Press "Enter" to skip to content

Will Boeing 737 Max take off again this year?

Boeing (NYSE: BA) is now expected to return from the 737 Max debacle by October 2019 if the aircraft is re-certified in September, according to brokerage firm Cowen. However, market analysts predict the airplane to return to service by the end of the year. The service reentry continued to be pushed further as a new risk has been identified during a Federal Aviation Administration review.

In mid-June, Boeing executive chief Dennis Muilenburg said on CNBC that the Max is expected to be back in the air by year-end. The projection made by Muilenburg was confirmed by the FAA’s associate administrator for aviation safety Ali Bahrami, who believed the Max will be returning to service when the FAA believes it will be safe, according to the Time.

Currently, both Boeing and the FAA continues to undertake intensive testing and evaluation of the 737 Max planes in the wake of two similar crashes that claimed hundreds of lives. Boeing said it is working on a software fix and believes a hardware change, which would be more time-consuming, will not be required.

Will Boeing 737 Max takeoff again this year
Photo Courtesy: Boeing

At the same time, Boeing continues to work with foreign regulators and the FAA to resolve all the other software and training issues required for certification. The company hopes to achieve certification “in the September time-frame” with foreign approvals hopefully following shortly thereafter.

Cowen estimates Boeing currently has 160-170 undelivered Max aircraft in inventory, and a delay in the resumption of deliveries to the end of September could boost this by about 110 aircraft to 270-280. The company is expected to have a carryover of undelivered Max in inventory at year-end 2019. This is because Boeing’s first priority will be to prepare the 381 planes in customers’ fleet for service, and the company is unlikely to exceed its prior monthly 737 delivery peak of 69 planes last December.

Since March, the 737 Max aircraft have been grounded. Major airline companies have kept the plane off their schedule including American Airlines (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and United Continental Holdings (NASDAQ: UAL).

Also read: Regulators detect new software glitch in 737 Max

Both United Continental and Southwest are looking to resume Max flights in early August while American Airlines remained firm on grounding the plane till September 3. According to Bloomberg Intelligence, the grounding could hurt Boeing by $1.4 billion due to the canceled flights and lost operating profit.

Meanwhile, Cowen believes that each month of delay would result in an incremental $1.2 billion of negative cash flow. Thus, if Max deliveries don’t begin until October, the cash flow for the third quarter could be near zero. The firm expects the total cumulative undelivered and grounded Max inventory could rise to 780 that assumes grounding extends through year-end 2019.

The Boeing 737 Max is expected to fly this year for testing purposes and flying in routes for storage and repositioning purposes. Meanwhile, when it comes to passengers, the airlines remained the deciding authority in using 737 Max for flying. For returning the grounded aircraft into service, the necessary procedures are necessary to be followed by airlines that would need time for repositioning the 737 Max.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

Top
%d bloggers like this: