Two important Boeing (NYSE:BA) customers are rallying behind the 737 MAX. That’s helping to propel Boeing shares higher on Thursday, with the stock up 7.5% as of noon EST.
The long-troubled 737 MAX is airborne again, 20 months after it was grounded after a pair of fatal crashes. That’s a big step forward for Boeing, but now the aerospace manufacturer has to rebuild public confidence in the plane and sell it in the middle of a pandemic.
American Airlines Group is leading the way in helping rebuild public confidence. The airline will be the first to fly the 737 MAX again, with the plane in its late-December schedule, and on Wednesday cohosted a media flight with Boeing from Dallas to Tulsa.
American has had 260 mechanical specialists divided into three shifts working around the clock to prepare its fleet of 737 MAX planes for service, Reuters reports.
Boeing also got positive news in its effort to sell additional airframes. Irish discounter Ryanair on Thursday placed an order for 75 additional 737 MAX planes with a total value of up to $9 billion, at list prices. Ryanair is already a large 737 operator, and now has 210 MAX planes on order.
Boeing has had a lot of time to prepare for the 737 MAX return, and what we are seeing now is a well-orchestrated campaign to restore the confidence of both fliers and investors in the plane. It’s a good first step, but still too early to declare victory.
Boeing has delivered 111 planes so far in 2020 after delivering 380 in 2019. That’s down from more than 800 in 2018, and the drop is a direct result of the 737 MAX grounding. The company built more than 400 of the planes while it was grounded, and is now scrambling to find homes for those jets even as airlines cut back on growth plans due to the pandemic.
Ryanair most likely got a very favorable price well below list for its new order, and Boeing is likely to do a lot of discounting in the months to come to move metal. Even if it is successful it is likely not to see production of the jet normalize until 2022.
These are important steps, but we’re still in the very early days of a recovery. Investors should remain cautious for now.