Shares of Boeing (NYSE:BA) gained 7% on Monday morning after the company’s long-grounded 737 Max was cleared to begin a series of test flights. Boeing desperately needs to get the plane airborne and resume deliveries to customers, and the safety assessment flights are an important step in that process.
The 737 Max has been grounded since March 2019, with Boeing attempting to revamp the airplane after a pair of fatal crashes. Boeing has missed a number of self-imposed deadlines to get the plane airborne, but it appears to be getting closer.
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Why Shares of Boeing Are Taking Flight Today
The Boeing Company () is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide. The company also provides leasing and product support services. Boeing is among the largest global aerospace manufacturers; it is the second-largest defense contractor in the world based on 2018 revenue, and is the largest exporter in the United States by dollar value. Boeing stock is included in the Dow Jones Industrial Average. Boeing is incorporated in Delaware.Boeing was founded by William Boeing in Seattle, Washington on July 15, 1916. The present corporation is the result of the merger of Boeing with McDonnell Douglas on August 1, 1997. Then chairman and CEO of Boeing, Philip M. Condit, assumed those roles in the combined company, while Harry Stonecipher, former CEO of McDonnell Douglas, became president and COO.The Boeing Company has its corporate headquarters in Chicago, Illinois. Boeing is organized into five primary divisions: Boeing Commercial Airplanes (BCA); Boeing Defense, Space & Security (BDS); Engineering, Operations & Technology; Boeing Capital; and Boeing Shared Services Group. In 2017, Boeing recorded US$93.3 billion in sales, ranked 24th on the Fortune magazine “Fortune 500” list (2018), ranked 64th on the “Fortune Global 500” list (2018), and ranked 19th on the “World’s Most Admired Companies” list (2018). In 2019, Boeing’s global reputation, commercial business, and financial rating suffered after the 737 MAX was grounded worldwide following two fatal crashes in late 2018 and early 2019.
The firm has also been criticized for supplying and profiting from wars, including the war in Yemen where its missiles were found to be used for indiscriminate attacks, killing many civilians.
The Federal Aviation Administration told congressional staffers over the weekend that it has competed its review of Boeing’s changes, clearing the way for flight certification testing to begin.
Why Shares of Boeing Are Taking Flight Today
Even assuming the tests go well, Boeing will not get a quick rubber-stamp approval for airlines to resume flying the 737 Max. The FAA still needs to review new pilot-training standards to help minimize the risk of future accidents, and airlines will have to do retraining and perform maintenance checks before their idled planes take flight.
The company will also need to work out issues identified by foreign regulators. At best it will probably be September, at the earliest, before 737 Max airplanes are used for scheduled service.
Boeing faces a tough near-term future even with the 737 Max. The COVID-19 pandemic has caused airlines to shrink their schedules and lowered demand for new planes. It will likely take years for airlines to restore capacity to pre-pandemic levels, meaning the commercial aerospace industry is in for an extended down period.
Still, getting the 737 Max flying again is an important piece of Boeing’s plan to survive the downturn. The aerospace giant bled through $4.7 billion in the first quarter in large part due to 737 Max-related expenses, including costs associated with the nearly 400 planes built but not yet delivered to customers.
Recertification would allow Boeing to begin to clear out that inventory, which will improve cash flow and stem losses. But Boeing has warned suppliers it does not expect to hit its original 737 Max production goals in 2020, so there is still a lot of work to be done before this company can soar to pre-pandemic highs.
Why Shares of Boeing Are Taking Flight Today @themotleyfool #stocks $BA