FAA to Require Engine Inspections for All 737 MAX Jets

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Late Thursday afternoon, Reuters reported that the U.S. Federal Aviation Administration (FAA) will require that all engines currently in use on Boeing Co.’s (NYSE: BA) 737 MAX 8 (737-8) aircraft be cleared by the agency before flight tests can resume. The company has built about 25 of the planes and each has two engines.

The 737-8 uses Leap-1B engines manufactured by CFM International, a 50/50 joint venture between General Electric Co. (NYSE: GE) and France’s Safran. The company also manufactures two other versions of the engine: the Leap-1A for Airbus’s A320neo and the Leap-1C for China’s C919. Neither of the other engine variations is affected by the FAA decision.

The issue came to light earlier this week when a CFM quality inspection revealed that a part in the Leap-1B’s low-pressure turbine section displayed some cracking. Boeing and CFM determined that the problem was related to a batch of parts received from one supplier that had used an incorrect manufacturing process for making the part.

Boeing and CFM are being required to submit data to the FAA for review and the FAA will decide if the repaired engines can be cleared for flight. There is no estimate of how long this process will take.

The first delivery of a 737-8 to a customer is scheduled for later this month, and Boeing says it still plans to make the delivery on time. That’s important to Boeing not just for the optics, but the company doesn’t receive the final (large) payment for an airplane until it is delivered to the customer. The list price for a 737-8 is $112.4 million.

Boeing’s stock traded up about 0.8% in Friday’s premarket, at $185.40 in a 52-week range of $122.35 to $187.21.