Boeing Stock Drops Again. Don’t Expect the 737 MAX 9 to Fly Soon.

The FAA, which is providing regular updates, said Thursday: The “incident should have never happened and it cannot happen again. FAA formally notified Boeing that it is conducting an investigation to determine if Boeing failed to ensure completed products conformed to its approved design. ”

Investors shouldn’t be surprised aviation regulators are taking a close look at safety. Still, Boeing shares dropped 2.3% Thursday, closing at $222.66 apiece, after rising 0.9% Wednesday to snap a two-day losing streak. The
S&P 500
was down 0.1%. The
Dow Jones Industrial Average
was flat. Coming into Thursday trading, Boeing stock was down 13% since the start of the year.
Alaska Air
shares dropped 0.2% Thursday.
Spirit AeroSystems,
which makes the MAX 9 fuselage for Boeing, fell 6%.

Alaska said Wednesday it will keep Boeing 737 MAX 9 planes grounded through Saturday, which affects 110 to 150 flights a day. The Federal Aviation Administration suspended all flights with that model of aircraft last Saturday and is still inspecting planes for loose bolts.

Boeing has been working with regulators on instructions for operating the MAX 9 jets with emergency door plugs safely. The plugs are used for certain seating configurations that don’t require all available emergency exits. Plugs aren’t new and have been used for decades.

Jefferies analyst Sheila Kahyaoglu pointed out Wednesday that Boeing has revised its initial instructions after receiving feedback from the FAA.

The “safety over speed [dynamic] likely extends [the] grounding,” wrote Kahyaoglu. Still, she assumes a two-week pause in flights as her base case.

She rates Boeing stock Buy and has a $315 price target for shares. BofA Securities analyst Ron Epstein rates shares Buy as well. His price target is $275 a share.

Epstein is also an aerospace engineer and is trying to help investors parse all the competing ideas about what is wrong with the MAX 9. Epstein wrote Thursday that he believes the door plug blowout was the result of an assembly issue. Still, he advises against jumping to conclusions. He is focused on what investigators have to say about loose bolts found on some door plugs on 737 MAX 9 jets. That could result in some redesign of parts.

U.S. Transportation Secretary Pete Buttigieg said Wednesday that no grounded aircraft will go back into service until they are safe and that there’s no timeline for getting them back in the air.

His comments, along with the FAA’s update, underscore that investors shouldn’t expect the MAX 9 issue to be resolved quickly for Boeing.

One bit of good news for investors amid the turmoil is that the MAX is a relatively low-volume plane. The two-week grounding would cost Boeing roughly $36 million, according to Kahyaoglu. Wall Street sees the MAX 9 grounding costing Boeing between $1 million and $2 million a day in customer compensation.

Boeing is expected to generate some $6 billion in free cash flow in 2024.

Write to Brian Swint at [email protected] and Al Root at [email protected]