Boeing

[AsleepInYorkshire]

21st December 2019
Boeing union creates strike fund for 2024 contract negotiations
https://leehamnews.com/2019/12/21/boein ... otiations/

The MAX crisis throws future product strategy into doubt. Boeing already announced losses and costs of the crisis of nearly $10bn. More charges are expected to be announced during the Jan. 29 earnings call for the full year of 2019. Some believe the costs and charges could double by the time the MAX is recertified and returned to service.

Noting the above article was written by Scott Hamilton
https://leehamnews.com/team/
Scott Hamilton is the managing editor of Leeham News and Analysis. Having spent more than three decades in the aviation news industry, he was named Best Aerospace Journalist of the Year in 2009 in the Regional Airline Category and served on the Board of Directors for Pacific Northwest Aerospace Alliance from 2010 to 2013.

Additional Articles here (It's a subscription site but these articles, albeit small, are free and worth a quick read (imho))
https://leehamnews.com/author/scotthamilton/

AiYn'U

[AsleepInYorkshire]

20th December 2019
United pulls 737 Max until June, adding to Boeing woes
https://abcnews.go.com/Business/wireSto ... s-67851838

United Airlines says the Boeing 737 Max has been pulled from its flight schedule until June, the latest in a string of troubling news plaguing the airplane manufacturer.

Turkish Airlines prepping case against Boeing over 737 MAX -news agency
https://uk.reuters.com/article/uk-boein ... YO0HJ?il=0

ISTANBUL (Reuters) - Turkish Airlines (THYAO.IS) is preparing to open a court case against Boeing Co (BA.N) due to uncertainty regarding the plane manufacturer’s 737 MAX jetliner, Demiroren news agency said on Thursday evening.

AiYn'u

[dspp]

It could get even worse for Boeing,

http://www.richardaboulafia.com/shownote.asp?id=636

"But earlier this year, air travel demand growth suddenly spiked downward. After a decade of above trend growth, peaking at 7.6% year/year in 2017 and 6.5% last year (IATA numbers), we saw a serious downshift, from 6.5% in January and 5.3% in February, to just 3.1% in March. The year since has hovered just above that, with an anemic 3.4% in October. IATA’s latest forecast calls for just 4.2% growth this year and 4.1% in 2020."

dspp

[Lootman]

It could get even worse for Boeing,

http://www.richardaboulafia.com/shownote.asp?id=636

"But earlier this year, air travel demand growth suddenly spiked downward. After a decade of above trend growth, peaking at 7.6% year/year in 2017 and 6.5% last year (IATA numbers), we saw a serious downshift, from 6.5% in January and 5.3% in February, to just 3.1% in March. The year since has hovered just above that, with an anemic 3.4% in October. IATA’s latest forecast calls for just 4.2% growth this year and 4.1% in 2020."

3.4% annual growth, the lowest of all those rates quoted, still isn't "anemic" by many standards. It would still lead to a doubling of air traffic by 2040, approximately.

Growth rates of 5% per annum or more were probably never sustainable, especially if we get a spike in oil prices or another global recession. And in any event both Boeing and Airbus have several year's worth of orders lined up so it would take a few years for any reduction in growth to affect revenue numbers. Even at constant numbers there are still many 747's, 757's, 767's and MD-11's flying around which will reach the end of their useful life in the next decade. Even some 777's are approaching age 25 or so whilst Air France, Emirates and Singapore Airlines have even retired A380's.

I do wonder whether some of the hysteria around climate change and attempts to stigmatise people who fly a lot has actually had some effect. (Not on me, however

[AsleepInYorkshire]

It could get even worse for Boeing,

http://www.richardaboulafia.com/shownote.asp?id=636

"But earlier this year, air travel demand growth suddenly spiked downward. After a decade of above trend growth, peaking at 7.6% year/year in 2017 and 6.5% last year (IATA numbers), we saw a serious downshift, from 6.5% in January and 5.3% in February, to just 3.1% in March. The year since has hovered just above that, with an anemic 3.4% in October. IATA’s latest forecast calls for just 4.2% growth this year and 4.1% in 2020."

dspp

Yes. I'd forgotten about this and earlier in the year one analyst correctly said this could be Boeings largest issue. It's highly interesting that the Airlines seem to be adjusting at least in part to life without the Max, noting the exception of Ryanair and that could be bluster from the CEO. And Airbus, contrary to predictions have increased their output and watched their profits soar.

