Nov. 12, 2019, © Leeham News: Wall Street rewarded Boeing with a $15 spike in its share price after the company said it expects the recertification of the 737 MAX and the first deliveries to begin in December.
Actual return to service is not expected until January, following pilot training, Boeing said.
“Boeing rallied 4.5% today in a slightly down market after the company outlined the remaining milestones for the 737 MAX’s return to commercial service,” JP Morgan’s aerospace analyst wrote in a note after the close of the market.
“Boeing’s messaging has now caught up to Street expectations, which is that the MAX can return in early 2020, though the company’s timeline still allows for FAA certification and potentially deliveries before year-end.”
“Returning the MAX to service remains the most important issue for Boeing from a stock perspective and so today’s news allows the market to level set at a time when expectations were diverging,” JP Morgan continued. “It also highlights the potential for progress in the coming weeks and our base case is a return to service in early 2020. Nevertheless, as we have seen before, it’s not done until it’s done, so we will continue to monitor developments.”
Indeed, Boeing has consistently been optimistic in its timing projections, However, this is also the first time it has been this specific.
It’s not clear why customers would want to take delivery of the airplanes in December if RTS can’t begin until January, unless flight tests and pilot familiarization is part of the RTS. There are still few MAX simulators.
Some airline officials said they plan to operate flights with only employees on board as a mechanism to demonstrate confidence in the airplane.
Here is Boeing’s complete press release, issued yesterday:
Boeing’s priority remains the safe return to service of the MAX and supporting our airline customers through this challenging time. We are working closely with the FAA and other regulatory authorities as we work towards certification and safe return to commercial service, and we are taking the time to answer all of their questions. With the rigorous scrutiny being applied, we are confident the MAX will be one of the safest airplanes ever to fly.
While the FAA and other regulatory authorities will determine the timing of certification and return to commercial service, Boeing continues to target FAA certification of the MAX flight control software updates during this quarter. Based on this schedule, it is possible that the resumption of MAX deliveries to airline customers could begin in December, after certification, when the FAA issues an Airworthiness Directive rescinding the grounding order.
Subject to strict regulatory approval, we are working towards the Max to be certified, airworthiness directive issued, ungrounded in mid-December. We are targeting pilot training requirements to be approved in January. Those two things mean the plane can return to commercial service, however, we know that our airline customers will need more time to return their fleets to service and to train all 737 pilots, therefore they have announced schedule updates into March.
There are five key milestones Boeing must complete with the FAA before return to service:
Boeing and the FAA successfully concluded the first of these milestones this past week, and are now working towards the FAA line pilots evaluation and the FAA certification flight test.
At each step of this process Boeing has worked closely with the FAA and other regulators. We’re providing detailed documentation, had them fly in the simulators, and helped them understand our logic and the design for the new procedures, software and proposed training material to ensure that they are completely satisfied as to the airplane’s safety. The FAA and other regulatory authorities will ultimately determine return to service in each relevant jurisdiction. This may include a phased approach and timing may vary by jurisdiction.