NEW YORK – American planemaker Boeing’s shares fell nearly 7 percent on Friday to $344 on news that a company technical pilot had raised concerns in 2016 instant messages to a colleague about certain systems on Boeing’s 737 MAX jet, which were later implicated in two fatal crashes.
Boeing turned the information over on Thursday to the United States’ Federal Aviation Administration, which said the company had discovered the messages “some months ago.”
The revelations are the latest black eye for the commercial aerospace giant, which was forced to ground the MAX in March due to safety concerns. They also mean more uncertainty for Boeing shareholders, who are keenly focused on when the MAX might return to service.
Boeing’s stock has fallen 9 percent since the flying ban, although it is up year to date.
Anything that demonstrates progress on clearing the plane for flight would probably cause a rally in Boeing shares.
Richard Safran, an analyst at Buckingham Research Group, thinks the stock will trade back up to a pregrounding $420 or so when the plane is allowed to fly again, implying a gain of 22 percent from Friday’s close.
“When” is the operative word, of course, but Boeing faces three tests in coming weeks that might yield important clues.
Boeing will report third-quarter earnings on Oct. 23. The actual numbers won’t matter, but investors are hoping for some sort of update about the MAX’s status. (For those keeping score, Boeing is expected to earn $2.21 a share for the quarter, down 37 percent year over year.)
Next, Boeing CEO Dennis Muilenburg is scheduled to testify on Oct. 30 before a House transportation committee on the plane’s design and certification, and may appear before a Senate committee, as well. The instant-message revelations are almost certain to be on the agenda.
Finally, Boeing will submit proposed fixes for the MAX to global aviation authorities later this fall.
Boeing’s most recent guidance is for the 737 MAX to fly commercially again by the end of 2019. That looks optimistic.
Southwest Airlines, which flies an all-737 fleet, has removed the newest model 737 from schedules through February 2020.
United Airlines Holdings recently removed the MAX from its schedules until January.
Investors also want an update about production. Boeing cut back production of the plane in April. Since then, about 275 new jets have rolled off assembly lines and been parked. The company might cut production again to manage inventory levels and cash flow.
More delays and production cuts sound bad, but if delays stretch out just a few more months, the updates could be good news for the shares.
Despite the slump resulting from the Oct. 29, 2018 crash of a Lion Air 737 MAX plane into the Java Sea, killing 189 people, the stock has returned 1 percent since, versus a total return of 10 percent for the S&P 500 index.
The structure of the commercial aerospace industry has helped: There are only two major suppliers of commercial aircraft, and jet backlogs stretch out for years.
Longer term, Boeing’s stock’s trajectory will depend on consumer acceptance of the updated MAX jet. UBS analyst Myles Walton recently surveyed 1,000 fliers, and most indicated they would feel comfortable on a MAX jet after about six months of safe operation. When that happens, the stock will be higher.