In July we both discussed some rough and ready numbers for the total cost of this "event". My estimate was £30bn which included £15bn to bring a new single aisle airframe to market. I think the current estimates now seem to be tipping £20bn just for the crashes and the groundings. And there seems to be some talk that Boeing couldn't afford to develop another single aisle airframe. These are staggering numbers and again my guts are telling me this is just not going to get better any time soon.

There is one pervading thought that I cannot square away. Why did Boeing not ground theses vehicles temporarily after the first crash when many were pointing their finger at the software. In my opinion this goes to the culture and mindset that is Boeings top Management. Ample proof that this company is not managed by those who understand the product or are prepared to listen to those that do. This company has focused on sales. They have focused on reducing costs by using an out of date airframe [in a failed bid to keep pace with Airbus], share buy backs and a costly decision to outsource the Dreamliner's development. All smack of short term management techniques which for any company involved in Airframe manufacture are counter to good provenance.

AiYn'U

[dspp]

It could get even worse for Boeing,

http://www.richardaboulafia.com/shownote.asp?id=636

"But earlier this year, air travel demand growth suddenly spiked downward. After a decade of above trend growth, peaking at 7.6% year/year in 2017 and 6.5% last year (IATA numbers), we saw a serious downshift, from 6.5% in January and 5.3% in February, to just 3.1% in March. The year since has hovered just above that, with an anemic 3.4% in October. IATA’s latest forecast calls for just 4.2% growth this year and 4.1% in 2020."

dspp

Yes. I'd forgotten about this and earlier in the year one analyst correctly said this could be Boeings largest issue. It's highly interesting that the Airlines seem to be adjusting at least in part to life without the Max, noting the exception of Ryanair and that could be bluster from the CEO. And Airbus, contrary to predictions have increased their output and watched their profits soar.

In July we both discussed some rough and ready numbers for the total cost of this "event". My estimate was £30bn which included £15bn to bring a new single aisle airframe to market. I think the current estimates now seem to be tipping £20bn just for the crashes and the groundings. And there seems to be some talk that Boeing couldn't afford to develop another single aisle airframe. These are staggering numbers and again my guts are telling me this is just not going to get better any time soon.

There is one pervading thought that I cannot square away. Why did Boeing not ground theses vehicles temporarily after the first crash when many were pointing their finger at the software. In my opinion this goes to the culture and mindset that is Boeings top Management. Ample proof that this company is not managed by those who understand the product or are prepared to listen to those that do. This company has focused on sales. They have focused on reducing costs by using an out of date airframe [in a failed bid to keep pace with Airbus], share buy backs and a costly decision to outsource the Dreamliner's development. All smack of short term management techniques which for any company involved in Airframe manufacture are counter to good provenance.

AiYn'U

If the first crash had been in a western country, with western passengers, and western pilots, and western maintainers, and western lawyers then it would have been grounded. I am afraid a lot of the shills were blaming it on asian pilots. Undoubtedly cultural perspectives played a part at all levels.

regards, dspp

[Lootman]

If the first crash had been in a western country, with western passengers, and western pilots, and western maintainers, and western lawyers then it would have been grounded. I am afraid a lot of the shills were blaming it on asian pilots. Undoubtedly cultural perspectives played a part at all levels.

Whilst cultural bias might have been a factor, it is also true that a US commercial pilot has to have a lot more hours flying experience than some other countries. A mainline pilot in the US has to have more than 1,500 hours whereas some other nations allow pilots on board with as little as 250 hours. At the margin that could make a difference.

[AsleepInYorkshire]

If the first crash had been in a western country, with western passengers, and western pilots, and western maintainers, and western lawyers then it would have been grounded. I am afraid a lot of the shills were blaming it on asian pilots. Undoubtedly cultural perspectives played a part at all levels.

Yes. I've had those thoughts ... I have uttered that Boeings only stroke of good luck was that these vehicles did not crash in the US. Boeing have settled many liabilities quickly through foreign courts. Astute indeed.

There are two sides to the Boeing crashes. Financial and emotional. Let's not forget the lives lost. And the lives surrounding those who were lost. Incomes lost. Plans for tomorrow torn apart. And the only answer I can find is because of a need to pay a dividend. A need to make a profit at any expense. Did the board of Boeing set out to achieve this. Hell no. But did they rush straight into hell with a bag of ice and a gallon of water. Hell yes. Completely oblivious. And that's what they call Management.

