Boeing (BA) stock tumbled after the company confirmed it now sees getting regulator clearance for the 737 Max’s return well into the summer. Shares began trading again after a brief halt.
The aerospace giant sees regulators signing off on the Boeing 737 Max in June or July, sources told CNBC, months later than what it previously expected.
“We are informing our customers and suppliers that we are currently estimating that the ungrounding of the 737 MAX will begin during mid-2020,” Boeing said in a statement later. “This updated estimate is informed by our experience to date with the certification process. It is subject to our ongoing attempts to address known schedule risks and further developments that may arise in connection with the certification process.”
Top Boeing 737 Max customers Southwest Airlines (LUV), United Airlines (UAL) and American Airlines (AAL) have already removed the plane from their schedules through June. Last week, another issue with the Boeing 737 Max was found during a review of the troubled jet’s updated software package, threatening to push its return back even further.
Meanwhile, European rival Airbus (EADSY) said it will create new production capacity for the A321 at its French site in Toulouse. At the moment the European final assembly line for the A321 is in Hamburg, while the A321 is also assembled and delivered in Alabama.
“We are enjoying an unprecedented high demand for our winning A320neo Family and especially its A321 Long Range (LR) and Xtra Long Range (XLR) derivatives,” Airbus COO Michael Schoellhorn told Reuters.
Airbus crushed Boeing last year, delivering 786 commercial planes and logging net orders for 768 new aircraft. Boeing had negative orders of 87 and delivered 380 jets during 2019.
After trading resumed, shares closed down 3.3% to 313.37 on the stock market today after hitting the lowest level in a year.
The relative strength line for Boeing stock fell to its lowest level since mid-2017. The Dow Jones stock has a dire IBD Composite Rating of 25.
Airbus stock was off 0.15% at 38.06, holding above a 37.79 buy point. In contrast to Boeing stock, it is trading above both its 50- and 200-day moving averages.
The relative strength line has been moving sideways so far in 2020. Nevertheless, Airbus holds a decent Relative Strength Rating of 78, meaning it has been outperforming 78% of stocks in the IBD database over the last 12 months.
Boeing To Tap Debt Market
Boeing reportedly has also met with banks to secure a loan of $10 billion or more due to rising costs stemming from two fatal crashes of its 737 Max planes.
Sources told CNBC the firm has secured at least $6 billion so far, and is negotiating with other lenders for more contributions. This figure could yet rise further “if there is additional demand from banks,” CNBC said.
While liquidity is not seen as an immediate issue for Boeing, it further underlines the challenges facing the world’s biggest jet-maker. The figure is higher than the $5 billion expected by some analysts.
The Boeing 737 Max has been grounded following the Ethiopian Air crash in March 2019. In October 2018, a 737 Max operated by Lion Air crashed. Combined, the two crashes killed 346 people.
The FAA is now unlikely to approve the jet’s return until March, and the approval process could take until April to complete. Boeing has also changed course by saying it will now recommend pilots take simulator training before flying the 737 Max, a process that will take time and cost money.
Boeing 737 Max Brand ‘Damaged’
Meanwhile, Air Lease (AL) Chairman Steven Udvar-Hazy has said the Dow Jones stock may have to drop the 737 Max name completely to regain confidence.
“We’ve asked Boeing to get rid of that word Max. I think that word Max should go down in the history books as a bad name for an aircraft,” he said at an aviation finance conference in Dublin. “The Max brand is damaged and there is really no reason for it.”
Udvar-Hazy also said it is still unclear how badly consumer confidence in the Boeing 737 Max has been affected by the two deadly crashes.
“Will it be two months, will it be six months, will it be different in different parts of the world?” he said. “Will people in the U.S. after a few months forget about the accidents and think ‘oh, it’s just another 737’, or are there going to be parts of the world where people are going to be more superstitious and it will take longer for them to erase that stigma?”
This Jet Looks Set For Takeoff
There was some good news for Boeing, as the first test flight of its delayed 777X airplane looks set to take place this week.
Sources told Reuters the flight would take place on Thursday or Friday at Boeing’s commercial base outside Seattle. However this could change, depending on weather.
The 777X will be Boeing’s biggest ever twin-engine model. It is designed to hold an average of 406 people. The firm has projected it will fly for the first time in early 2020, and it will be delivered for service in 2021. It had originally been scheduled for delivery in mid-2020.