Aerospace & Defense

Boeing Resumes Test Flights on 737 MAX Jets

Boeing Co. (NYSE: BA) revved up its test flights of the 737 MAX 8 (737-8) again on Friday in an effort to meet the company’s commitment to Indonesia’s Lion Air subsidiary Malindo Airways to deliver the first 737-8 by the end of the month.

The test flights were halted earlier last week due to a faulty part in the plane’s Leap-1B engine, and the stoppage was revealed only on Wednesday. Boeing’s stock dropped 1.25% on Wednesday as a result of the delay. Shares of General Electric Co. (NYSE: GE) dropped 1% on Wednesday, as GE is a 50/50 partner with France’s Safran in CFM International, the maker of the Leap engines for Boeing, Airbus and China’s Comac.

Boeing has had a remarkably trouble-free flight testing program for the 737-8, and even this recent issue was not a big deal. The problem was discovered during a routine inspection and quickly isolated to a bad batch of parts from one supplier. The other two suppliers of the part experienced no such manufacturing flaw, so Boeing’s exposure was limited and it has been able to swap out engines and get the test flights restarted on the plane destined for Malindo.

Boeing will be required to clear all engines currently in use on 737-8 aircraft before flight tests can resume. The company has built about 25 of the planes and each has two engines.

CFM makes three variations of the Leap engine: the Leap-1A for the Airbus A320neo family, the Leap-1B for the Boeing 737 MAX family and the Leap-1C for the Comac C919 passenger jet made in China. CFM expects to deliver more than 500 Leap engines in 2017, rising to 1,900 in 2018 and 2,000 in 2019. Each aircraft, no matter from which aircraft maker, uses two Leap engines.

Boeing stock closed at $183.25 a share on Friday, down about 1.3% for the week, but up from $179.66, the week’s low point following the revelation of the 737-8 grounding. The stock’s 52-week trading range is $122.35 to $187.21, and the consensus 12-month price target is $188.05.

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