheated. Prior to that, the last such action halting flights on a fleet occurred in 1979 on the Douglas DC-10.
(Updates with Boeing statement, more Trump comments from fourth paragraph.)
To contact the reporters on this story: Alan Levin in Washington at alevin24@bloomberg.net;Jennifer Epstein in Washington at jepstein32@bloomberg.net
To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman
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