Aerospace Analysts Weigh In on Boeing’s Mid-Air Incident

Boeing Stock

Boeing (NYSE:BA) is under regulatory scrutiny following a significant mid-air incident, just as it awaited approval for new models of its popular MAX jet. The incident involved a door plug falling off from the side of a 737 MAX 9 aircraft operated by Alaska Airlines (NYSE:ALK), carrying 171 passengers. Here’s what aerospace analysts are saying about the expected impact on Boeing:

Cai Von Rumohr, TD Cowen Analyst

According to Rumohr, the Federal Aviation Administration’s (FAA) required checks are expected to take 4-8 hours, significantly less than recent issues with the 737 aft pressure bulkhead. Rumohr suggests that the checks will likely be completed within several days. Once the National Transportation Safety Board (NTSB) determines the root cause, he believes the fix may involve a more rigorous inspection of exit door plugs at Spirit and Boeing. The question remains whether the FAA will mandate more frequent inspections and impact the delivery pace, but based on past responses, Rumohr deems this unlikely.

Nicolas Owens, Morningstar Analyst

Owens indicates that inspections or potential revisions to how Spirit Aero Systems manufactures 737 MAX-9 fuselages for Boeing may not have a significant financial impact on Boeing or its customers. He maintains an unchanged fair value estimate of $232. However, Owens notes that the dramatic nature of the flaw may raise questions about Boeing’s product governance among customers, regulators, and the flying public.

JPMorgan Analysts

JPMorgan analysts highlight the importance of China as a regulator in this situation. While China has not yet permitted carriers to resume 737 MAX deliveries, the Friday accident could delay the process. However, the analysts note that Chinese carriers do not operate MAX 9s, and there’s no information about them ordering any.

Jefferies Analysts

Jefferies analysts focus on the cost aspect, emphasizing the low cost of compliance with the FAA’s guidance of a 4-8 hour inspection per jet. Assuming inspection costs of $10,000 per unit, the total cost would be $1.7 million across the 171 aircraft. They suggest that Boeing and suppliers would likely shoulder the cost, given the typical 4-year warranty. While concessions are not contractual, a baseline pause of one week could lead to concessions totaling $18 million.

These insights offer a glimpse into the varied perspectives of aerospace analysts regarding the potential repercussions for Boeing in the aftermath of the mid-air incident.

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