Boeing's 737 MAX is to take to the skies once more after the go-ahead from the FAA, fueling the stock's rise.
"C-FTJV Air Canada Boeing 737 MAX 8" by Liam Allport is licensed under CC BY 2.0
Shares of Boeing (BA) have continued to climb this month, rising over 33% from their October 30th closing of $144.39, and have continued to climb this week.
There are a few key events contributing to this rapid rise in the stock:
1. October’s quarterly report unveiled further job cuts, for the airline as well as a smaller-than-expected loss. Losses were $1.39 a share, beating out expected losses of $2.47 a share. Headcount will also shrink by 11,000. Even in one of the worst markets for travel stocks in decades, investors appear to be confident in the company’s long-term prospects.
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2. With multiple COVID-19 vaccine trials reporting positive results, investors are starting to eye a post-coronavirus world where pent-up demand for travel will see millions taking to the skies. With Boeing still the market-leader in US commercial aircraft, expect that demand to trickle down to the airplane manufacturer’s bottom line.
3. With the FAA clearing the 737 MAX to fly after two fatal crashes, the plane is expected to become a hot commodity once more. The planes have been grounded for 20 months while Boeing made changes to software, design, and training to reassure customers, and airlines are eager to get them flying once more.
The 737 MAX has a longer range and burns 14% less fuel than Boeing’s previous 737 NG, making it a strong choice for airlines’ long-distance and trans-continental routes. Alaska Airlines and Ryanair are both expected to take MAX deliveries in a matter of months and US passengers could be prepared to fly in already-delivered planes as early as late December.
That’s not to say Boeing’s rapid rise will continue. These vaccines are still awaiting FDA approval and the 737 Max still needs clearance from air safety regulators internationally including Transport Canada, Civil Aviation Administration of China, and the European Aviation Safety Agency.
Meanwhile, it may be an uphill battle for passengers to board a plane again after COVID-19, not the least on an airplane model that dominated the headlines following the crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302.
Positive news in the last month has allowed Boeing’s stock to soar. The real question is how long will it stay up?
