Boeing Still Has A Long Process Before Take-off

After the Federal Aviation Administration (FAA) cleared Boeing’s 737 Max to fly passengers again after 20 months on the ground, Boeing shares climbed Wednesday morning. Since June, the stock hit its highest level but turned negative and ended the day down 3.2%, at $203.30, despite the good news.

Since the FAA decision covers only domestic flights, Boeing still needs to get approval from international regulatory agencies.

The best-selling jet in Boeing’s (BA) fleet was grounded in March 2019 after two fatal crashes that killed 346 people. It was discovered that a problem in a safety feature caused the crashes.

Before take-off, though, the carriers who have the plane in their fleets need to complete the software update and train their pilots. And the FAA said it will check any jet individually.

Some companies plan to put the 737 Max in the air before others. American Airlines included the plane on its flight schedule starting December 29, while United Airlines expects to use the aircraft again in the first quarter next year, and Southwest only in the second quarter.

The process to prepare the plane to fly again took longer than expected and cost more than $20 billion to the company.

In these 20 months with the planes grounded and the deliveries of the jet halted, Boeing shares lost about 50%.

Challenges Ahead

The FAA approval was just the first of many challenges that Boeing has to overcome.

The company sold 387 737 Max jets to 59 airlines across 32 countries. Only 72 are used in domestic flights in the US.

It is expected that soon, 737 Max will be approved abroad. The European Union Aviation Safety Agency (EASA) said, for instance, that it would decide in late December or early 2021. 

Transport Canada, Canada’s aviation regulator, said it expects to conclude its review “very soon,” but added, “there will be differences between what the FAA has approved today, and what Canada will require for its operators.”

It isn’t clear yet, though, if passengers would want to fly in the plane again or if they will try to avoid the flights that use them.

The companies could also avoid the 737 Max. 

CNN reported that there are about 1,500 single-aisle passenger jets parked by airlines around the world, according to the research firm Ascend by Cirium. 

The number does not include grounded 737 Max jets and it represents more than 25% of the single-aisle planes worldwide.

Boeing cut the 10-year commercial market deliveries by 11% to 17,000 aircraft in the third quarter, a level projected in 2017. 

Trading Boeing

Since Boeing’s stock price dropped about 50% in less than two years, it could look like a bargain for some investors.

But a bargain doesn’t always mean a good investment, especially in the short-term, not even when there is good news.

Markay Latimer, one of our top traders, says she avoids trading right after news is released unless it’s to close a trade.

“I normally wait for a pullback post-news and watch for a bounce to trade it. Sometimes the stock will move higher on news, but that move will be overdone, and then investors switch back to looking at company fundamentals and the bigger picture,” she says.

That was exactly what happened with Boeing stock on Wednesday.  The stock was rising in the pre-marketing, kept rising after the bell opening but ended the day more than 3% down.

And this Thursday, it’s still going south.