Shares of Boeing (NYSE:BA) were trading 5% higher at midday on Friday thanks to positive developments in the company's effort to get the 737 MAX airborne again.
The 737 MAX was grounded in March 2019 following a pair of fatal crashes, and has been a financial drag on the company in the quarters since. Boeing has continued to build the planes to try to protect the health of its supply chain, and it burned through nearly $10 billion in the first half of 2020 in large part due to payments and expenses related to the plane.
Boeing has made changes to address the flaws that caused the crashes, and regulators have completed flight tests evaluating the changes. Europe's top aviation safety regulator told reporters on Friday that the plane could be approved to fly by November and enter service before year's end.
Patrick Ky, executive director of the European Union Aviation Safety Agency (EASA), said his group is expected to lift its ban on the plane not long after the U.S. Federal Aviation Administration acts, which should happen in November. FAA administrator Steve Dickson is expected to fly on the plane as soon as next week, a clear sign his agency is nearing the end of its investigation.
Boeing's defense business got some good news as well, winning a $2.24 billion contract to supply Small Diameter Bombs.
Getting the 737 MAX airborne again would be a big step in Boeing's recovery, but investors need to be mindful that this is a multistep process. The aftermath of the debacle will linger at Boeing for years, from shareholder lawsuits to lost market share.
Boeing has more than 400 737 MAX planes on its lots waiting to be delivered, and the company faces an uphill battle to place them in an environment where the coronavirus has caused airlines to scale back flying. It will likely take years for Boeing to normalize production rates, which could impact the overall profitability of the 737 MAX program.
Even if the plane does fly again in the near future, I still expect continued turbulence for Boeing shares.