Airbus stock (EADSF) fell another 1.4% in early trading, bringing its total decline to 8% since the company recalled approximately 6,000 A320-family jets. The decline is fueled by investor nerves following the mandatory recall, which addresses a potential computer issue.
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However, analysts are stressing that the current situation is fundamentally different from the systemic failures at rival Boeing (BA). While the issue, a flight control hiccup potentially caused by radiation, sounds serious, the industry knows it can happen and the fix appears to be a minor software correction.
Cosmic Rays Spark Computer Error Recall
The mass recall was triggered by an incident on Oct. 30 when a JetBlue (JBLU) flight “experienced an uncommanded and limited pitch down event.” European regulators issued an emergency directive after a computer provided incorrect flight data.
The highly unusual cause of the error appears to be cosmic rays hitting microchips in the upper atmosphere. These radiating particles are so small they can flip a transistor on or off, temporarily causing an error in the onboard computers. Deutsche Bank (DB) analysts characterized the event as a “massive recall caused by cosmic radiation.”
Redundancy Prevents Systemic Failure
The key difference from past aerospace crises is that the industry anticipates these rare radiation-induced errors. This is why aerospace systems utilize extensive redundancy and software error-checking.
Airbus was able to address the condition mainly with a software patch, a code that can check and correct the errors. In fact, the initial fix appears to have been simply undoing a recent software update, reverting to an older version. The speed of the industry response and the nature of the fix indicate a known technical challenge, not a fundamental design flaw.
It Is Not a Boeing 737 MAX Situation
The situation is radically different from the major crisis that grounded Boeing’s 737 MAX fleet. That crisis was caused by a poorly designed new flight control system that lacked adequate redundancy and was not properly disclosed to pilots.
In contrast, the Airbus issue involves known challenges in computer microchips that can be corrected with a software check. Most of the recalled Airbus planes are already back in service, confirming that the problem did not require a prolonged, worldwide grounding of the jet family.
Key Takeaway
Despite the stock drop, analysts remain bullish on Airbus’s long-term outlook, which is fueled by rising jet demand. The core challenge for Airbus and Boeing is to boost production to meet orders. The swift, software-based fix for the cosmic ray issue confirms that the company’s manufacturing and delivery goals are likely not at risk, unlike the multi-year delays caused by the systemic issues at Boeing.
Investors can compare Airbus and Boeing’s stocks side-by-side based on various financial metrics and analyst ratings on the TipRanks Stocks Comparison Tool. Click on the image below to find out more.
