The global grounding of its bestselling model after 346 deaths has created a genuine crisis for the company and its clients

Within three minutes of takeoff, Ethiopian Airlines flight 302 had accelerated to unusually high speeds. Captain Yared Getachew knew something was wrong as the aircraft, a Boeing 737 Max 8, erratically dipped and climbed by hundreds of feet. He radioed air traffic control, requesting a return to Addis Ababa airport.

He was cleared to return and the aircraft began to turn right, climbing even higher. A minute later, flight 302 disappeared from the radar.

All 157 people on board were killed as the plane crashed 30 miles south-east of the airport, approximately six minutes into its two-hour flight to Nairobi. It was the second fatal accident involving a Boeing 737 Max 8 in five months, following the crash last October of a Lion Air flight in Indonesia with the loss of 189 lives.

Suspicion over the cause of both crashes is centred on the plane’s new flight control system – MCAS, or Manoeuvring Characteristics Augmentation System – which can intervene to push the plane’s nose down automatically when it rises.

On Wednesday, Boeing said it was suspending operations of the entire global fleet of 371 aircraft, after the US Federal Aviation Administration (FAA) imposed a temporary ban on the model. Dozens of countries had already imposed bans earlier in the week. The fleet will be grounded until Boeing installs a software update for the jet’s flight systems, which could happen before the end of the month, according to one report last week.

As Boeing scrambles to fix one of its most significant products, there are questions now over the impact on the world’s most renowned aerospace group. The crashes are devastating for Boeing because the 737 has been a staple of its roster for more than 50 years. It is the company’s bestseller and a short-haul workhorse. The new version, the Max, is more fuel-efficient than previous models and has clocked up $600bn (£450bn) worth of orders. “It’s a very important aircraft to Boeing, with 5,000 orders placed,” said John Strickland, an aviation analyst.

It’s likely to be a tough few months for the Chicago-based manufacturer, with regulatory issues, legal claims and the threat of cancelled orders piling up. Last Sunday’s crash hit shares hard as soon as markets opened on Monday, and wiped $25bn from its value over the course of last week.

Facebook Twitter Pinterest One of the engines from flight 302, the second Boeing 737 Max 8 to come down. Photograph: Jemal Countess/Getty Images

Boeing now faces a struggle to maintain that huge order book: several big customers have threatened to cancel in the wake of the crash. VietJet, which doubled its order to about $25bn last month, said it would decide on its plans once the cause of the tragedy had been found. Others putting the squeeze on Boeing are Utair of Russia and Kenya Airways, which could switch to Airbus’s short-haul rival, the A320. Lion Air is also said to be reviewing a $22bn order for the 737.

A source said: “The commercial reality is that Boeing will be offering all sorts of incentives to customers in order to persuade them to stay. If I know Boeing, it will be in company meltdown trying to sort this out. You can see what it’s doing to the share price and to passenger confidence in the 737 Max. This is tough stuff.” But crucially, its three big US customers – American, Southwest and United – are standing behind the Max.

Despite the scale of the reputational and commercial crisis facing the company, many experts believe Boeing will recover, because technical problems – albeit none as fatal as the one apparently facing the 737 Max – have been overcome before. The FAA grounded the company’s 787 Dreamliner in 2013 because of a problem with its batteries catching fire, which was subsequently fixed. “That didn’t have any long-term impact on customer confidence and it has become a very successful aircraft,” Strickland noted.

Regulators around the world grounded the 737 Max after concluding there were too many similarities between the Addis Ababa disaster and the crash of Lion Air flight 610. That also plummeted from the skies shortly after takeoff: a preliminary investigation shows the pilots struggled to get control of the plane after the nose was forced down by the flight control system.

The seeds of Boeing’s misery were sown back in the winter of 2010. Airbus, its big European rival, caught it off guard with the news that it was relaunching its short-haul workhorse with new engines as the A320neo.

Airlines had pressured the two manufacturers for a more fuel-efficient plane following a jump in the cost of oil in 2008, when a price of $147 per barrel forced dozens of carriers into bankruptcy.

The A320neo forced Boeing to retaliate by creating a revamped 737 – one with engines that could deliver the fuel-efficiency now demanded by their customers.

The 737 Max would do that, but not without some engineering witchcraft to help fit its big new engines under the wings. The American manufacturer had to extend the nose landing gear, add aerodynamic winglets and push the technology to make it more efficient and cheaper to operate.

The engines may have solved one problem, but they created another. Testing showed that in certain conditions the plane was prone to entering a nose-up aerodynamic stall – where the aircraft cannot create enough lift from the airflow over its wings.

Boeing attempted to fix the issue by installing the MCAS, which would stabilise the aircraft by bringing the nose down. This system is now at the centre of the investigation into the Lion Air crash and appears to be implicated in the Ethiopian Airlines disaster.

Facebook Twitter Pinterest Boeing’s factory in Renton, Washington. Photograph: Stephen Brashear/Getty Images

In December, the FAA issued an airworthiness directive to all owners of the 737 Max. It warned of an issue where the automated anti-stall system would engage if “an erroneously high single AOA [angle of attack] sensor input is received by the flight control system”. The system would then automatically attempt repeated nose-down commands. “This condition, if not addressed, could cause the flight crew to have difficulty controlling the airplane, and lead to excessive nose-down attitude, significant altitude loss, and possible impact with terrain,” it said.

Automation has increased in order to eradicate human error, which has traditionally been the biggest cause of air accidents. David Gleave, a safety expert, said: “Very few airplanes fall out of the sky because the wings fall off. Most of the time it’s related to human error. Automation can go too far, but this is an extra security system that was brought in to cure something and has caused a problem elsewhere … There’s a history of problems with the introduction of new technology. But people are not going to stop flying in 737s because of this.”

Boeing’s executives will be pleading with customers and investors for patience. But they need to come up with a fix, and soon.