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The final report about the Oct. 28, 2018 crash of a Boeing 737 MAX jet operated by Indonesia’s Lion Air is out—more information investors can use to understand the jet maker’s MAX crisis, but not the kind of news that might push the stock out of its postcrash trading range.
Indonesian investigators said maintenance and pilot issues played a role, but they also laid blame squarely on the plane’s design.
It can be surprising—or even jarring—when Boeing (ticker: BA) stock doesn’t drop on crash news. In fact, shares sometimes rise when seemingly negative news is released.
Boeing shares were down 1.2% to $340.29 at 1:56 p.m. Friday, after the report was released.
Two factors are at play. Markets are forward looking and most investors already accept that design, certification, and oversight failures all played a role in the two crashes that led to the jet’s world-wide grounding in March. Aviation stakeholders including airlines, regulators, and Boeing appear to believe the MAX is coming back in late 2019 or early 2020.
Boeing will have to compensate families devastated by both crashes as well as pay its customers. And the 737 MAX is expected to be less profitable in the long run—Boeing added about $300,000 in per-plane cost assumptions when reporting its third- quarter earnings.
Boeing’s market value is down more than $40 billion since the second MAX crash. That is one measurement of what the market thinks of the damage the crisis has inflicted on the company.
“The design and certification of the [Maneuvering Characteristics Augmentation System, or MCAS] did not adequately consider the likelihood of loss of control of the aircraft,” reads the report. “A fail-safe design concept and redundant system should have been necessary.” The report also points out software errors and a lack of information in pilot manuals.
Boeing, for its part, seemed to accept the criticism. It detailed some of the changes it has made to fix the MAX in a Friday morning news release.
“We commend Indonesia’s National Transportation Safety Committee for its extensive efforts to determine the facts of this accident, the contributing factors to its cause and recommendations aimed toward our common goal that this never happens again,” said CEO Dennis Muilenburg in the release. “We are addressing the KNKT’s safety recommendations, and taking actions to enhance the safety of the 737 MAX to prevent the flight control conditions that occurred in this accident from ever happening again.”
Boeing added details regarding changes made to the MAX over the past few months, including redesigning the way angle of attack, or AoA, sensors work with MCAS. The system will now compare information for multiple AoA sensors and only activate if both sensors agree. The release goes on to say MCAS can be overridden as well.
In a Thursday research report, SunTrust analyst Michael Ciarmoli said Boeing has submitted its MAX software updates to the Federal Aviation Administration for evaluation. That marks another milestone in the MAX crisis.
“The FAA’s first priority is always safety,” reads the FAA’s Friday morning news release. “The Indonesian National Transportation Safety Committee’s accident report on Lion Air Flight 610 is a sober reminder to us of the importance of that mission, and we again express our deepest condolences to the families and loved ones of those who died in that tragic accident.”
Boeing stock is down about 18% since a MAX jet flown by Ethiopian Airlines crashed in early March. The Dow Jones Industrial Average is up about than 5% over that span.
Next week, Boeing officials travel to Washington to testify before Congress. The crash report and internal communications at Boeing about the jet, as well as the plane’s design and certification, and management’s crisis response, will likely be discussed by lawmakers.
Write to Al Root at allen.root@dowjones.com