Boeing (BA) is reportedly planning to make fundamental changes to the flight-control system of its troubled 737 MAX jets. The Seattle Times reported last week that the aircraft manufacturer was considering a redesign of the whole architecture of the system.

Boeing Plans to Redesign Its 737 MAX Flight-Control System

Boeing’s latest move comes in the wake of a new flaw discovered by the FAA (Federal Aviation Administration) in late June. There’s been a flying ban on 737 MAX planes since mid-March after they were involved in two fatal accidents within five months of each other. The initial investigation report suggests a fault in the aircraft’s MCAS (Maneuvering Characteristics Augmentation System) or flight control system.

In April, the company claimed that it had completed a software update for MCAS. However, during a simulator test, FAA pilots found that the updated system was taking a long time to respond in a situation where the plane’s nose was pitched down. They pointed out that the issue could slow a pilot’s ability to react quickly, increasing the risk of a crash.

Therefore, Boeing is now looking for a complete solution so that the flying ban on 737 MAX planes doesn’t drag on any further. According to the Seattle Times, the company is changing the software architecture of the MCAS system. The change will allow the aircraft to take input from both of its flight-control computers instead of just one. For decades, Boeing’s 737 series planes have been designed to receive data from only one flight-control computer.

MAX grounding hurt airlines

The discovery of the new software flaw in June could delay the MAX’s return to service. However, Boeing continues to believe that it will fix the problem by September’s end. It hopes to obtain regulatory approval by early October.

We think it’ll be challenging for Boeing to meet this timeline. Whether or not the company completes the necessary changes by September, the FAA will need several weeks to test the updates and certify the corrections. Once the company receives regulatory approvals, airlines will also need time to train their pilots. They’ll also need time to do maintenance, as the 737 models have been in storage for months.

Major US airlines have already canceled the operations of their 737 fleets through early January, citing uncertainty about regulatory approval. Southwest Airlines (LUV), United Airlines (UAL), and American Airlines (AAL) own a combined 72 MAX aircraft.

The grounding of the MAX planes has severely hurt these airlines’ business operations as well as their financials. Southwest has faced over 20,000 flight cancellations since mid-March. United and American recorded flight cancellations of 3,440 and 7,800, respectively, in the second quarter.

Stock performance

Since mid-March, Boeing stock has fallen significantly. The stock’s YTD (year-to-date) return was nearly 31% until March 8. However, since the Ethiopian Airlines crash on March 10, its YTD gain has fallen to 3%. The stock has underperformed the Dow Jones and the S&P 500, which have risen 11% and 14.3%, respectively, YTD.

Boeing’s YTD gain is also much lower than that of the iShares U.S. Aerospace & Defense ETF (ITA). The ETF invests in companies that are engaged in assembling, manufacturing, and distributing aerospace and defense equipment. ITA has gained nearly 20% YTD.

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