Boeing 737 Groundings Extended to November

July 15, 2019
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Boeing’s (NYSE: BA) Boeing 737 MAX jets have been grounded worldwide since March of this year, and the pain for the Chicago-based aerospace manufacturer is likely to get even worse. According to a statement from American Airlines, one of Boeing’s key customers, the faulty 737 jets will be grounded until at least November this year.

Looking even further ahead, some analysts believe that planes might not be seen in the air until next year.

Surprise American Airlines Boeing 737 MAX Announcement

American Airlines, which has already taken delivery of 24 Boeing 737 MAX 8 jets, announced on Sunday that it would be cancelling up to 115 flights per day, due to ongoing groundings. The company surprised investors and the public by revealing that cancellations would be ongoing until at least November 2.

This is the fifth time that American Airlines has had to push back its target date for the recertification of its new planes. After groundings were first announced in March, the airline expected that cancellations would only last until April 24.

Despite pushing back its deadline, the company still has faith in the work that Boeing is doing to restore confidence in its airplanes. It released a statement on Sunday saying that “American Airlines remains confident that impending software updates to the Boeing 737 MAX, along with the new training elements Boeing is developing in coordination with our union partners, will lead to recertification of the aircraft this year.”

The company also noted that it is in frequent contact with all relevant parties, including Boeing, the National Transportation Safety Board, the Department of Transportation, and the Federal Aviation Administration.

737 MAX Groundings are Now Hurting Boeing’s Bottom Line

The extended recertification delay is starting to hurt Boeing’s bottom line, which could erode confidence in what is typically one of the best growth stocks on the market. Boeing’s 737 sales fell by over 50% in June. The company also lost a major $5.9 billion deal to supply 50 jets to Flyadeal, with the airline choosing to go with Airbus instead. The safety controversy surrounding the 737 was a major influence on this decision.

Long term, analysts believe that groundings could continue into 2020, with the Wall Street Journal reporting recently that software fixes for the 737 are taking longer than expected.

Boeing stock is up 13.28% year to date but has lost -3.77% in the last three months. Investors should take all 737 MAX news into consideration when evaluating this stock.

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