Boeing (NYSE:BA) finally did it. After months of waiting, the company has received authorization from the Federal Aviation Administration that will allow its 737 Max planes to carry passengers. Importantly for investors, this approval marks the start of a potential turnaround story. What does it mean for BA stock? And what else do you need to know about Boeing this morning?
With those questions in mind, here are 13 things investors need to know about the BA stock news.
- Boeing has kept its 737 Max planes grounded since March 2019.
- It initially grounded the planes because of two fatal accidents that killed a total of 346 passengers.
- Importantly, the company hoped that the path to recertification would be shorter. However, these planes have now been grounded for 20 months.
- On that same note, the process of seeking new approval cost Boeing $20 billion.
- Both crashes occurred when a sensor in the flight control system malfunctioned. This sensor was supposed to keep the 737 Max from climbing too fast and stalling. Instead, it pushed the nose of the planes down and caused them to crash.
- There are many steps for Boeing to complete now before its 737 Max is fully approved.
- To start, it must complete all necessary changes to the 737 Max, including software tweaks.
- Then, pilots must complete further training.
- After that, the 59 airlines that operate a total of 387 planes can begin adding them back to their flight schedules for late-2020 and beyond.
- Unsurprisingly, there have been reputational impacts to Boeing from the crash.
- Since March 2019 there has also been a criminal investigation.
- This also led to the resignation of the former CEO, Dennis Muilenburg.
- Even now, many family members of the crash victims say they disagree with the FAA decision. They have spoken out in favor of keeping the 737 Max grounded.
BA Stock: Is This a Real Turnaround Play?
While many investors are likely cheering for Boeing, they may also be wondering if this is truly a turnaround play. Shares of BA stock are up more than 6% in pre-market trading even though many investors knew FAA approval was coming this week.
Importantly then, there are two things for investors to consider. The first is that there is a long path forward for Boeing. As Courtenay Brown wrote for Axios, just because the FAA has given it the green light does not mean that the reputational damage is gone. Who will feel safe flying on a 737 Max? Will fear of a similar accident turn away potential customers? Additionally, it will take a while for all of the participating airlines to get 737 Max planes back on their schedules. In fact, Southwest Airlines (NYSE:LUV) has already said it will need until the spring of 2021.
The second thing to consider is the damage of the novel coronavirus. Importantly, the FAA approval does not come at an ordinary time for the travel industry. Demand is way down, particularly as a second wave of the coronavirus accelerates. Just because 737 Max planes can take to the sky once more does not mean customers are interested.
Therefore, there are two big unknowns. When will customers feel safe flying in general? And then, once they are really ready en masse to hit the skies, how long will it take for the 737 Max to lose its fear factor?
As you consider the BA stock news today, make sure you keep those guiding questions in mind.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.