✈️ When Will Boeing Exit The Air Pockets?

Moderna's new innovation; Another fine for Wells Fargo.


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✈️ Boeing: Hitting Air Pockets?

Aircraft manufacturer Boeing (BA) has made a habit of hitting air pockets. A US judge has allowed shareholders to file a suit against the board of directors in connection with the twin crashes of Boeing’s 737 MAX planes. Order cancellation and delivery delays are adding to the pile of woes. (Tweet This)

“Court”ing MAXimum Problems

In 2018 a Lion Air flight crashed in Indonesia. Less than five months later, an Ethiopian Airlines flight crashed just after takeoff. A total of 346 people lost their lives—the aircraft in question: Boeing 737 MAX. The FAA grounded the entire MAX fleet globally. Boeing’s reputation was in a downward spiral.

Out of desperation to get the planes back in the air, some key employees working with FAA inspectors made misleading statements that impeded the investigation. This was a bad idea! In January, Boeing was forced to settle criminal charges by paying $2.5B in fines.

Eventually, the FAA lifted the ban on MAX, and Boeing’s long-time customers such as Southwest, American, and United started embracing the MAX once again. Some minor hiccups notwithstanding, MAX was back in the sky again. But the impact of the crashes was still being felt.

Yesterday, the Chancellor of Delaware recognized that in addition to victims who lost their lives in the plane crashes, the shareholders of Boeing also suffered due to the board’s negligence. The judge said the board ignored red flags about the aircraft’s safety systems and didn’t question the process.

The court also took Boeing CEO Dave Calhoun to task regarding his misleading comments about how quickly the board met to discuss the first crash. Predictably, Boeing said it is “disappointed” by the decision and will consider the next steps after reviewing the order.

Dreamliner Nightmare

On the one hand, Boeing is dealing with the courts and the regulators. As if that’s not enough, or perhaps because of this, the company’s business is taking almost daily punches to the gut. Key customers are canceling orders, and planned aircraft deliveries are facing delays.

Ireland’s Ryanair is one of Boeing’s biggest customers. In December, Ryanair placed an order for 75 737 MAX 8-200 jets. Separately, it was also looking to purchase the larger 737 MAX 10 jets worth “tens of billions of dollars.”

After months of wrangling over pricing, Ryanair called off the talks earlier this week while noting that it had a “disciplined track record” for not paying a high price for aircraft. Even so, the risk of Ryanair abandoning Boeing in favor of rival Airbus is low as there’s no love lost between them.

The other issue Boeing is facing has to do with its 787 Dreamliner. The company had initiated an inspection proposal, but the FAA promptly rejected it, citing the defects uncovered in July and that more needs to be done to fix the issues. Dreamliner deliveries have been halted since May, and this is expected to persist through October.

Just last quarter, the company had reported a surprise profit after six straight quarterly losses while raising its outlook for the whole year. However, the specter of the shareholder lawsuit, consistent delays in product delivery, and failed negotiations with long-term customers don’t augur well.

It may well be that the share price reflects these issues. But that doesn’t mean much if the company gets into the habit of taking one step forward and two steps back. As of now, turbulence is reigning supreme at Boeing.

Market Reaction
BA ended at $213.94, up 1.21%. Shares are up 5.5% this year and 35% over the last 12 months.

Company Snapshot 📈

BA $213.94 +2.56 (1.21%)

Analyst Ratings (26 Analysts) BUY 50%  HOLD 46%  SELL 4%


Newsworthy 📰

Launch: GM debuts off-road Chevrolet Silverado ZR2 as flagship truck ahead of EV pickup. (GM -1.12%)

Woes: Wells Fargo hit with new $250M fine for failure to pay back wronged customers (WFC +1.28%)

In Progress: Moderna reveals single-shot vaccine booster for Covid and flu (MRNA +7.81%)


Later Today 🕒

  • Kroger Co. Earnings (KR)
  • Beyondspring Inc. Earnings (BYSI)
  • 6:00 PM IST: Producer Price Index

Today’s Market Terminology: Target 🎯

Target price is an estimate of the future price of a stock. It is the price at which the stock is fairly valued with respect to its historical and projected earnings


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