BofA Securities analyst Ronald J. Epstein hosted Chris Brady, author of The Boeing 737 Technical Guide, to discuss the Federal Aviation Administration's (FAA) mandatory production freeze of Boeing Co's (NYSE: BA) 737 MAX aircraft and the possible implications for MAX 7 and MAX 10 certification process.
As per the analyst, Brady praised the FAA's decision to freeze production rates and noted that an alternative (such as slowing down rates) could have been much worse for Boeing.
The analyst is cautious about the probability of the MAX 7 and 10 aircraft being allowed Time Limit Exceptions (TLE) due to scrutiny related to the door plug incident of Alaska Air Group Inc (NYSE: ALK).
Brady says that, before that incident, the FAA would have granted the TLE to Boeing.
The analyst notes that Boeing has given June 2026 as a reasonable timeframe for fixing the anti-ice system.
The analyst further adds that if certification is delayed until then, Boeing may face the risk of customer loss, as United Airlines Holdings Inc (NASDAQ: UAL) announced that they plan to make up for the shortfall in 737 MAX 10 deliveries.
While it is unlikely that customers will break their contracts and cancel orders, the customer may turn to other aircraft providers in the future due to delivery delays, writes the analyst.
On the other hand, if Boeing is not able to meet its production and delivery commitments, it may face the risk of the customers leaving the contract free of cost, says the analyst.
Given the decision on Boeing's fate is to be taken by Congress, Brady thinks due to its position as a massive U.S. exporter and employer, there is less chance of the decision going against it.
The analyst maintained a Neutral rating at a price target of $225 on Boeing as he expects the company to 'come out of the production slowdown with a more robust production and quality control system.'
Price Action: BA shares are down 0.17% at $205.12 on the last check Monday.