Boeing’s 737 Max timetable for return remains a guesswork

When will Boeing Co.’s 737 Max return to the skies? It’s anybody’s guess. The aerospace giant said that it was planning for an early fourth-quarter return for the jet, giving investors hope that it had turned the corner on the crisis that’s engulfed the best-selling plane following two fatal crashes. But in the earnings call, executives threw out an alternative scenario: that timeline gets delayed and the cash flow and storage pinch is such that Boeing instead decides to temporarily halt production of the Max.
Boeing noted that a more measured step-down in the production rate from the already reduced pace of 42 per month could disrupt supply-chain synchronisation and the stability of the workforce, making a full-on halt more efficient in some cases. Still, this would be a dramatic action, with wide-reaching consequences not only for Boeing’s future earnings trajectory, but that of the entire aerospace industry.
Boeing maintains that its best estimate is that it will be able to submit all of the recertification materials to the Federal Aviation Administration in September, with the goal of having the grounding lifted at some point in October, but a longer grounding is a possibility that it has to prepare for. (It had previously said it would have all the paperwork for a fix into FAA by the end of March.)
One could argue that Boeing should use the more conservative scenario as its baseline for planning purposes. Regulators reportedly view a 2020 return as more realistic, although one bright spot from Boeing’s earnings update was that a recently discovered issue with a microprocessor that’s separate from the flight-software system linked to the two Max crashes could be remedied with a software update. There had been some concern that the issue would require a hardware change. And Boeing’s cash burn in the second quarter from the halt in 737 Max deliveries wasn’t nearly as bad as analysts had feared. But that still leaves investors staring down two wildly divergent outcomes. Do they assume the Max will return in the fourth quarter, per Boeing? Or do they prepare for the worst?
The worst, by the way, isn’t just a delay to the Max. The idea that Boeing can just bounce back and carry on as if nothing has changed is riddled with logic gaps. Boeing said that it now expects the first flight for its 777X wide-body jet to get pushed into 2020, creating “significant risk” to its target of starting deliveries of the jet that year. Boeing blamed General Electric Co.’s 9X engine for the delay, with CEO Dennis Muilenburg pointing out that the overall airplane system is otherwise progressing on plan.
Or maybe the FAA is taking a much more rigorous approach to all aspects of the certification process. The crisis has cast an equally harsh spotlight on the FAA and raised questions about whether the agency had too cozy of a relationship with Boeing and was rigorous enough in testing its aircraft. As the regulator reasserts its credibility, more of Boeing’s timelines may be subject to change.

—Bloomberg