Market Overview

Analyst: Boeing 737 MAX Still On Path To Take Flight Again In 6-9 Months

Analyst: Boeing 737 MAX Still On Path To Take Flight Again In 6-9 Months

News of a new software problem on Boeing Co (NYSE: BA)’s already-grounded 737 MAX jet is unlikely to change an estimated six-to-nine-month time frame for the airplane’s return to service, according to Bank of America Merrill Lynch. 

What Happened

Chicago-based Boeing said in securities filings Wednesday that the Federal Aviation Administration had identified a new software problem with the plane as it investigated a previously targeted issue with the plane’s flight control software in the wake of two crashes. Boeing said it agreed to the FAA’s request to seek a fix.

"The Boeing Company agrees with the FAA's decision and request, and is working on the required software to address the FAA's request,” the company said in the filing.

“Boeing will not offer the 737 MAX for certification by the FAA until we have satisfied all requirements for certification of the MAX and its safe return to service."

The 737 MAX has been grounded in the United States and elsewhere since March, after investigators said they believed the plane’s MCAS flight control system was faulty and contributed to two crashes, one in Indonesia and one in Ethiopia, that killed a total of 346 people.

What It Means

BofA's initial projection for a six-to-nine-month period out of service is likely to stand, and the FAA’s finding of another potential risk is “not all that surprising," analyst Ronald Epstein said in a Thursday note. 

“Given that the FAA is reviewing a complex software/hardware system in a thorough manner, we would expect to see some back and forth before a final software/hardware package is determined,” the analyst said. 

BofA maintained a Neutral rating on Boeing with a $420 price objective. 

What’s Next

If it does take more than nine months for the 737 MAX to return to the air, BofA would revisit its financial forecast for the company, Epstein said. 

Price Action

Boeing shares were down 1.91% at $367.78 at the time of publication Thursday. 

Related Links:

FAA Head Assures Congress Boeing 737 Max Won't Return Until Safe

Barclays Downgrades Boeing After Survey Shows Long Road To Regaining Passenger Confidence

Photo by Edward Russell/Wikimedia

Latest Ratings for BA

Sep 2020Morgan StanleyInitiates Coverage OnUnderweight
Jul 2020RBC CapitalMaintainsOutperform
Jul 2020Wolfe ResearchDowngradesPeer PerformUnderperform

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