Boeing

[AsleepInYorkshire]

1st May 2020
With $25B Debt Raise, Boeing Is Now ‘Owned By The Banks’

• Year ending 2020 Boeing paid $722m interest & debt expenses
• Average debt interets payments for next 10 years will be £2bn
• Total debt load $54bn

Boeing may use the proceeds of the debt issuance in a way that further raises its financial risks, warns analyst Richard Aboulafia of Teal Group, internally financing jetliner orders for customers and allowing it to maintain a higher rate of production than the market justifies.

Aboulafia is, I believe, suggesting that Boeing are "rolling the dice" on the long term market rebounding. If it doesn't they will ... well let's just say I wouldn't want to hold this stock on a long term basis.

AiYn'U

[AsleepInYorkshire]

8th May 2020
Boeing Expects to Start 737 MAX Production in May: Fox Business News
"I am confident we will start our line this month on the MAX again," Calhoun told Fox Business.

How Supplier Troubles Could Affect Boeing Stock
Engines for Boeing's commercial jets come from four suppliers: General Electric Co. (NYSE: GE); Raytheon Technologies Corp. (NYSE: RTX); Rolls-Royce; and CFM, a 50-50 joint venture between France's Safran and GE.

Boeing Sacrifices Stakeholder Value For Managerial Control
Boeing has a market capitalization, i.e., equity value of about $75 billion and debt of about $40 billion before the bond issue. Adding $25 billion of extra debt, at a time when airlines are struggling, puts the company at a considerably high default risk. Boeing also has substantial amounts of other liabilities, such as customer advances of over $50 billion and uncertain amount of losses due to lawsuits on the 737 Max accidents.
...
Indeed, S&P downgraded the company’s credit rating to ‘BBB-’, a rating just above the threshold of junk bonds on April 29, i.e., before the debt issuance.

How Boeing went from appealing for government aid to snubbing it
Boeing had to make concessions to cajole the credit rating agencies and bond investors. It agreed to increase interest payments by 25 basis points each time the two biggest credit rating agencies lowered its rating by one level into junk, according to the bond issue's prospectus. It capped these concessions at 100 basis points per credit-rating agency and 200 basis points in total.

Deal For 200 Boeing 737 MAXs Impacted If British Airways Closes London Gatwick Base
British Airways told staff it could close its London Gatwick base, raising questions about the 200 Boeing 737 MAX aircraft that the airline’s parent, IAG, signed a letter of intent to buy.

Boeing CEO David Calhoun buys Palmolive building condo for $2.75 million
Boeing CEO David L. Calhoun and his wife, Barbara, paid $2.75 million March 4 to buy a three-bedroom, 3,259-square-foot condominium on the 16th floor of the Palmolive building in the Gold Coast.

I deliberated somewhat before I included the last link. There may, in my opinion, be a clue to the mindset of this CEO and the board of Boeing? 346 lives lost, untold grief and sadness. Calhoun has been on the board since 2009. Part of the board that approved a culture of sales before safety.

That the stock price has not gone into freefall is surprising. The headwinds have, again in my opinion become greater in the last 12 months. Significantly so. Warren Buffett has recently stated he wouldn't look at any form of financial involvement with Boeing as he cannot predict their future with any great certainty.

I'm not entirely convinced that Boeing will survive. The suggestion that Boeing has raised $25bn in bonds to "bank role" its sales through self finance is disturbing. Their credit rating is disturbing and if it falls further the interest rate on the bond[s] increases.

And Boeing have yet to begin investment into the single aisle airframe of the future. There can be no more iterations of the 737 as evidenced by the recent crashes.

AiY"t"n'U

[AsleepInYorkshire]

Perhaps Boeing's future survival will be as a "good Boeing" and a "bad Boeing". The latter becoming a defacto government owned company due to it's strategic value? A bit like what happened in the UK with Northern Rock in the 2007/08 financial crisis?

RVF

Yes. I think that airframe manufacturing will be detached from the rest of the group within the next decade.

