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Boeing : Trials Near for Boeing 737 MAX Fix -- Update

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06/16/2019 | 02:25pm EDT

By Andrew Tangel, Alison Sider and Andy Pasztor

PARIS -- The Federal Aviation Administration could start flight trials of Boeing Co.'s proposed 737 MAX safety enhancement as early as this week as the plane maker's chief executive vowed to restore public confidence in the jet.

Boeing Chief Executive Dennis Muilenburg said he was disappointed in the company's communication lapses surrounding the MAX and promised greater transparency to rebuild public trust in the plane and company.

Boeing has some work to do in fixing public perception. A Wall Street Journal/NBC News poll shows that 25% of U.S. fliers said they would try to avoid flying on a MAX, with a further 38% saying they weren't sure or had no opinion. Of 774 people polled between June 8 and June 11, 37% said they would travel on the plane as readily as any other once regulators allow the aircraft to return to service.

"We're going to bring a MAX back up in the air that will be one of the safest airplanes ever to fly," Mr. Muilenburg told reporters Sunday on the eve of the Paris Air Show, the aerospace industry's flagship gathering this year. "But we also know it will take time rebuilding the confidence of our customers and the flying public, and this will be a long-term effort," he added.

Boeing's effort to repair its reputational damage is taking on a greater sense of urgency with the FAA preparing to take an important step to return the MAX to service by late summer. Barring last-minute snags, the agency may start flight testing the MAX as early as this week to assess whether an upgrade developed by the U.S. plane maker fixes a flight-control system implicated in two fatal crashes, according to people familiar with the planning.

The flights trials would be a crucial step to return the MAX to the sky after it was idled world-wide more than three months ago over safety concerns. Regulators grounded the plane in March after it was involved in the two fatal accidents overseas within five months, killing 346 people. It isn't clear when the plane will return to service.

Mr. Muilenburg told reporters the company was making progress with getting the MAX cleared again to fly passengers, but that the schedule to do so remains uncertain. "We haven't given the airlines a specific timetable," he said, adding "this will all be governed by safety."

Mr. Muilenburg said the communications lapses involving the MAX wouldn't be repeated. The company has been reviewing the design of the MAX and how the company handled the aftermath of the two crashes. Mr. Muilenburg said no personnel action has been taken as a result of the accidents.

Getting the FAA's endorsement is only one of the hurdles Boeing and airlines face in returning the plane to regular service. Foreign regulators also have to sign off on the fix.

The long-anticipated certification tests, the people said, have been planned with the support of European and Canadian regulators. They could take a week or more to complete, according to one person briefed on the anticipated timeline, and would be followed by additional weeks of FAA experts analyzing and formally documenting the test results. Engineering or handling problems uncovered during the tests, these people emphasized, could extend that timeline.

The start of FAA-run airborne testing could prepare for the MAX to potentially return to U.S. airspace around late summer. Boeing previously said it completed extensive flight tests of its own and submitted the results to the FAA.

At an international safety conference in Germany last week, senior FAA officials told foreign regulators, including leaders of the European Union Aviation Safety Agency, that certification tests were imminent, according to a person who attended the briefings.

On Saturday, an FAA spokesman said "we have no updates to provide at this time." He added that "we continue to work with Boeing to gather the necessary data we need to ensure the aircraft is safe to return to service."

EASA is performing an independent safety review of the MAX flight-control system that is expected to stretch at least into July, and depending on the early conclusions, could take until September to complete, according to two European government officials familiar with the details.

Returning the several hundred MAX planes grounded globally to the sky is a challenge that cuts across the aviation industry. Engine supplier CFM International, a joint venture of General Electric Co. and Safran SA, will have about 250 technicians working closely with airlines to get each plane ready to fly again, a process that can take several days, said Allen Paxson, executive vice president for the engine maker. That involves such steps as removing protective covers, changing oil and other fluids and running engines on the ground.

While the fleet is idled, CFM is pulling forward some scheduled maintenance to get equipment in pristine condition. "Our teams are going to be on site with those airplanes to make sure that everything goes smoothly," Mr. Paxson said.

But airlines may have the hardest task: selling the plane's safety to customers. It is a dilemma for carriers that typically focus marketing on prices, reliable service, or the allure of a vacation rather than safety.

American Airlines Group Inc. and Southwest Airlines Co. have struck the plane from schedules through Labor Day. United Continental Holdings Inc. and Southwest have said they would let passengers on MAX flights switch to other itineraries for free once the plane returns to service.

Jamie Hawley, who owns a business in the fishing industry, said he wished Southwest, his preferred airline, had grounded the plane more quickly before the FAA ordered it in March.

"I can't say it's going to be an airplane I will readily want to board, and given the option, I would definitely switch off of it," he said.

Mr. Muilenburg promised Boeing would be more transparent after regulators, airlines and pilots faulted the aerospace giant for not being forthcoming with key information about the MAX.

American's Chief Executive Doug Parker said last week that there likely will be a period after regulators certify the plane but before it returns to commercial service, when the airline will put executives and crew members on MAX flights to demonstrate its safety. United CEO Oscar Munoz has said he would be on United's first MAX flight after the plane returns. Southwest CEO Gary Kelly has said he would "love" to be on one of the first MAX flights.

It is an unusual role for carriers. Airline ads promote "comfort, fares, destination and service," said John Lampl, a former communications executive at British Airways. "Airlines never advertise safety."

Ryan Green, senior vice president and chief marketing officer at Southwest, said the airline likely won't craft a national marketing campaign around the relaunch of the MAX. "Really, it's going to be less about what we say and more about how we act," he said. "We're prepared for all different types of reactions."

Some travelers have said they wouldn't hesitate to fly on the plane.

Daniel Joseph, a retired transportation worker outside of Chicago who owns Boeing shares, said the manufacturer has been "very standoffish" in communicating with the public, but appears to have fixed the plane's problems to his satisfaction.

"As far as the safety of the plane, I have no qualms," he said.

But travel-industry analyst Henry Harteveldt found that nearly half of the 2,000 people he surveyed would pay $80 more round-trip to avoid a MAX. Some 44% of respondents to that survey said they would take a flight at a less convenient time and more than 40% of both business and leisure travelers said they would opt for a connection over a nonstop to avoid flying on a MAX.

Seasoned business travelers are concerned, too. Nearly 60% of 155 corporate travel managers polled by the Global Business Travel Association said their employees had expressed at least some concern about flying on a MAX. Two-thirds of the travel managers said there was a chance employees would change travel plans to avoid the MAX -- another headache for airlines that go to lengths to keep lucrative corporate clients satisfied.

--Robert Wall contributed to this article.

Write to Andrew Tangel at Andrew.Tangel@wsj.com, Alison Sider at alison.sider@wsj.com and Andy Pasztor at andy.pasztor@wsj.com

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Financials ($)
Sales 2019 101 B
EBIT 2019 11 272 M
Net income 2019 9 805 M
Debt 2019 5 898 M
Yield 2019 2,25%
P/E ratio 2019 20,98
P/E ratio 2020 14,53
EV / Sales 2019 2,03x
EV / Sales 2020 1,69x
Capitalization 199 B
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Number of Analysts 25
Average target price 421 $
Spread / Average Target 19%
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Dennis A. Muilenburg Chairman, President & Chief Executive Officer
Jenette E. Ramos Senior Vice President-Supply Chain & Operations
Gregory D. Smith CFO, EVP-Corporate Development & Strategy
Theodore Colbert Chief Information Officer & SVP-Data Analytics
Gregory L. Hyslop CTO, Senior VP-Engineering, Test & Technology
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