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United Airlines<\/a> shares fell about 4% Monday\u2014wiping out about $600 million of its market capitalization\u2014following United\u2019s Friday announcement that the Federal Aviation Administration would increase oversight<\/a> of the airline following a series of safety gaffes.<\/p>\n \u201cThe number of safety-related events in recent weeks have rightfully caused us to pause and evaluate whether there is anything we can and should do differently,\u201d Sasha Johnson, United Airlines\u2019 vice president of corporate safety, said in a memo to employees late Friday. \u201cWe welcome their engagement and are very open to hear from them about what they find and their perspective on things we may need to change to make us even safer.\u201d<\/p>\n The FAA told Fortune<\/em> in a statement that the oversight will \u201censure that [United] is complying with safety regulations; identifying hazards and mitigating risk; and effectively managing safety.\u201d It may prevent the airline from making new routes<\/a> ahead of the busy summer season and may also delay future projects, depending on the oversight\u2019s findings. The FAA also suspended United from promoting and approving pilots to fly different plane models, Bloomberg reported<\/a>.\u00a0<\/p>\n The crackdown underlies the seriousness with which the regulator is responding to safety meltdowns in the airline industry, which have appeared abundant lately.<\/p>\n United had a run of 10 safety misfires in the two weeks leading up to the FAA\u2019s increased scrutiny: A flight from Houston on March 4 was forced to return to the airport shortly after takeoff because its engine caught on fire<\/a>. Several days later, a Boeing<\/a> 777-200 in United\u2019s fleet sat on the runway for over an hour before being deplaned because of a broken engine.<\/a> The airline also had trouble with a missing panel<\/a> on a plane\u2019s fuselage; a Boeing 737 MAX that rolled onto the grass<\/a> next to the taxiway; and another Boeing 777-200 that lost a tire<\/a> midair, the debris of which landed in the airport\u2019s parking lot, damaging several cars.\u00a0<\/p>\n \u201cUnfortunately, in the past few weeks, our airline has experienced a number of incidents that are reminders of the importance of safety,\u201d United CEO Scott Kirby<\/a> said in an email to customers<\/a>. \u201cWhile they are all unrelated, I want you to know that these incidents have our attention and have sharpened our focus.\u201d<\/p>\n United is familiar with navigating crises in the industry. The airline filed for Chapter 11 bankruptcy in 2002<\/a>, unable to continue operating after the 9\/11 attacks rocked trust<\/a> in the U.S. aviation business. It underwent a record 1,150 day restructuring process that saw a 30% reduction in staff and 20% reduction in aircrafts. Despite emerging from bankruptcy in 2006, the airline, once the second-largest in the world, failed to make significant gains, growing only 3.8% since that time.<\/p>\n Today\u2019s shareholder mistrust in United coincides with Boeing CEO Dave Calhoun<\/a> announcing his departure this year following months of mishaps across airlines and an FAA investigation<\/a> which exposed dozens of issues within the manufacturer\u2019s culture. Boeing\u2019s shares jumped as much as 3.6% immediately<\/a> following the news.<\/p>\n Boeing and United have more than just repeated cataclysms in common. They have a shared history dating back to the airline\u2019s inception. Not only was Boeing Air Transport\u2014first intended for international postal delivery\u2014the precursor to United Airlines, but United Airlines helped Boeing skyrocket to success. In 1990, United bought the 1,832nd 737 aircraft, cementing its status as the world\u2019s best-selling plane<\/a>. The entities\u2019 fates were inextricably linked then, but there are key factors that could spare one of them as United undergoes an FAA probe of its own.<\/p>\n Despite United\u2019s safety misfires occurring on Boeing planes\u2014which make up about 80%<\/a> of United\u2019s fleet\u2014airline consultant James Darcy of Darcy Strategic said that United likely needs to shoulder some of the blame.\u00a0<\/p>\n \u201cThere\u2019s really nothing in these incidents that I\u2019ve seen to date that would suggest that the accountability lies with Boeing, for each of them,\u201d he said. \u201cIt\u2019s much more reasonable to do what the FAA has done, which is to turn to United and to say, \u2018We need to understand if there\u2019s an underlying issue here.\u2019\u201d<\/p>\n Given the wide gamut of United\u2019s safety incidents, the mistakes don\u2019t appear to be related and could be attributed to either the manufacturer or maintenance by the airline. A March 8 incident in which a United-operated Boeing 737 returned to the airport shortly after taking off was due to the engine ingesting a piece of bubble wrap<\/a>.<\/p>\n \u201cThat could have happened on any engine, any airplane, by any manufacturer,\u201d Darcy said.<\/p>\n On the other hand, a hydraulic failure of a separate United flight could indicate a maintenance mistake or a premature failure of a part. It\u2019s just too early to dole<\/a> out blame, he argued.\u00a0<\/p>\n The increased oversight also doesn\u2019t mean that United has reason to panic: \u201cIn this industry, trouble is rarely portioned out to companies over time,\u201d Darcy said. \u201cIt tends to be delivered in large, lump-sum payments.\u201d\u00a0<\/p>\n There\u2019s also pressure on the FAA, which was heavily scrutinized<\/a> in how it handled two Boeing 737 crashes<\/a> in 2018 and 2019, which killed hundreds of passengers. After the accidents, the FAA reworked<\/a> its oversight rules. That may mean lots of investigations these days, Darcy asserted, but it\u2019s a correction to regulatory laxity that may have missed problems in the past.<\/p>\n \u201cThat\u2019s probably all good news for the flying public,\u201d he said.<\/p>\n<\/div>\n\n\u2018They are all unrelated\u2019<\/strong><\/h2>\n
How much is Boeing to blame for United\u2019s troubles?<\/strong><\/h2>\n
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