Boeing Faces FAA Scrutiny - Analyst Blog

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Troubles for aerospace major The Boeing Co. ( BA ) seem to see no end with federal records revealing that the regulators had warned of cracking and corrosion problems on Boeing 777s.   

Last week, the Federal Aviation Administration (FAA) had issued an Airworthiness Directive (AD) to inspect U.S. registered 777 planes in operation for cracking and corrosion in the fuselage skin. The directive was initially drawn in September last year and approved in Feb 2014. This was due to take effect on Apr 9, 2014. Hence, this revelation appeared before the Malaysia Airlines flight MH370 disappeared.

The cracking and corrosion problem on Boeing 777s could lead to rapid decompression and mid-air break-up. The FAA ordered checks on many Boeing 777s after receiving a report of cracking in the fuselage skin underneath a satellite antenna from one operator. This revelation is particularly telling in the light of the mysteriously vanished Malaysia Airlines' Flight 370, a Boeing 777 aircraft, with desperate searches still in progress.

The directive was issued on all Boeing 777-200, -200LR, -300, -300ER, and -777F series airplanes. However, Boeing claimed that the missing Malaysia Airlines flight - the 777-2H6/ER - did not have that antenna installed.

That said, the Boeing 777 aircraft is considered as one of the company's most popular and top-selling wide-body jets with a flawless safety record. In its 19 years of service, the plane met with only one critical accident.

However, just as Boeing is trying its level best to iron out wrinkles, it seems that for each effort, more creases are popping out in its place. On Mar 7, Boeing announced that about 40 of its 787 Dreamliners were found with possible hairline fractures in the wings on the production line following a change in a supplier's manufacturing process.

The fallout of a manufacturing defect by Boeing's wing manufacturer, Mitsubishi Heavy Industries Inc. of Japan, could further delay production of the 787 Dreamliner and hit Boeing's first-quarter 787 delivery target. Yet, the defect in the 787 planes has been noted before delivery to clients and the hairline cracks have not been found in the planes in use.

The company's most precious 787 Dreamliner was marred by glitches from the very beginning. Following its delayed launch, the two battery overheating incidents in Jan 2013 grounded the entire fleet of 50 Boeing 787 airplanes. However, in Apr 2013, Boeing received the green light from FAA for the 787 Dreamliner's redesigned battery.

Boeing currently carries a Zacks Rank #3 (Hold). There are other companies in the sector that appear more promising and are worth accumulating now. These are Zacks Ranked #1 (Strong Buy) Huntington Ingalls Industries, Inc. ( HII ), and Zacks Ranked #2 (Buy) Lockheed Martin Corp. ( LMT ) and Northrop Grumman Corp. ( NOC ).



BOEING CO (BA): Free Stock Analysis Report

HUNTINGTON INGL (HII): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BA , HII , LMT , NOC

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