A Congressional transportation committee released a report about the troubled Boeing 737 MAX on Wednesday, but in stock market terms it amounted to old news.
The report, issued by the House Transportation & Infrastructure committee, outlines design flaws, poor assumptions about pilot responses and management failures. The 245-page report spreads blame across Boeing (ticker: BA) and the Federal Aviation Administration.
Boeing issued a statement after the release of the report saying it cooperated fully and that the company has implemented many fundamental changes based on input from aerospace stakeholders, including government officials.
Boeing shares were up 2.2% to $167.06 Wednesday afternoon. The rally coincided with gains in the broader market, although stocks were retreating a bit after the Federal Reserve said interest rates would remain near zero even if the economic recovery quickens.
The MAX has been grounded worldwide since mid-March 2019 following two deadly crashes inside of five months. Before the second tragic crash, Boeing stock traded for more than $400 a share.
Shares closed 2019 at $325.76, down roughly 20%. Then came the Covid-19 pandemic. Boeing stock is down about 48% year to date. Shares of peer Airbus (AIR.France) are off about 46%. The pain extends to suppliers and customers. Aerospace supplier stocks Barron’s tracks are down about 33% on average. U.S. airline shares are down roughly 40%. Aviation-related stock returns are far worse than comparable returns of the S&P 500 and Dow Jones Industrial Average.
Aerospace has been hit harder than most sectors of the economy by the pandemic. U.S. commercial air traffic fell more than 90% year over year in April, and recovery has been slow.
Looking ahead, Boeing expects to have the MAX back in service this year. Boeing pointed Barron’s to CEO Dave Calhoun’s comments on the second quarter conference call, when he was asked about the report and the MAX.
“Based on our latest assessment, we now expect the necessary regulatory approvals will be obtained in time to support resumption of deliveries during the fourth quarter,” he said. Of course, the actual timing will ultimately be determined by the global regulators.”
The FAA also issued a statement after the report reiterating its commitment to safety. “The FAA continues to follow a thorough process, not a prescribed timeline, for returning the aircraft to service.”
The FAA published an airworthiness directive at the end of July that is open to public comment for 45 days.