Boeing could need between three and six months to fix and install new software on its 737 Max aircraft, following the move by the U.S. and other countries to ground the planes this week. The repairs could cost Boeing at least $500 million and delay deliveries of new planes on order, analysts estimate.
President Trump grounded all of Boeing’s 737 Max aircraft in the U.S. Wednesday, after the crash involving one of the planes Sunday in Ethiopia, killing all 157 people on board. Last October, 189 people died after another Boeing 737 Max jet operated by Lion Air plunged into the Java Sea off the coast of Indonesia. The pilots of that flight reported that the plane’s nose kept pitching down dozens of times before it crashed.
In a research note, Bank of America analyst Ronald Epstein said he sees a “definitive time line” for the fixes after the investigation into the latest crash is finished. “Once Boeing identifies the issue on the 737 Max, the most likely scenario, in our view, is that the company will take about three to six months to come up with a fix and certify the fix,” Epstein wrote Thursday, according to Investor’s Business Daily.
Another analyst, Ken Herbert of Canaccord Genuity, said Boeing could end up spending about $500 million to fix and install new software. And that doesn’t include the costs the aerospace company will face, as deliveries of new aircraft are delayed to focus on the software changes.
“We view the risk as less about near-term expenses, but the full year 737 delivery estimates for Boeing could be impacted,” Herbert said in a research note. “Moreover, the larger risk is the reputational concern for Boeing.”
On top of that, there are the potential costs for compensating airlines for the grounded aircraft. Norwegian Air, for example, is demanding compensation from Boeing for revenue lost from the grounded planes. JPMorgan analysts estimated that those compensation costs could add up to another $115 million per month.
Boeing’s stock has fallen 12% this week, although it’s still up 16% year to date. Some analysts have argued that the stock is oversold following this week’s declines. Jeffries analyst Sheila Kahyaoglu said Boeing’s order book remains “quite strong,” while Carter Copeland of Melius Research said that, overall, this week’s selloff in Boeing shares is overdone.