(Sept 30): The US Federal Aviation Administration (FAA) is working to understand the severity of a new software glitch facing Boeing Co’s best-selling 737 Max family of jets — a determination that risks disrupting aircraft deliveries and hitting the plane-maker’s bottom line. 

The agency plans to convene a so-called corrective action review board (CARB) consisting of a panel of FAA experts to evaluate whether the software problem poses a “safety of flight issue”, meaning it could endanger the aircraft or the people on board. 

While CARBs are a standard part of the FAA’s safety review process, the consequences could be significant depending on the outcome. Should the arrival of the Max 7 and 10 be further delayed, it would hamper Boeing’s efforts to generate free cash flow and pare down over US$45 billion (RM184 billion) of debt. Together, the two aircraft represent about a quarter of Boeing’s overall commercial backlog, a sizeable chunk of yet-to-be-realised cash.

The board will decide whether an unsafe condition exists and what actions, if any, are required. In serious situations where the FAA determines an issue poses an immediate danger to pilots, crew or the flying public, the FAA can publish an emergency airworthiness directive laying out corrective actions for aircraft owners and operators to take. 

The FAA hasn’t yet said when it will convene the CARB or how long it will be before a final conclusion is reached. The European Aviation Safety Agency said it is monitoring the situation and is prepared to act accordingly, but won’t participate in the CARB directly. 

Investors are meanwhile seeking to parse the impact of the agency’s review. Until the software glitch was revealed over the weekend, Boeing looked poised to gain certification for the long-delayed Max 10, with the final nod only days or a few weeks away.

The smaller Max 7 variant was certified in August. But the 737-10 in particular, the largest of the popular narrowbody family, is crucial for Boeing with orders already exceeding 1,500 aircraft, and arch-rival Airbus SE gaining more ground with its stretched A321neo models.

Boeing stock fell 6.9% in trading on Monday following the revelation that the regulator would delay certification of the Max 10. 

RBC Capital Markets analyst Ken Herbert said he sees “incremental risk” to Boeing’s 2026 free cash guideline of US$1 billion to US$3 billion, which Boeing chief financial officer Jay Malave had already warned this month could be “a little bit less likely” to exceed US$2 billion as deliveries lag.

Some of Boeing’s customers struck a more optimistic tone. Ryanair Holdings plc’s chief executive officer Michael O’Leary, Boeing’s biggest operator in Europe, said on Tuesday that he didn’t think the issue is significant or would cause a substantial delay. Similarly, Alaska Air Group Inc CEO Ben Minicucci said on CNBC on Tuesday that he wasn’t “overly concerned”. 

Financial risk aside, chief for Boeing is the potential reputational fallout. The company has been working to rebuild trust with the public and regulators following two fatal crashes of its 737 Max aircraft and widespread manufacturing and quality lapses uncovered after a door-sized panel blew off one of the jets in 2024. 

Bank of America Corp analyst Ronald Epstein predicted that the FAA delay could span six to nine months as the agency investigates the software issue, estimating a potential US$500 million to US$750 million hit to free cash flow. 

“The financial impact is manageable for Boeing, but the reputational damage brought about by the 737-Max crisis represents an enduring uphill battle even for issues of a much smaller magnitude,” Epstein said in a note. 

The public disclosure of the software glitch comes at an particularly inopportune time for Boeing. The company is working to avert a potentially costly strike of its Seattle-area technicians and engineers, many of whom may work directly on these kinds of issues. 

Boeing in August notified all 737 operators about the software problem, which can cause an automated navigation feature to fail during specific landing scenarios. The company said the glitch can occur when a pilot needs to abort a landing attempt, forcing the autopilot into a simpler level of automation for pitch control, which increases pilot workload compared to the standard mode used.

A representative for GE Aerospace, which supplies the affected software, said the company is “working closely with Boeing and will support the FAA’s evaluation”.

The software issue drew quick comparisons to the faulty flight control software, known as the Maneuvering Characteristics Augmentation System — or MCAS — that gained notoriety after it was linked to the 2018 and 2019 fatal Max crashes. 

Yet officials have been quick to differentiate between the two issues.

FAA administrator Bryan Bedford told reporters on Monday that unlike with the MCAS, the pilots “remain in control of the airplane”. He said with this latest issue, the question is really how much extra work the glitch puts on pilots and “how we feel about that”, he said. 

Bedford said the agency still hasn’t determined whether there’s a safety of flight issue but that it will be delaying certification of the 737 Max 10 until the FAA makes that call. 

Uploaded by Tham Yek Lee