Boeing (BA) CEO Dennis Muilenburg has once again reiterated his expectations about the 737 MAX resuming services in the fourth quarter. Muilenburg made the comments during an investor conference in California on September 11, according to CNBC.
However, he warned that the timetable of the jet’s return could be different in every country, given the disparity among regulators, reports CNBC. Muilenburg said, “I think the phased ungrounding of the airplane amongst regulators around the world is a possibility.”
Boeing is awaiting safety approval for the 737 MAX, which has been under a global flying ban since mid-March after a software problem caused two deadly accidents within five months. Once Boeing updates the software, world regulators will scrutinize it before approving the model to fly again.
The quick return of the MAX is critical for Southwest Airlines (LUV), American Airlines (AAL), and United Airlines (UAL). Together, the three airlines own 72 Boeing 737 MAX planes. They have suffered over 35,000 flight cancellations since the MAX’s grounding, costing them millions of dollars in foregone revenue and operating profit.
Why could the 737 MAX’s return be in phases?
Muilenburg’s concerns look realistic given the changing circumstances. On September 3, The Wall Street Journal reported that Boeing “failed to provide technical details and answer specific questions about modifications in the operation of MAX flight-control computers.” It added that regulators from the US, Europe, Brazil, and many other countries cut short Boeing’s August briefing.
Following the event, several global regulators are reportedly considering conducting independent analyses. The move is in contrast with past events when global regulators relied on each other’s judgment, according to Reuters. However, several loopholes related to the US Federal Aviation Administration’s certification process found during crash investigations have put a question mark on its reliability. The Seattle Times reported on March 17 that the FAA had delegated crucial technical evaluations of the 737 MAX aircraft to Boeing.
On September 3, Reuters reported that International Air Transport Association head Alexandre de Juniac had concerns about the rift among regulators over reapproving 737 MAX’s return to skies. He believes the discrepancies could impact future aircraft certification.
Boeing’s growth intact with MAX return
The return of the 737 MAX is crucial to Boeing’s growth. The plane accounted for approximately 70% of the company’s overall aircraft shipments, and nearly 30% of its total operating profit.
Boeing reports its aircraft shipments fell 72% YoY to 18 units in August. And from January through August, its total deliveries fell 58% YoY. Therefore, any further delays in the MAX’s safety approval could worsen Boeing’s financial troubles.
With a year-to-date gain of 18.7%, Boeing stock has lagged behind the industry. This year, the iShares U.S. Aerospace & Defense ETF (ITA) has risen 30.6%.