Boeing is running into more delays correcting problems that have halted deliveries of its popular twin-aisle 787 jet, The Wall Street Journal reported Friday. The stock has fallen, but there is more going on than a response to that negative news.
Boeing (ticker: BA) shares were down more than 4% in Friday trading, while the S&P 500 rose 0.1%. The Dow Jones Industrial Average fell 0.5%, partly because of the loss at Boeing, a large component of the 30-stock index.
According to the Journal, Boeing is slowing down production of 787 jets while it continues to correct quality issues discovered in recent months. Boeing, without any problems or delays, would like to be making five 787 jets a month, but today’s rate is more like two a month. Large jets like the 787 cost much more than smaller planes like the 737 sized jet, but the sales volumes are lower.
Boeing hasn’t been delivering 787s for months now. At the end of the third quarter, Boeing had about 105 wide-body 787 jets in inventory, waiting to be delivered. Management, on the company’s third-quarter conference call, didn’t give a timeline for when deliveries would resume. That is partly up to the Federal Aviation Administration, who will approve Boeing’s quality fixes.
“This is Boeing being tough on Boeing,” the company said in response to a request for comment on the outlook for deliveries. “We are conducting inspections and rework and continue to engage in detailed, transparent discussions with our regulators, customers and suppliers.” It said that while those efforts have affected deliveries, they are essential to the jet’s long-term success and position the company for growth as air traffic picks up following the pandemic.
The delay isn’t actually all that big a deal in itself, although a resumption of deliveries would remove a factor that is dragging on the stock.
The bigger problem is that investors seem to lack confidence in Boeing. In addition to the issues with the 787, the company has had a far more serious problem with the 737 MAX, which was grounded worldwide between March 2019 and November 2020 following two deadly crashes. The MAX debacle resulted in many management changes and much higher scrutiny of the company’s safety and engineering culture.
Investors are simply tired of hearing about new issues related to either engineering, quality, or safety. That is part of the reason for Friday’s decline.
There is another big issue too: Rising Covid-19 cases in Europe threaten the recovery in global air traffic that Boeing, and all commercial aerospace companies, want to see happen.
Airbus (AIR. France) American depository receipts were down 3.8% in Friday trading.
Write to Al Root at [email protected]