In a letter sent on Monday, the Federal Aviation Administration (FAA) sounded the alarm on aerospace icon Boeing (NYSE:BA), noting that the company anticipates not winning regulatory approval for its 737 Max 10 jetliner before next summer. Per Reuters, Boeing faces a December deadline to gain approval for the Max 10, as well as the smaller variant Max 7. BA stock declined 1% during Wednesday’s afternoon trading.
Adding to the pressure, the FAA sent Boeing a letter on Sept. 19 expressing concerns about timely safety certification requirements for the Max 10. According to Boeing CEO Dave Calhoun, the company must first get approval for the Max 7 as the Max 10’s approval remains contingent on the former variant’s documentation.
In the Sept. 19 letter, the FAA stated that Boeing had not completed all its required assessments. Further, if the company were to meet the aforementioned December deadline, it had to have turned in the remaining documents by mid-September.
In the most recent correspondence, FAA Administrator Billy Nolen wrote to Senator Roger Wicker, the top Republican on the Senate Commerce Committee. In part, Nolen stated: “With regard to the 737-10, Boeing’s current project plan timeline has the 737-10 receiving an amended type certificate no sooner than summer 2023,” according to two sources whom Reuters interviewed.
The focus of the regulation centers on new cockpit alerting requirements that Congress mandated in 2020. Between October 2018 through March 2019, two separate Max 8 airliners crashed, killing in a total of 346 people.
BA Stock Faces Turbulent Air Ahead
One possibility that can help BA stock get back on track is a deadline extension from Congress. Unless Boeing meets the December deadline, it has no choice but to integrate the new cockpit safety requirements. According to Bloomberg, doing so would be costly, necessitating a complex redesign.
However, it’s not clear whether Congress will play ball. The proposed redesign involves the emergency warning systems — the very systems legislators targeted as culprits of the Max 8 crashes. Therefore, a dark cloud hangs over BA stock.
If this matter wasn’t troubling enough, last week, Boeing agreed to pay $200 million to settle civil charges from the Securities and Exchange Commission (SEC). The issue centered on missing public statements following the fatal crashes. Thus, past history loosely implies that Boeing may struggle to meet the tight regulatory deadline, which wouldn’t help sentiment for BA stock.
Still, optimists are not giving up hope. Last month, Calhoun told reporters that he believed the FAA would approve the Max 7 this year. Therefore, a “chance” of approval for the Max 10 before the end of 2022 was still on the table.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
