Boeing CEO Grilled By Shareholders On 737 Max Issues

Boeing Co BA stock traded mostly flat Monday after CEO Dennis Muilenburg discussed the company’s outlook with shareholders in the wake of its 737 Max issues. The 737 model was grounded earlier this year after two fatal crashes involving its most popular model.

Muilenburg denied accusations that Boeing rushed the 737 Max to market.

“It was a six-year development; 1,600 test-flights of the airplane; 3,700 flight hours of development on the Max, so it was thorough and it was disciplined,” Muilenburg told shareholders on Monday. He said investors and the media should remain patient for the outcome of the ongoing investigations into the crashes.

Muilenburg said Boeing is making steady progress in implementing a software fix for the issues that caused the two crashes and said pilots have already logged 246 hours of test flight time with the new software. Muilenburg said Boeing is working with airliners that have missed out on profits due to the 737’s grounding, but said Boeing is primarily concerned with safety at this point.

Financial Impact

Raymond James estimates Southwest Airlines LUV will take a $260 million revenue hit in the first quarter thanks to the 737 Max grounding. The firm also estimates American Airlines Group Inc AAL will also lose $185 million in the second quarter.

For now, at least, Muilenburg’s position as both chairman and CEO appears to be safe. Shareholders on Monday voted down a proposal to separate the CEO and chairman positions, and Muilenburg said he has no intention of stepping down.

“I am strongly vested in that my clear intent is to continue to lead on safety and quality and integrity,” he said.

Muilenburg told investors Boeing doesn’t need a tragedy like the loss of hundreds of lives to continuously look for ways to improve safety.

“We never claim we have reached the end point. We are continuously, across all of our airplane programs, improving safety every day,” he said.

Analyst Reaction

Boeing shares are down 13 percent since March 1 but are still up 17.9 percent overall year-to-date. CFRA analyst Jim Corridore said Boeing likely won’t be back to full production until 2020.

“As an analyst, we’re looking toward the future, and the future for Boeing is going to be fine as long as they get this right,” Corridore told CNBC of the investigation and software fix.

Despite the overhang, Corridore is bullish on Boeing and has a Buy rating and $450 price target for the stock.

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Photo credit: Jeff Hitchcock, Wikimedia