Aviation Sector Still Struggling as More Boeing Orders Go Bust

Through the first 8 months of 2020, Airbus has easily maintained its status as the world’s largest plane manufacturer, capturing the top spot for the first time since 2011 last year. Though that title is somewhat bittersweet, considering both companies have seen huge declines in deliveries this year, Boeing’s problems are likely to be more protracted. More than 90% of the American aircraft giant’s unfilled commercial orders are now in flux and under scrutiny as the 737 MAX and 787 Dreamliner face heightened oversight from the FAA. Additionally, the launch of the company’s new 777X model has been delayed to 2022. After a year and a half, all MAX jets remain grounded and their future still shrouded in mystery. MRP’s coverage and skepticism toward Boeing’s handling of the crisis, as well as their ongoing problems with Dreamliner aircraft, goes all the way back to June 2019.

Related Stocks, ETF: iShares U.S. Aerospace & Defense ETF (ITA), The Boeing Company (BA), Airbus SE (EADSY)

18 months after Boeing Co.’s 737 MAX jets were grounded globally in the wake of two separate crashes within a 5-month span, culminating in the death of all 346 passengers and airline crew on board, they’ve yet to return to service.

At the onset of the grounding, Boeing led investors and airlines to believe that a fix of the faulty Maneuvering Characteristics Augmentation System (MCAS) software present in the jet, along with re-certification would come as soon as mid-May 2019.  The MCAS is an adjustment that is supposed to account for the plane’s relatively large engines (in comparison to the small frame that has not been scaled up in decades), which tended to lift the plane’s nose during takeoff. Therefore, the MCAS would automatically shift a powerful control surface at the tail to force the front of plane downward. This downward momentum, however, could become too great, overriding the pilot’s ability to manually control the plane, sending it nosediving toward the ground.

Last year, the Wall Street Journal reported that the FAA’s internal analysis of the MAX’s first crash projected that, without an intervention, the faulty MCAS software could have caused 15 MAX crashes over the next 30 to 45 years, an average of one fatal crash about every two or three years.

MRP initially expressed skepticism about the simplicity of the fixes in the month following that first missed target date, noting that, in addition to software problems, almost 150 parts inside the wings of 312 Boeing 737 jets were potentially defective and needed to be replaced.

Several missed recertification deadlines later, software bugs had only become more prolematic and issues effecting other components of the MAX were piling up. Though the company appeared very confident re-certification would come before the end of 2019, those estimates were not even close. By Q3 of last year, MRP had concluded that any estimated return date provided by Boeing could not be relied upon.

In January of this year, the company laid out its longest timetable yet, aiming for re-certification by June. Obviously even this projection was a gross underestimation. Though the MAX has now made considerable progress toward re-certification in the US and Europe, nothing is set in stone regarding a return before 2021.

Even when the MAX does make a return to the sky, Boeing is not out of the woods…