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In 2020, the Boeing 777X will be shown.
Getty Images/David Ryder
Commercial aerospace behemoth
Boeing
The 777X, the company’s newest 777 airplane, has received some terrible news. The business was recently informed by the Federal Aviation Administration that the plane would most likely not be certified for commercial operation until mid-2023, prompting its shares to plummet to the Dow Jones Industrial Average’s bottom on Monday. Although the period outlined in a May letter from the regulator to the company is longer than investors might have anticipated, it isn’t necessarily terrible for the stock.
Boeing
According to CEO Dave Calhoun’s comments at a recent investment conference, management was aiming for late 2023.
Calhoun stated in early June, “We are still hopeful that we will be approved in the fourth quarter of 2023.” “We’ve included all of the MAX [recertification] timetable lessons we could reasonably incorporate, as well as the architectural preferences that both the FAA and the [European regulator] have enshrined in their regulations.” According to a Boeing spokeswoman, the business is undergoing a rigorous procedure to guarantee that all regulatory criteria are followed. In January 2020, the 777X made its first test flight. Based on how the business functioned a few years ago, this may have put it on schedule to be certified by mid-2021. Take into account that the 737 MAX made its first flight in early 2016 and was approved for service 14 months later. Around the middle of 2017, deliveries began. However, the MAX was grounded in March 2019 after two fatal crashes in less than five months. Boeing had to wait 20 months for the plane to be cleared to fly again due to design changes, additional testing, and regulatory scrutiny. The MAX incident prompted changes at Boeing, including the formation of new safety committees and improvements to the FAA’s supervision procedure. These changes could cause the approval procedure for new planes to take longer. The epidemic most likely slowed down the 777x approval process as well. The approval procedure has been slow for a variety of reasons. Although delivery of MAX planes and the recovery of the commercial aerospace market are bigger issues, Boeing investors aren’t happy with the announcement of the delay. At 12:50 p.m., Boeing stock was down 3.5 percent, making it the biggest loser in the market.
The Dow Jones Industrial Average (DJIA) is a stock market index
On Monday, it was down 197 points, or 0.6 percent. The
S&P 500 Index
Little had changed. In a Monday study, Vertical Research Partners analyst Rob Stallard summed up all of Boeing’s benefits and negatives. Although the 777X delay is a regulatory issue, it is only one of three he mentions. China, for example, has yet to reapprove the 737 MAX, while the 787 is still being scrutinized. New orders for the 737 MAX are starting to pour in, which is an encouraging sign. He anticipates
United Airlines is an airline based in the United States
In the next days, (UAL) will announce an order for about 100 MAX jets. Boeing stock is still on a “roller coaster ride,” he said, adding that “this week’s events are unlikely to have an immediate impact on our numbers.” Boeing’s stock remains at $242 a share, according to his target price. He assigns a Hold rating to the stock. Stallard is more pessimistic than his colleagues. Approximately 57 percent of analysts who cover the stock rank the stock as a Buy. The average Buy-rating ratio for S&P 500 stocks is around 55%. Analysts’ average price objective is around $267. Post-pandemic demand is the most pressing challenge confronting the whole commercial aerospace business. Commercial aviation travel in the United States is down around 25% in June 2021 compared to 2019. However, as compared to June 2020, it has increased by about 300 percent. Things are gradually improving for the industry. For example, United Airlines announced on Monday that it expects to make a profit in July. It would be the first monthly profit for the airline since January 2020. Al Root can be reached at allen.root@dowjones.com.
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