boeing-has-a-safety-issue-why-the-stock-is-gaining.

Boeing Has a Safety Issue. Why the Stock Is Gaining.


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The nose of a Boeing 737-A jet.


Olivier Douliery/AFP via Getty Images

The Federal Aviation Administration will look into how Boeing handles safety-related communications with it, but the stock isn’t reacting, for a good reason.

The review, reported late Monday by The Wall Street Journal, comes after a small survey, conducted by the FAA, found that about a third of respondents at the company reported difficulties in being transparent with the regulator.

Boeing (ticker: BA) stock was up about 1.3% in morning trading Tuesday. The

S&P 500

had risen about 0.3%. The

Dow Jones Industrial Average

gained 0.2%.

Safety is paramount in the aerospace industry, but the stock’s lack of reaction makes some sense. Boeing has been dealing with safety issues for about two years following the worldwide grounding of the 737 MAX jet in March 2019.

The MAX is back in most countries throughout the world. But the crashes that resulting in its grounding, and the recertification process, led to increased Congressional scrutiny, new laws regarding plane certification, and a change of management at Boeing. Former CEO Dennis Muilenburg was succeeded by current CEO Dave Calhoun. And while all that was happening, Boeing created a board-level committee dedicated to safety oversight.

All that means that to some extent, the FAA letter is backward looking for investors. A lot of safety news is already reflected in Boeing’s stock price. Shares are down about 50% from their all time high.

Airbus

(AIR. France) stock, for comparison, is down about 20% from its peak.

What matters about the letter is how Boeing’s new management reacts to it.

“We take these matters with the utmost seriousness, and are continuously working to improve the processes we have in place to ensure the independence of the [FAA-related] members,” said Boeing in an emailed statement. The company acknowledged receiving the letter, but declined to make it public. The FAA wasn’t immediately available for comment.

Boeing added in its statement that the company has worked hard to build a culture of open communication and that it has told the staff that employees charged with communicating directly with the FAA must be accorded the same respect and deference the company gives the regulator itself.

Barron’s recently wrote positively about Boeing stock, believing that if Calhoun took the right steps—including changing the company’s culture to re-emphasize engineering excellence—the shares could gain. That article appeared earlier in August. Shares are down about 6% since then.


Airbus

shares are off about 3%. News about the Delta variant of Covid-19, and concern about how if could affect travel and demand for jets, appears to be weighing on both stocks.

Write to Al Root at allen.root@dowjones.com