AiYn'U

[dspp]

"Boeing on Monday fired its chief executive Dennis Muilenburg as the company battles to regain the trust of regulators, customers and the public after two fatal crashes of its best-selling plane, the 737 Max, that claimed 346 lives.

The Seattle-based company said its chairman David Calhoun will take over as CEO in January.

In a statement, Boeing said the board had “decided that a change in leadership was necessary to restore confidence in the company moving forward as it works to repair relationships with regulators, customers, and all other stakeholders”."

https://www.theguardian.com/business/20 ... muilenburg

- dspp

[Lootman]

"Boeing on Monday fired its chief executive Dennis Muilenburg as the company battles to regain the trust of regulators, customers and the public after two fatal crashes of its best-selling plane, the 737 Max, that claimed 346 lives.

The Seattle-based company said its chairman David Calhoun will take over as CEO in January.

In a statement, Boeing said the board had “decided that a change in leadership was necessary to restore confidence in the company moving forward as it works to repair relationships with regulators, customers, and all other stakeholders”."

https://www.theguardian.com/business/20 ... muilenburg

The market likes that news. Boeing is up more than 2% today.

I still think its shares will be higher in 12 months time.

[AsleepInYorkshire]

"Boeing on Monday fired its chief executive Dennis Muilenburg as the company battles to regain the trust of regulators, customers and the public after two fatal crashes of its best-selling plane, the 737 Max, that claimed 346 lives.

The Seattle-based company said its chairman David Calhoun will take over as CEO in January.

In a statement, Boeing said the board had “decided that a change in leadership was necessary to restore confidence in the company moving forward as it works to repair relationships with regulators, customers, and all other stakeholders”."

https://www.theguardian.com/business/20 ... muilenburg

- dspp

DSPP as you're aware this is an endemic issue embedded deep into Boeing's culture and this removal, whilst overdue and very necessary isn't going to be all that's needed. Already the speculation is that this will not strengthen the "engineering" weakness within Boeing.

I'm going to set that aside and come back to it at a later date. For me whilst there is no bottom to this problem the company is teetering on the edge of a financial collapse. If I was the incoming CEO I'd focus on my balance sheet and I'd be out to the market for the best part of $40bn. And that's the figure Boeing has spent on share buy backs. Coincidentally I think it's the amount Boeing will need to overcome the current issue and move ahead with a new single aisle aircraft development plan.

A previous post noted the following figures

Boeing have bought back $39Bn of their own stock over the last 5 years. They have reduced share count from 767m to 586m. In the same period they have spent $17Bn on R&D. Whilst the EPS has obviously benefited, the same may not be true of the value of the share buy back costs. The short term looks far more rosy than the long term. And now with the 737-Max grounded the damage to the balance sheet is going to be far more significant. Often the Board of large companies is incentivised through bonus payments to improve EPS. One point of view is that share buy backs guarantee an increase in EPS. Another widely held view is that share buy backs can often signal that a company has no better way to invest residual cash. At the same time that Boeing have embarked upon such a large scale share buy back it should be noted that their long term debt has risen and is currently sat at around $11Bn. There may be some structured purpose to this. But on the face of it there does seem to be a higher priority to purchasing their own stock than reducing debt and investing in R&D.

At the same time I'd be making a robust contingency plan for the "early" retirement of the Max if its return to service isn't received greatly by both the flying public and the airlines. And if that plan was put into action I'd already have warned the shareholders that I may be back for more. Accepting the latter is a judgement call and a subjective comment on my part. The former is not subjective in my opinion ... it's necessary. The big problem for the incoming CEO is simply he has no way to tell where the bottom is and that's a circle I can't square neither. The variables are complex and immense.

AiYn'U

[AsleepInYorkshire]

24th December 2019
New Boeing boss faces EU pressure over Embraer tie-up: sources
https://uk.reuters.com/article/us-boein ... KKBN1YS0T8

As Boeing’s new boss tackles the immediate crisis over its grounded 737 MAX jet, he also faces pressing questions from European regulators over a deal to buy the commercial arm of Brazil’s Embraer - seen as key to its longer-term strategy.

I've speculated in a previous post that Embraer may have a single aisle vehicle that could be developed to give Boeing a cheap 200 seat single aisle airframe. May be worth looking into this further?

