Boeing Co. (BA) - Get Report shares traded at a six-month low Monday after Federal regulators called on the planemaker to replace defective parts on its flaghship 737 aircraft before they can be cleared to return to service following two deadly software-related crashes over the past eight months.
The U.S. Federal Aviation Administration said Sunday that so-called 'slats' on both current 737 MAX jets and the plane's earlier version, which assist in takeoff and landing, "may be susceptible to premature failure or cracks resulting from the improper manufacturing process." The slats, Boeing said, could be replaced within one or two days once alternate parts are received from suppliers, and identified around 20 737 MAX airplanes as needing immediate replacement. Around 159 more, Boeing said, will need to be checked "to ensure a thorough assessment.
"One batch of slat tracks with specific lot numbers produced by a supplier was found to have a potential non-conformance," Boeing said in a statement. "If operators find the parts in question, they are to replace them with new ones before returning the airplane to service."
"Boeing is now staging replacement parts at customer bases to help minimize aircraft downtime while the work is completed," the statement added. "Once the new parts are in hand, the replacement work should take one to two days. Boeing will also issue a safety service bulletin outlining the steps to take during the inspections."
The FAA said it will put out an "Airworthiness Directive" to call for service by Boeing and to "identify and remove the discrepant parts" from service within 10 days.
Boeing shares were marked 1.6% lower Monday and changing hands at $336.04 each, the lowest for the Dow component since January 8.
Last week, International Air Transport Association director Alexandre de Juniac cautioned that the planemaker's grounded 737 MAX may not return to full service before the end of the summer, while CEO Dennis Muilenburg told an investor conference in New York hat the company was focused on "safely returning the MAX to flight" and stabilizing its production rate at 42 units per month.
The FAA itself has said there would be no near-term clearance for the 737 MAX following meetings with national and international regulators in Forth Worth, Texas, on May 23 that focused on Boeing's recent overhaul of its MCAS flight software system.
Boeing officially acknowledged that its software system played a role in two recent deadly 737 MAX 8 accidents.
The planemaker said the preliminary report into the cause of Ethiopian Airlines Flight 302's fatal crash on March 10, as well as the Lion Air 610 disaster in Indonesia in early October, which took the lives of 189 people, were caused by activation of the Maneuvering Characteristics Augmentation System, or MCAS, in response to "erroneous angle of attack information" from a broken sensor.
It also posted weaker-than-expected first quarter earnings and pulled its earnings guidance for the rest of the year until it has clarity on the fate of its 737 MAX program, which has seen 300 planes grounded in markets around the world.