Despite optimism over FAA comments about return to service, which sent the stock up to the highest level since early December, the narrative of mid-year flight is now starting to crack.
Randy Tinseth, vice president of commercial marketing at Boeing, painted a wonderful story for Bloomberg earlier this week about how the troubled 737 Max would return to service by mid-year.
Tinseth is paid by Boeing to tell happy stories, not sad ones. His mid-year narrative of a return to service was a ploy by the company to keep investors from dumping shares.
However, the narrative is now coming apart at the seams! That is because, on Thursday morning, Southwest Airlines extended cancellations of Max flights from June to now early August, reported Reuters.
Southwest, the largest operator of Max jets, said all flights with the aircraft were slated to return by June 6, have now been pushed back to August 10.
The delay will remove 371 weekday flights from its peak-day schedule of more than 4,000 daily flight – during the carrier's summer travel season, could affect profitability and lead to earnings revisions on the year.
Boeing CFO Greg Smith, on Wednesday, said the company would abandon forward guidance as long as the planes remained grounded and production halted.
Smith said when production of the planes restarts (still no clear timetable) -- it would take two years to get the volume back to the pre-grounding level of 57 planes per month.
And to make matters worse, the grounding of the planes and image deterioration of the company led to zero new orders for jets in January.
None of this is surprising, as it appears the return to service continues to be pushed further out, which begs the question if the problem isn’t just situated with the Maneuvering Characteristics Augmentation System (MCAS) flight control system, but maybe rather the entire design of the jet has a flaw.
Boeing trading at the highest level since early December. Glad they fixed that 737 MAX mess— Hipster (@Hipster_Trader) February 12, 2020
This could only mean one thing for Boeing shares: back to the 300 level.
How long until the grounding and production halt starts eating into Q1 GDP figures?
In an interview where he claimed the economy was doing great, Steve Mnuchin said the GDP might be lower by 50 basis points due to Boeing’s issues with the 737 max pic.twitter.com/yU4A5AWtFn— Acyn Torabi (@Acyn) January 12, 2020