Quality issues at Boeing (NYSE: BA) are disrupting the schedules of airline customers. Shares of the aerospace giant are down nearly 5% as of 1 p.m. ET as investors ponder the long-term impact on Boeing.
Airlines forced to fly in reverse
Boeing's once pristine reputation as an aerospace manufacturer has been badly bruised by a series of mishaps over the past five years. The company's 737 MAX, which was once predicted to break aviation sales records, was grounded for 18 months after a pair of fatal accidents and subsequent engineering fixes. Other models, including the 787 Dreamliner and 777X, have either been delayed or temporarily grounded because of concerns.
More recently, a near-disastrous issue involving a 737 operated by Alaska Air Group (NYSE: ALK) led to a Federal Aviation Administration-mandated production slowdown and delays in certifying new designs.
At a Wall Street conference Tuesday, various airlines provided details about how Boeing's issues have been impacting their operations. SouthwestAirlines(NYSE: LUV)stock is down big after the airline said it expects to take significantly fewer deliveries in 2024 than it had previously thought -- and has to rethink full-year guidance.
Alaska Airlines said that after a challenging start to the year following the grounding of much of its Boeing fleet, all its planes are now airborne again. However, full-year capacity expectations "are still in flux due to uncertainty around the timing of aircraft deliveries as a result of increased Federal Aviation Administration and Department of Justice scrutiny on Boeing and its operations."
United Airlines Holdings has said it's pausing pilot hiring because it will not be able to expand its fleet as quickly as it had thought heading into 2024.
Is Boeing stock a buy?
The bull case for Boeing involves the company getting its act together in the months to come, winning back FAA confidence, and ramping up production in the second half of the year. That would minimize the delays to customers and indicate that Boeing is on the right path toward restoring its operations.
But with the mistakes piling up, there's little reason for confidence that Boeing will quickly be able to make a fresh start. And the airline commentary highlights the reputational damage that will not be easy to fix: Given what has happened in recent years, will airlines have confidence in choosing Boeing planes over Airbus in future procurements?
At best, Boeing faces a long and arduous turnaround from here. Given the risks and the delayed payoff, there's no reason for investors to rush in.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Alaska Air Group and Southwest Airlines. The Motley Fool has a disclosure policy.
