Boeing's fix for 737 Max may take three to six months, Bank of America predicts

Joshua Roberts | Reuters
An American Airlines Boeing 737 MAX 8 flight from Los Angeles lands at Reagan National Airport shortly after an announcement was made by the FAA that the planes were being grounded by the United States in Washington, March 13, 2019.

The software fix that Boeing said it is working on for its 737 Max jets could take as long as six months, according to Bank of America.

Boeing earlier this week said a software change is in the works as well as updates to pilot manuals and training and the Federal Aviation Administration said it would mandate those changes by April.

"Once Boeing identifies the issue on the 737 MAX, the most likely scenario, in our view, is that the company will take about 3-6 months to come up with a fix and certify the fix," the bank's analyst, Ronald Epstein, said in a note Thursday.

The FAA on Wednesday grounded all Boeing 737 Max jets in the U.S., citing links between two fatal crashes. The turnaround came after dozens of countries grounded the planes, tanking the stock more than 11 percent this week, on pace to post its biggest weekly decline since 2008.

Bank of America kept its buy rating and $480 price target on Boeing as the bank believes the investigation would have a "definitive timeline" as the recovery of the black boxes is already underway. This would significantly reduce the uncertainty around Boeing and the 737 Max model, the bank said. The two black boxes from the Boeing 737 Max 8 that crashed Sunday in Ethiopia were being taken to Paris for investigation.

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"We would expect Boeing to continue to produce the 737 at the current rate of 52 per month in order to minimize disruption in the supply chain. Boeing may have to carry inventory in its balance sheet of about $5.5bn per quarter. We would expect working capital to improve as the aircraft begins delivery again," Epstein said.

The bank predicts that the rentals Boeing would have to pay for alternative airlines would cost the company $500 million or 88 cents per share in the first quarter.

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