Nothing seems to be going right for Boeing (NYSE: BA) which is battling an inundation of negative PR over its 737 Max jets. In yet another blow for the company, a whistleblower has come forward and flagged potentially devastating structural flaws on its 787 and 777 widebody planes.

The US Federal Aviation Administration (FAA) has said that it is investigating the claims which would only increase Boeing’s troubles with the regulator. It could also have an impact on Boeing stock which is anyways the worst-performing Dow Jones constituent with losses of 31% so far in 2024.

Coming back to the whistleblower complaint, Boeing engineer Sam Salehpour, who worked with the company for over a decade, accused it of taking shortcuts in the construction of its 787 and 777 jets due to which the parts of the plane’s fuselage were not properly fastened together.

At its press conference, Salehpour said that his complaint raises “two quality issues that may dramatically reduce the life of the planes.” He added, “I am doing this not because I want Boeing to fail, but because I want it to succeed and prevent crashes from happening.”

He had a word of advice for Boeing and said, “The truth is Boeing can’t keep going the way it is. It needs to do a little bit better, I think.”

Boeing Reacts to Whistleblower Compliant

Expectedly, Boeing has termed Salehpour’s complaint as “inaccurate” and added, “We are fully confident in the safety and durability of the 777 family.”

Salehpour, on the other hand, alleges that the company retaliated against him when he flagged drilling issues with the 787. He claims that he was transferred to the 777 program where he discovered another issue related to aligning body pieces.

He also alleges that there was a lot of pressure on Boeing engineers to provide a go-ahead to work they had not even inspected. According to Salehpour, the issues impact more than 400 777 and 1,000 787 aircraft. If true, this could be absolutely devastating for Boeing and the airlines that rely on these jets.

Notably, another whistleblower, John Barnett, previously raised very similar concerns about Boeing’s production process. Unfortunately, after being asked to give one more day of testimony, he was found dead in the US by apparent suicide. There is still no physical evidence to indicate that this was anything other than suicide, though statements of disbelief from friends and family have cast doubt on the theory. Conspiracy theorists like Matt Wallace are arguing that Boeing executives may have actually killed Barnett and staged a suicide, but again, there is no physical evidence of this as of yet.

Boeing stock fell almost 2% yesterday amid the broader market meltdown. The stock is trading near its 52-week lows as the company grapples with multiple issues, with the whistleblower complaint being the most recent one.

Senate to Hear Complaint Against Boeing

Senator Richard Blumenthal, D-Conn., who is the chairman of the Senate Homeland Security and Governmental Affairs Committee’s investigations subcommittee, has convened a Senate hearing with Salehpour on April 17.

In his statement, Blumenthal said, “Repeated, shocking allegations about Boeing’s manufacturing failings point to an appalling absence of safety culture and practices — where profit is prioritized over everything else.”

His argument clearly has at least some merit as a door panel of a 737 max jet blew off during an Alaska Airlines flight earlier this year. After that event, Boeing made some leadership changes while the US Justice Department began a criminal investigation. Boeing’s CEO Dave Calhoun also resigned last month and would step down by the end of 2024.

Alaska Airlines said that Boeing has paid it $160 million in “initial compensation” and it expects additional compensation whose details it did not disclose.

Boeing’s Terrible, Horrible, No Good, Very Bad Year

In yet another incident, on Sunday, the engine cover on a Southwest Airlines Boeing 737-800 fell off during the takeoff.

After that incident, Rick Erickson, the managing director of RP Erickson and Associates aviation consultants in Calgary, said that while Boeing was once very particular about safety, “over this last probably dozen or 15 years, there’s been a switch in terms of management focus.”

He added, “And I think there’s a bit more priority perhaps on shareholder value, on driving profits and the like.”

The 737 Max has faced controversies in the past as well and the FAA grounded the fleet twice. Earlier this year, the FAA halted the production expansion of Boeing 737 Max.

FAA Administrator Mike Whitaker said, “Let me be clear: This won’t be back to business as usual for Boeing. We will not agree to any request from Boeing for an expansion in production or approve additional production lines for the 737 MAX until we are satisfied that the quality control issues uncovered during this process are resolved.”

BA Stock Is Suffering Accordingly

Given the recent troubles with its programs and the disastrous PR, it is no wonder that Boeing’s stock has underperformed badly. The company is also battling a tough macro environment and its competition is likely to intensify as Chinese state-owned plane maker COMAC tries to capitalize on Boeing’s woes.

While COMAC is arguably an untested player for global airlines, Boeing does not have any laurels to its name either when it comes to credibility – or at least that’s what the general perception has been about the brand over the last couple of years.

Boeing stock has been out of favor with markets as there is a fear that it might lose out to Airbus as airlines grow wary of its aircraft. In addition to damage to the brand, such issues also take a toll on profits, as is evident in the massive compensation that Boeing paid to Alaska Airlines.

Analysts Are Worried BA Stock Will Continue to Tumble

Wall Street analysts are also taking note of the new whistleblower complaint and Bank of America analyst Ronald Epstein lowered his price target on BA stock from $210 to $190 while maintaining his neutral rating.

He argued that given the uncertainty and ongoing investigations, Boeing should trade at lower multiples. To be sure, amid the ongoing troubles, Boeing’s valuation multiples have also come down, and it trades at a next 12-month price-to-sales multiple of 1.24x, which is lower than the five-year average of 1.5x.