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Boeing 737 MAX Safety Changes Are “Positive Progress” – Report

support@smarteranalyst.com (Ben Mahaney)
·3 mins read

Boeing’s proposed safety upgrades in the 737 MAX aircraft were “positive progress” toward meeting cockpit and systems recommendations, Reuters reported citing comments by National Transportation Safety Board (NTSB) Chairman Robert Sumwalt.

The comments come after the US air accident investigator faulted Boeing (BA) and the US Federal Aviation Administration (FAA) last year for development flaws of the 737 MAX jet. The 737 MAX has been grounded for more than a year after two fatal crashes, which killed 346 people in Ethiopia and Indonesia.

According to the report, the comments by NTSB’s Sumwalt were submitted during a 45-day public comment period for proposed 737 MAX design and operating changes laid out by the FAA last month. Separately, victims’ families called for additional steps, saying that Boeing’s proposed modification of a key software system called MCAS linked to both crashes does not address the jet’s underlying aerodynamic problem, introduces greater complexity, and may create additional failure modes.

Sumwalt, said the FAA’s actions on the MCAS system were “positive progress” toward meeting the intent of the NTSB’s own safety recommendation related to uncommanded flight control inputs. Sumwalt also said proposed changes to pilot procedures were “generally consistent with the intent” of another NTSB recommendation.

The changes could pave the way for the FAA to lift a ban on the jet, potentially before year-end, according to the report. However, in addition to the FAA’s final airworthiness directive, Boeing is facing reviews by foreign regulators, who are also weighing new pilot training procedures.

Shares in BA have plunged 49% year-to-date as the coronavirus travel restrictions have resulted in a deep cut in the number of commercial jets and services Boeing customers need over the next few years. As such, global airlines suffering billions of dollars in losses have been seeking to cancel or delay some of the orders they have with Boeing including the 737 MAX. (See BA stock analysis on TipRanks)

Cowen & Co analyst Cai Rumohr this week reiterated a Hold rating on the stock with a $150 price target (10% downside potential), saying that there is no urgency to step back into the stock.

“Increases in MAX and 787 inventories through 2020 should become a source of cash starting in mid-2021 as deliveries recover; but magnitude and timing of the delivery recovery is unclear,” Rumohr wrote in a note to investors. “This could lead to further downward adjustment of production plans, limiting potential upside until a concrete delivery recovery is in focus.”

The rest of the Street is also sidelined on the stock with a Hold analyst consensus on the stock. That’s with a $186.24 average analyst price target (11% upside potential).

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