Rock and Roll...
Carry me back, carry me back
Carry me back, baby, where I come from.
- Page, Plant, Jones. Bonham (Led Zeppelin), 1971
Maybe. The news broke while most of you were sleeping. It appears that EASA, which is the European Union Aviation Safety Agency, is now going through the necessary final document reviews ahead of what would be a draft airworthiness directive to be issued sometime in November. Then comes four weeks of public comment. The directive is expected to state that changes made to Boeing's (BA) 737 MAX passenger jet have made this airplane safe enough to return to the skies over Europe. Think that's a long time to wait? The aircraft has been grounded since March of 2019. That's a long time. Even if there has now been little demand for air travel globally for the past six to seven months now.
Why is this a big deal? Recall that just recently, the FAA in the U.S., sent out a draft report on a revised training regimen regarding procedures for flying the 737 MAX. There has long been a bid placed beneath the stock over recent months as many have believed that there could be a globally coordinated effort to get this aircraft recertified prior to year's end. While positive vibes from the FAA are welcome here, an approval from a major region's regulator such as EASA is actually of more importance as much of the world considers the FAA's reputation to be damaged due to what happened during the original certification process for this jet.
"It" won't be all over for quite some time. Even after EASA gets this aircraft back in the sky, the agency is likely to demand the development of a "synthetic sensor" that would get the craft to a higher level of safety. This could be a two year process all by itself. Then, there's the whole of getting air travel back to where it was. Does that ever even happen? Will our legislators even try to get more money into the airline industry. Then if they do, will folks fly again? Will it even be safe? From an infectious disease perspective.
If you read Jim Cramer often, then you know that next year, according to Goldman Sachs (GS) , should be a turnaround year for free cash flow, and that the year 2023 is seen as the "normalized" year. Until then, this could be a slow growth industry, and Boing may have to rely more upon selling satellites to the Space Force and fighter jets to nations still in the mood to spend on defense such as Finland. I would think that defense spending may take a back seat for many economically damaged nations unless there is an imminent or persistent threat.
Boeing has obviously cleaned up the firm's act. There will always be a need for a certain level of aerospace and defense spending, though I expect a bit less of this to our immediate front than to our immediate past. Air travel? Heck, who wants to get on an airplane these days? I drove whenever possible way before that was the norm, even on trips that take multiple days. Now, with the threat of shared air with hundreds of folks I don't know? Yeah, that's a hard pass. Maybe some other time.
That said, folks will travel. Business travel likely never recovers as office workers have learned to be quite productive from afar. Many of you have gone to your last convention. I'm sorry. That's gone. Having to visit a client is one thing. Having fun on the company's dime is over for good. Expense account? LOL.
Note that BA shares retraced just about 61.8% of the March through early June rally as the stock hit a bottom in late September.
Readers will now see that the shares trended lower in a June through late September series of lower highs and lower lows. Then the lows abruptly head in a northerly direction for the month of October. This indicates to me an imminently violent move in price. Given the recent news, and a dash of fiscal help for the airlines (maybe too much to ask), the name is ripe for speculation.
I can sanction an entry level position based on spec. 2023 is a long way to go for a normalized year, but trade the name? Why not? Target Price: $195.