FAA just ordered further inspections of Boeing 737s

By:
on Jul 8, 2024
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  • FAA wants 2,600 of Boeing's 737 planes to be inspected.
  • It is concerned that oxygen masks on those may malfunction.
  • Boeing stock is currently down well over 25% year-to-date.

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FAA – the Federal Aviation Administration of the United States ordered inspections of 737 planes on Monday.

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In total, Boeing Co (NYSE: BA) will have 2,600 of its narrow-body airliners inspected.  

Shares of the Virginia-based behemoth are currently down well over 25% versus the start of 2025.

Why did the FAA order Boeing 737 inspections?

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FAA attributed today’s move to concerns that passengers on the aforementioned planes may fail to use oxygen masks during an emergency.   

There have been multiple reports of oxygen generators “shifting out of position” in the passenger service units (PSUs) of the 737 Max. Such a malfunction could deprive passengers of supplemental oxygen in a depressurization event, the agency added.

Boeing stock is still up close to 100% versus its pandemic low at writing.

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Boeing’s response to the FAA

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On Monday, Boeing agreed that a new adhesive it introduced on restraining straps of its 737 planes in 2019 could allow the oxygen generators to shift as much as three-quarters of an inch but added:

We have gone back to the original adhesive for all new deliveries to ensure the generators remain firmly in place, as intended.

The defence and aerospace giant also confirmed that inspections of both in-service as well as the undelivered planes did not discover any units that failed to serve their purpose.

Still, it told airlines today to update that part of the restraining straps on the 737 planes, including the upgraded NG variant of that aircraft.

BA pleaded guilty to criminal charges today

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The news arrives a day after Boeing Co pleaded guilty in a criminal case pertaining to two back-to-back fatal crashes of its 737 Max within six months.

BA will pay $243.6 million in fine and invest another $455 million in safety as part of that guilty plea.

Boeing stock is slightly in the green because now that the criminal case is behind it, the multinational will be able to “go to the next step which is getting a new chief executive and then getting the 737 production ramp up,” as per Tony Bancroft (portfolio manager at Gabelli Funds).

The $114 billion giant based out of Arlington County, Virginia is scheduled to report its quarterly financial results in the final week of July. Consensus is for it to lose $1.0 a share versus 82 cents per share a year ago.

Ahead of the company’s earnings release, Wall Street rates its shares at “overweight” and sees upside in them to $213 on average.

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