The Federal Aviation Administration levied a small, $1.25 million fine against Boeing related to activities in South Carolina. Boeing investors are shrugging it off, as they should.
Stephen Brashear/Getty ImagesThe Federal Aviation Administration is levying a small, $1.25 million fine against Boeing related to activities in South Carolina.
The fine isn’t related to the troubled 737 MAX jet.
The proposed penalty is for “exerting undue pressure” on FAA designees. The FAA’s organization designation authorization, or ODA, is essentially the process through which company representatives complete certification work. The ODA process is being overhauled in the aftermath of 737 MAX problems.
The MAX has been grounded world-wide since mid-March 2019 following two deadly crashes inside of five months. Boeing (ticker: BA) doesn’t make the MAX in South Carolina though. That plant manufacturers the 787 twin-aisle jet.
The fine is tiny. Even in its reduced state Boeing is worth, including debt, about $140 billion. What’s more, the FAA fined Boeing almost $20 million for installing unapproved sensors on 737 aircraft. The 737s in question were MAX and older “NG” models.
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The FAA referred Barron’s to compliance and enforcement document. The guide includes a sanctions matrix and range. The precise calculation isn’t determinable, the FAA wasn’t immediately available for clarification. Boeing didn’t immediately respond to a request for comment on the penalty, or changes made to processes in South Carolina.
Boeing stock isn’t reacting to the news, which probably makes sense. Shares are up 0.3% in early Thursday trading. The news may also represent another issue put to bed for the commercial aerospace giant.
Corporate scrutiny ramped up significantly after the tragic MAX crashes. Reports, unrelated to the MAX, about wiring and manufacturing practices followed.
The biggest headwind faced by the company remains Covid-19. Boeing stock is down almost 50% year to date, far worse than comparable returns of the Dow Jones Industrial Average and S&P 500 over the same span. And far more than the roughly 20% Boeing stock decline which followed the second MAX crash.
Viral pandemic is keeping people off planes and leading airline to cancel and rework orders for MAX and other model jets.
Write to Al Root at allen.root@dowjones.com
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Boeing’s FAA Fine Isn’t for the 737 MAX - Barron's
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