Aerospace & Defense

Daunting Flight, Simulator Tests Lie Ahead for Boeing Stock

Boeing Co. (NYSE: BA) is expected to conduct a test flight of the 737 Max before the end of the month, according to news reports. But it may not be clear skies for the aerospace company for months to come.

The 737 Max 7 test aircraft will be put through its paces by Federal Aviation Administration pilots. An analysis of the flight should be completed within a few days, FAA Administrator Steve Dickson said in February when he described the process.

But even if everything goes well with the test flight, the earliest the airliner could return to flight would be September, The Air Current, a website that tracks commercial aviation, estimated last week. The aircraft will have additional milestones to achieve before it is recertified.

After the test flight, the FAA and other regulators will hold a Joint Operations Evaluation Board review. The board will determine the training requirements for pilots to be recertified to fly the 737 Max. In addition, engineering simulator tests will be needed to validate the software.

Starts and Stops on Path for 737 Max

Boeing’s single-aisle passenger jet has been grounded since March 2019, after two crashes killed 346 people. The company still faces a criminal investigation and an inquiry by the Transportation Department’s inspector general.

The company resumed limited 737 Max production in May but it still has hundreds of the airliners parked around the United States after many airlines canceled or delayed delivery on them.

The COVID-19 pandemic made the situation worse as commercial airlines suspended flights and parked aircraft because of a steep dropoff of passengers.

Boeing chief executive Dave Calhoun has said he would not be surprised if at least one major domestic airline did not survive the economic recession brought on by the coronavirus.

Parts Supplier Stopping Production

In another sign of difficulties ahead, Boeing has asked one of its suppliers to halve production of 737 Max fuselages, according to news reports.

Spirit AeroSystems Holdings (NYSE: SPR) of Wichita, Kansas, is furloughing 900 employees who work on parts for the 737 Max, The Seattle Times reported last week.

Spirit said the three-week furloughs were necessary because of “the continued impacts to the airline industry due to the COVID-19 pandemic and resulting uncertainty surrounding the return to service of the 737 Max,” The Times reported.

This year Spirit had been planning to produce 125 ship sets — all the parts for one jet — for the 737 Max. The ship sets are delivered to a Boeing assembly plant in Renton, Washington.

The parts manufacturer said Boeing notified it on June 4 to pause work on four ship sets and to avoid starting production on 16 additional ship sets until further notice, the Wichita Eagle said.

Proposed Legislation on Certification Oversight

In another move that could affect Boeing’s production, two U.S. senators are circulating a bipartisan draft bill that would change how the FAA certifies new aircraft.

Senate Commerce Committee Chairman Roger Wicker, a Republican, and the top Democrat on the panel, Senator Maria Cantwell, completed the draft last week, Reuters said. It would give the FAA new control over the delegation of certification tasks to employees of aircraft manufacturers.

The measure would allow the FAA to hire or remove Boeing employees conducting certification tasks and allow the agency to appoint safety advisers.

Reuters quoted an unidentified congressional aide as saying the bill would put the FAA “back in the driver’s seat” regarding airplane certification.

A report released in October by a panel of international air safety regulators said the FAA initially delegated 40% of the 737 Max certification tasks to Boeing employees. That amount increased over the five-year review process

The panel said that greater FAA involvement in the certification of the flight control software “would likely have resulted in design changes that would have improved safety.”

The Senate Commerce Committee is scheduled to hold a hearing Wednesday with FAA Administrator Dickson to review oversight of aircraft certification.

Boeing has a consensus rating of Hold from 26 analysts who follow the stock. That is based on 9 Buy ratings, 14 Hold ratings and 3 Sell ratings. The median price target is $241.20.

After dropping about 15% last week, shares of Boeing were staying stable early Monday afternoon, trading around $189. The S&P 500 and the Dow Jones industrial average were down less than 1%.