AiYn'U

[Lootman]

24th December 2019
New Boeing boss faces EU pressure over Embraer tie-up: sources
https://uk.reuters.com/article/us-boein ... KKBN1YS0T8

As Boeing’s new boss tackles the immediate crisis over its grounded 737 MAX jet, he also faces pressing questions from European regulators over a deal to buy the commercial arm of Brazil’s Embraer - seen as key to its longer-term strategy.

I've speculated in a previous post that Embraer may have a single aisle vehicle that could be developed to give Boeing a cheap 200 seat single aisle airframe. May be worth looking into this further?

That's hypocritical given that the EU quickly approved the Airbus acquisition of the regional jet part of Canadian company Bombardier, which is the biggest competitor to Embraer:

"In July 2018, Airbus acquired a 50.01% stake in the CSeries for one Canadian dollar, with an option to acquire the remaining interest by 2024. Airbus built a second CSeries assembly line at its A320 assembly facility in Mobile, Alabama."

https://en.wikipedia.org/wiki/Bombardier_Inc.#Aerospace

[dspp]

24th December 2019
New Boeing boss faces EU pressure over Embraer tie-up: sources
https://uk.reuters.com/article/us-boein ... KKBN1YS0T8

As Boeing’s new boss tackles the immediate crisis over its grounded 737 MAX jet, he also faces pressing questions from European regulators over a deal to buy the commercial arm of Brazil’s Embraer - seen as key to its longer-term strategy.

I've speculated in a previous post that Embraer may have a single aisle vehicle that could be developed to give Boeing a cheap 200 seat single aisle airframe. May be worth looking into this further?

That's hypocritical given that the EU quickly approved the Airbus acquisition of the regional jet part of Canadian company Bombardier, which is the biggest competitor to Embraer:

"In July 2018, Airbus acquired a 50.01% stake in the CSeries for one Canadian dollar, with an option to acquire the remaining interest by 2024. Airbus built a second CSeries assembly line at its A320 assembly facility in Mobile, Alabama."

https://en.wikipedia.org/wiki/Bombardier_Inc.#Aerospace

Hardly.

The Airbus acquisition of the C-Series was a result of Boeing's strategy comprehensively rebounding against Boeing. That caused a 2+2 airframer supplier situation to shrink to 2+1.

The Boeing acquisition of Embraer is an attempt to partially make up for that. If by doing so it results in anti-trust problems* for Boeing, then presumably Boeing considered that before proposing to further shrink the supplier situation from 2+1 to merely 2. Or maybe Boeing just hoped. As I have been told before mind you, hope is no substitute for a strategy.

It is going to get worse still for Boeing because this episode will cause the Chinese to make sure Comac becomes competitive in time. Probably about the same point in time that Boeing gets a competitive 737 replacement. You can even imagine Comac acquiring Boeing civil on the cheap at this rate. Or other equally unpleasant things if one is Boeing.

Right now the future looks very difficult for Boeing civil aircraft.

regards, dspp

* by the way, I hope the UK is taking note that the people with the power here are the EU, not the UK.

[AsleepInYorkshire]

24th December 2019
New Boeing boss faces EU pressure over Embraer tie-up: sources
https://uk.reuters.com/article/us-boein ... KKBN1YS0T8

As Boeing’s new boss tackles the immediate crisis over its grounded 737 MAX jet, he also faces pressing questions from European regulators over a deal to buy the commercial arm of Brazil’s Embraer - seen as key to its longer-term strategy.

I've speculated in a previous post that Embraer may have a single aisle vehicle that could be developed to give Boeing a cheap 200 seat single aisle airframe. May be worth looking into this further?

That's hypocritical given that the EU quickly approved the Airbus acquisition of the regional jet part of Canadian company Bombardier, which is the biggest competitor to Embraer:

"In July 2018, Airbus acquired a 50.01% stake in the CSeries for one Canadian dollar, with an option to acquire the remaining interest by 2024. Airbus built a second CSeries assembly line at its A320 assembly facility in Mobile, Alabama."

https://en.wikipedia.org/wiki/Bombardier_Inc.#Aerospace

An alternative view could be that Boeing had the same opportunity as Airbus but we're already moving towards a significant stake in Embraer? There is an argument for stating that the Boeing acquisition of Embraer will reduce to two the number of airframe manufacturers. To counter this Boeing could argue "China" and or economies of scale are needed in a business where the cost base is ever increasing.

