The Boeing 737 MAX 10.
Stephen Brashear/Getty Images
China’s aviation regulator has laid out a series of steps for Boeing to bring its 737 MAX jet back into commercial service in the country. It’s a step forward for Boeing, and investors are cheering the news.
Boeing stock (ticker: BA) closed up 7.5% on Thursday. The S&P 500 and Dow Jones Industrial Average gained 1.4% and 1.8%, respectively.
The MAX was grounded worldwide from March 2019 to November 2020 following two deadly crashes within a five-month span. The U.S. approved the plane for a return to service in late 2020. MAX jets have been flying again for about a year in the U.S. and Europe, as well as in other regions, without incident.
Each country, of course, conducts its own reviews, and the MAX hasn’t been recertified to fly in China. That could be about to change.
“The Civil Aviation Administration of China (CAAC) has released an airworthiness directive for the Boeing 737 MAX that outlines the specific steps airlines need to take in order for the aircraft to get its final re-certification,” wrote RBC analyst Ken Herbert in a Thursday note. Those steps include doing things such as updating the flight manuals and flight control software. “This is a positive step on the heels of the airline comment period in China regarding the MAX and its eventual return to service.”
There is no specific date attached to the announcement, and Boeing wasn’t available immediately to offer comment on the report. Still, Herbert believes that MAX deliveries in China could recommence in the first quarter of 2022. “This news will be positive for Boeing, as well as key suppliers in our universe.” Suppliers with a lot of MAX exposure include Spirit AeroSystems (SPR) and Hexcel (HXL).
Herbert rates Boeing shares Buy and has a $275 price target for the stock. Boeing shares have been badly beaten up by the MAX woes and Covid-19. The all-time high for the stock was around $440, set early in 2019.
Benchmark analyst Josh Sullivan rates shares Buy, too. His target price is $270. Sullivan called the news positive as well. “China is one of Boeing’s largest customers,” wrote the analyst in a Thursday note. “The pending recertification of the 737-MAX in China is one of the largest overhangs for Boeing.”
Why recertification has taken this long in China is anyone’s guess. Sullivan, for his part, believes geopolitical tensions between the U.S. and China have influenced timing.
Write to Al Root at [email protected]