AiY"t"n'U

[ReformedCharacter]

Surprised to see that Boeing was not chosen for the study contract by NASA for a lunar lander as part of the Artemis project. Spacex, a group led by Dynetics and a group including Blue Origin received the funding. This sort of work is in Boeing's DNA.

RC

[ReformedCharacter]

Surprised to see that Boeing was not chosen for the study contract by NASA for a lunar lander as part of the Artemis project. Spacex, a group led by Dynetics and a group including Blue Origin received the funding. This sort of work is in Boeing's DNA.

RC

That decision could well be to telegraph informally to the Boeing management that they have to sort themselves out.

RVF

That's quite likely IMO, Boeing's recent test flight to the ISS didn't go very well.

RC

[dspp]

Perhaps Boeing's future survival will be as a "good Boeing" and a "bad Boeing". The latter becoming a defacto government owned company due to it's strategic value? A bit like what happened in the UK with Northern Rock in the 2007/08 financial crisis?

RVF

Yes. I think that airframe manufacturing will be detached from the rest of the group within the next decade.

AiY"t"n'U

To be fair to Boeing, it was the pretty near total decoupling of airframing to tier 1/0 contractorisation about 15-20 years ago in the relentless pursuit of short term financials that has caused the issues we see today which are of course only the most recent symptoms as there have been plenty of advance tremors. Doing more of that is imho not a good recipe for getting a different result.

Engineering companies manufacturing advanced integrated systems need to recognise that the design/manufacture loop needs to be very closely coupled and is a vital core competence. Get that right and the financials may follow. Get that wrong and the financials will inevitably at some point go pear-shaped. If the manufacturing part is 'dumb' then this should be a warning sign, not an outsourcing sign.

It ought to be a concern that the people now at the top of Boeing have been in charge for a long part of this problematic cycle.

regards, dspp

[AsleepInYorkshire]

11th May 2020
Qantas Said to Halt Plane Deliveries From Boeing, Airbus Amid Travel Freeze
The airline will push back the delivery of three Boeing 787-9 aircraft which was expected to be received by the end of 2020. It had also planned to start taking delivery in August of the first of 18 Airbus A321neos due by 2022.


AiYn'U

[AsleepInYorkshire]

17th May 2020
Saudi sovereign fund discloses stakes in Citi, Boeing, Facebook
PIF disclosed a $713.7 million stake in Boeing, around $522 million in Citigroup, a $522 million stake in Facebook, a $495.8 million stake in Disney and a $487.6 million stake in Bank of America, the Securities and Exchange filing on Friday showed.

A speculative thought could be a long term opportunity for the Saudi's to take a long term (30 years?) growing stake in Boeing? I'm thinking if you can't manufacture your own aircraft why not buy a company that can? I don't know a great deal about how the Saud's have dealt with their oil riches in the past. There's a definite in all of this though as the wealth from oil has and will continue to dwindle. The current bottom for Boeing seems to be $95-100.

Headwinds

1. A debt pile that will run for a significant time - approx cost $2bn pa.
2. Max not yet certified
3. Covid 19
4. Reducing demand for new aircraft
5. No replacement single aisle aircraft in development
6. A CEO who was part of the team that approved previous company cultures

Apart from that the company looks to be in great shape

AiYn'U

[scrumpyjack]

The other longer term problem for Boeing is that the Chinese will eventually sort out their own passenger jet manufacturing

https://www.bbc.co.uk/news/business-47689386

[AsleepInYorkshire]

The other longer term problem for Boeing is that the Chinese will eventually sort out their own passenger jet manufacturing

https://www.bbc.co.uk/news/business-47689386

Yes. I should have noted that by far Boeings largest customer is China. If they can overcome their quality and reliance issues they would be a perfect fit for China's 8 airlines of which 7 are state owned.

AiYn'U

[Lootman]

Boeing up another 13% today, to $232, easily more than double its earlier low. The shorts are being squeezed.