Pondering quite speculatively I wonder if the Embraer deal will be a dollar too far for Boeing? The outgoing CEO has only been gone for 24hrs and speculation is that some of his board need to follow him (and fast). There has also been some expressions of indignation about the new CEO's ability and long term affinity with Boeing. The mindset being that Boeing have not really solved "a" problem but created another.

I believe Boeing have to make some early and constructive noises in 2020 regarding their financial well being. They need to rebuild their Top Management Team promptly. And they really need to reflect on the need to make dividend payments.

AiYn'U

[AsleepInYorkshire]

24th December 2019
Boeing reveals new 'very disturbing' documents on 737 Max jetliner to FAA, Congress
https://eu.usatoday.com/story/news/nati ... 743402001/

A new batch of Boeing internal documents related to the 737 Max jetliner paint "a very disturbing picture" regarding employees' concerns about safety, a House committee reported Tuesday.
...
Boeing, in response, acknowledged the latest documents could prove damaging.

AiYn'U

[BobGe]

The company knows travelers are wary of its plane, so it has prepared presentations with strategies for airlines to help win back the public’s trust.
https://www.nytimes.com/2019/12/24/busi ... urvey.html

[AsleepInYorkshire]

The company knows travelers are wary of its plane, so it has prepared presentations with strategies for airlines to help win back the public’s trust.
https://www.nytimes.com/2019/12/24/busi ... urvey.html

Hi BobGe,

I can see why Boeing believe something like this may help passengers to re-embark this vehicle. After all it was their focus upon sales which got them into this mess. Boeing will [or they damn well should] know the critical trigger numbers for this vehicle to remain viable. And I would guess that they aren't far from them currently. If the vehicle is [say] 20% more efficient than Airbus (and I'm not sure it is) then a 20% drop in footfall from passengers will wipe out that lead. I suspect the numbers aren't as good as that.

I sense a huge amount of hope in Boeings plans. Whilst it would be totally disingenuous to dismiss their removal of Muilenberg as anything less than constructive I can only equate this to putting a sticking plaster on a broken limb.

And as DSPP has already noted there may be vultures waiting in the winds ready to buy up Boeing at a "knock down" price.

At some point I'd like to try and get a handle on just how much debt Boeing is currently carrying. Whilst their debt rating remains [almost] reasonable I suspect it will start to turn sour quite quickly. Noting that Moody's have already stated there's no upward pressure and if the Max isn't back in service by June they will drop to a B rating.

AiYn'U

[flyer61]

Lootman

Having spent a goodly amount of my working life involved in Airline Pilot training and examining I wanted to make a comment about 1500 hours flying versus 250 hours. Basically it comes down to what goes on in those hours. 1500 hours flying round in blue skies in a bug smasher is no substitute for a carefully crafted course (that includes 250 hours of flying) to produce an 'airline pilot'. Modern airliners are complex pieces of machinery that require expensive specialist training to be able to operate effectively. You do not get this down at the local aero club building flying hours. Whilst i acknowledge for a time their was very much a worry that the industry was producing 'children of magenta' that has been recognised and the training mitigates it.

As an aside London Fire Service could probably learn from the aviation industry in how to handle situations when things go away from the script/checklist. I wonder if their leadership will reach out to other industries for ideas and advice on how to train their 'Fire Captains'.

As to the MAX and it's future what will happen to Ryanair if this isn't resolved quickly. Will MOL lose his competitive advantage as he ends up flying round in 'old' 737's with a higher fuel burn than easyJets and others Airbus NEO's. MOL seems to have doubled down on his bet with the Max, he has been right about most things, on this, time will tell.

[tjh290633]

That's an interesting comment. Back in the 1950s the RAF's flying training programme involved 12 hours grading flying on the Tiger Moth, 60 hours basic training on the Chipmunk or Prentice then 120 hours on the Harvard or Oxford to "Wings" level. Then followed 60 hours of Advanced Flying Training on Meteor or Vampire, and if you went further more hours, probably 60, on operational conversion. That's a bit over 300 hours. With the ending of the Korean war, few National Service men went past AFS, flying ATC cadets in Chipmunks in many cases. I knew one who moved on to Hastings.

A fair bit of time would be devoted to aerobatics and formation flying, less relevant for commercial flying, and instrument flying, both real and on the Link Trainer. You got your white instrument rating during the Harvard or Oxford phase. Most NS pupils followed the Chipmunk and Oxford route, although a friend went to Canada where they flew Harvards.

TJH