American Airlines flight 718, a Boeing 737 Max, is seen parked at its gate at Miami International Airport as passengers board for the flight to New York in Miami, Florida.
Joe Raedle/Getty ImagesCommercial aerospace giant Boeing is paying a small fine to resolve some outstanding issues related to the 737 MAX. That’s good news. Not, however, because the fine is small, reportedly $17 million—smaller than it could have been. The fine is another step in putting MAX woes behind the company. What’s more, the entire process shows how the aerospace industry is taking problems seriously these days.
Investors clearly aren’t worried about the fine. Boeing (ticker: BA) stock is actually up 4.3% in early trading. And the fine looks to be the biggest news of the day. There isn’t much else to pin gains on. The S&P 500 and Dow Jones Industrial Average, for comparison, are up 0.4% and 0.7%, respectively.
The fines were related to two issues on a limited number of MAX, and older 737 model, jets identified by the Federal Aviation Administration in 2019. When the original fines were proposed they totaled roughly $20 million to $25 million.
One of the issues related to “hydrogen embrittlement” of “slat tracks.” Slat tracks are part of an airplane’s wings. In that instance, the FAA alleged, essentially, that Boeing wasn’t paying close enough attention to its suppliers and received a bad batch of parts.
The other issue related to a sensor change on a heads-up display. Aircraft makers have to track, disclose, approve and verify everything, including the smallest sensors. Using one sensor on a plane different from the specifications is a violation—and one that resulted in a multi-million-dollar penalty.
“We take our responsibility to meet all regulatory requirements very seriously,” a Boeing spokesman told Barron’s. “These penalties stem from issues that were raised in 2019 and which we fully resolved in our production system and supply chain. We continue to devote time and resources to improving safety and quality performance across our operations.”
Boeing has been focused on safety and its perception lately, largely because of the MAX. The MAX, the company’s newest single-aisle jet, was grounded world-wide between March 2019 and December 2020 after two deadly crashes. MAX problems badly battered Boeing stock in 2019—shares dropped more than 20% from the date of the second MAX accident to year end. MAX recertification delays dragged on and investors became sensitized to any problem reported about the MAX or Boeing’s manufacturing practices.
As all the legacy issues from 2019 and 2020 get resolved, investors should hear less and less about the MAX, which is ultimately what they want.
Boeing stock is up 17% year to date. The MAX isn’t responsible for the majority of those gains. Investors certainly care about the MAX, but they also concerned about Covid, and the recovery in global air traffic. Airbus (AIR.France) and Boeing have both talked about increasing production rates, a sign that things are slowly returning to normal.
Write to Al Root at allen.root@dowjones.com
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Boeing Paid a Fine Related to the 737 MAX. Here's Why That's Good News. - Barron's
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