Boeing Recommends Suspension Of Some 777 Aircraft After Denver Incident

Boeing Co. recommended the suspension of some of its 777 aircraft following the right engine failure of a United Airlines 777 plane on Feb. 21.

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The airplane maker stated, “Boeing is actively monitoring recent events related to United Airlines Flight 328. While the NTSB [National Transportation Safety Board] investigation is ongoing, we recommended suspending operations of the 69 in-service and 59 in-storage 777s powered by Pratt & Whitney 4000-112 engines until the FAA [Federal Aviation Administration] identifies the appropriate inspection protocol.”

Boeing’s (BA) 777 fleet of airplanes came under regulatory scrutiny after US regulators announced extra inspections of the jets using the same type of engine that failed at Denver on Saturday, Reuters reported on Feb. 22.

Specifically, the United Airlines (UAL) 777 flight powered by Pratt & Whitney (P&W) 4000 engines landed safely at Denver airport following the failure of its right engine on Saturday. According to the Reuters report, United Airlines said after the incident that it would temporarily and voluntarily remove 24 active planes of this type from its schedule.

According to the Reuters report, the NTSB said that the initial examination of the plane indicated that the right engine was damaged the most, with only minor damage to the airplane.

The Reuters report cited a statement by the FAA after the Denver incident, “We reviewed all available safety data following yesterday’s incident. Based on the initial information, we concluded that the inspection interval should be stepped up for the hollow fan blades that are unique to this model of engine, used solely on Boeing 777 airplanes.”

Boeing’s 777s powered by P&W 4000 engines were also suspended from use under an order from Japan’s transport ministry to Japan Airlines Co (JAL) and ANA Holdings while the Japanese ministry considered whether to take additional measures, Reuters said.

The, Japanese ministry suspended the use of Boeing’s 777 planes after a JAL 777 flight from Naha Airport to Tokyo had to turn back due to malfunctioning of the left engine in December last year.

Boeing also referred to the incident in Japan and said, “Boeing supports the decision yesterday by the Japan Civil Aviation Bureau, and the FAA’s action today to suspend operations of 777 aircraft powered by Pratt & Whitney 4000-112 engines. We are working with these regulators as they take actions while these planes are on the ground and further inspections are conducted by Pratt & Whitney.”

Shares of BA were up by 4.3% and closed at $217.47 on Feb. 19. (See Boeing stock analysis on TipRanks)

On Feb. 19, Benchmark Co. analyst Josh Sullivan lowered BA’s price target from $290 to $270 (24.2% upside), citing “the extended nature of the commercial air traffic recovery.”

Sullivan, however, stuck to his Buy rating on the stock as he believes that while cash generation could be “challenging” for the company in FY21, it could be “improving.” He expects positive cash generation from 2022 onwards.

Overall, analysts are sidelined on the stock with a Hold consensus rating. That’s based on 9 analysts recommending a Buy, 8 analysts suggesting a Hold and 4 analysts recommending a Sell. The average analyst price target of $234.95 implies 8% upside potential to current levels.