Boeing shares bounced late on Friday after US regulators said the company was making progress in the effort to return its grounded 737 Max to the skies.
The change of tone in a statement from the Federal Aviation Administration sent the Chicago jet maker’s stock to a close of $323.05, up 1.7 per cent on the day and erasing the remainder of the hit it suffered earlier this week when Boeing said the Max might not fly again until mid-year.
The FAA said that while there was no set timeframe to return the aeroplane to service, “the agency is pleased with Boeing’s progress in recent weeks toward achieving key milestones”.
Regulators worldwide grounded the Max in March following the second of two fatal crashes over five months and Boeing has been working since on a software fix and new pilot training procedures to restore confidence in its safety.
The company had been plagued with setbacks and bad headlines in recent weeks which had sent its stock to a one-year low. The company reversed position to recommend expensive simulator training for pilots earlier this month, released shocking internal messages from Boeing employees, and discovered an additional software glitch in the Max.
Before the FAA’s statement on Friday, Boeing’s shares had been down another 2 per cent on reports that the company could cut production of its 787 Dreamliner wide-body jet, from 12 a month to 10. The company had already said in October it would cut production of the aircraft from 14 a month to 12 in late 2020 and hold that rate for two years.
The possibility of another cut was first reported by Bloomberg. A Boeing spokesman said the company maintained “a disciplined rate management process taking into account a host of risks and opportunities. We will continue to assess the demand environment and make adjustments as appropriate in the future.”
The market for wide-body, twin-aisle planes has weakened in the past 18 months for both Boeing and European arch-rival Airbus. Boeing, which had counted on orders from Chinese airlines, saw its market position further undermined by the trade war between the US and China.
Boeing is relying on the 787 to bring in cash while the 737 Max is grounded. Although it sells fewer Dreamliners, the plane can seat up to 336 passengers and, at $300m, it retails at three times the cost of a 737. (Aeroplanes are sold at substantial discounts.)
Cutting the production rate to 10 a month would cost the company roughly $3.5bn annually, said William O’Neil + Co analyst Andrew Kessner. Boeing, which will report 2019 earnings next week, had $101bn in revenue in 2018.
“If they do this cut, that is a meaningful hit to the long-term outlook of the company,” Mr Kessner said.