Grounded by Safety Concerns
In late 2018, Boeing faced a series of setbacks following two fatal crashes involving the 737 MAX. This led to an extended grounding and an exhaustive safety evaluation of the jet. Just recently, nearly 200 737 MAX 9 planes were grounded due to an incident where a door plug separated during a flight, causing depressurization.
Regulatory Approval Under Conditions
The Federal Aviation Administration (FAA) has approved an inspection and maintenance process, allowing individual airframes to return to service. However, the FAA has also outlined strict guidelines. Boeing will not be permitted to increase its production rate until the regulator is confident that the plane’s issues have been adequately addressed.
FAA Administrator Mike Whitaker stressed that a return to business as usual is not in the cards for Boeing. The regulator is adamant that it will not consider requests for expansion in production or approval of additional production lines until the quality control issues have been resolved.
The FAA has not specified the duration of these restrictions or the number of planes that can be built. Nevertheless, this announcement comes as a blow to Boeing, its suppliers, and investors anticipating increased deliveries in 2024.
The recent stock plunge has left Boeing’s shares more than 50% below their pre-crash levels. As airlines worldwide look to purchase new jets, some analysts are considering whether Boeing is now an attractive investment opportunity.
While there may be potential for a rapid ascent in Boeing’s stock, the company’s recent troubles inspire caution. The ongoing scrutiny from the FAA will force Boeing to adopt a conservative approach to its growth plans, ultimately limiting its potential for substantial growth.
Given the current valuation, Boeing’s stock may seem tempting. However, the company’s track record in recent years raises doubts about its ability to stabilize manufacturing operations in the near future.