My cost for Boeing is $120 a share so I was only very briefly underwater. Didn't have the nerve to buy more at $95 though.

Next target is $330, where I top-sliced on the way up a couple of years ago, when it had become my largest position.

[dspp]

I see Boeing are planning on restarting the 737-max line but no news on the actual fixes.

Meanwhile French are announcing aero investment including into the A320 replacement
https://www.cbc.ca/news/world/france-an ... -1.5604190

"The rescue plan includes investment in developing the successor to Airbus's widely used mid-range A320, " apparently with the prototype available 2026-28.

The pace is being forced .....

regards, dspp

[AsleepInYorkshire]

I see Boeing are planning on restarting the 737-max line but no news on the actual fixes.

Meanwhile French are announcing aero investment including into the A320 replacement
https://www.cbc.ca/news/world/france-an ... -1.5604190

"The rescue plan includes investment in developing the successor to Airbus's widely used mid-range A320, " apparently with the prototype available 2026-28.

The pace is being forced .....

regards, dspp

Hmm ... there's a long term bet in there I think?

AiYn'U

[Wizard]

Boeing up another 13% today, to $232, easily more than double its earlier low. The shorts are being squeezed.

My cost for Boeing is $120 a share so I was only very briefly underwater. Didn't have the nerve to buy more at $95 though.

Next target is $330, where I top-sliced on the way up a couple of years ago, when it had become my largest position.

Considerable retreat since Monday, back at $170 now. I wonder how much more of the recent gains will fall away?

[dspp]

Some stuff beginning to come out re 737-MAX return to service.

https://theaircurrent.com/aviation-safe ... ts-return/

I wonder what EASA will have to say, the article is somewhat ambiguous in that respect

regards, dspp

[Lootman]

Some stuff beginning to come out re 737-MAX return to service.

https://theaircurrent.com/aviation-safe ... ts-return/

I wonder what EASA will have to say, the article is somewhat ambiguous in that respect

regards, dspp

When Boeing resumed production of the Max (last week?) I figured that Boeing must have been told that they will get certification in a couple of months or so. Otherwise why would Boeing restart?

[dspp]

Some stuff beginning to come out re 737-MAX return to service.

https://theaircurrent.com/aviation-safe ... ts-return/

I wonder what EASA will have to say, the article is somewhat ambiguous in that respect

regards, dspp

When Boeing resumed production of the Max (last week?) I figured that Boeing must have been told that they will get certification in a couple of months or so. Otherwise why would Boeing restart?

I thought something similar, but I have yet to see evidence of what has been decided re certification. This article colours that in a little, but not completely. I cannot imagine FAA certifying if EASA are not onboard, but stranger things have happened.

regards, dspp

[AsleepInYorkshire]

Some stuff beginning to come out re 737-MAX return to service.

https://theaircurrent.com/aviation-safe ... ts-return/

I wonder what EASA will have to say, the article is somewhat ambiguous in that respect

regards, dspp

When Boeing resumed production of the Max (last week?) I figured that Boeing must have been told that they will get certification in a couple of months or so. Otherwise why would Boeing restart?

I thought something similar, but I have yet to see evidence of what has been decided re certification. This article colours that in a little, but not completely. I cannot imagine FAA certifying if EASA are not onboard, but stranger things have happened.

regards, dspp

If I recall correctly didn't EASA and a others say they would want to certify the Max themselves before approving it? Thus undermining the agreement (which I don't know if it's written down or just a gentleman's agreement) regarding different agencies respecting others certifications

AiYn'U

[dspp]

737-MAX 'fix' becoming public
https://www.theregister.com/2020/08/04/ ... directive/

The circumstances that would cause an AoA discrepancy are likely highly correlated with the need for MCAS to remain active. So how come it is 'safe' to disable MCAS in these circumstances.

Hmmmm.........

- dspp

[dspp]

New lipstick on old pig
Boeing publicises new name for 737 Max planes after crashes
Statement unveiling new order from Polish airline calls it a 737-8 aircraft first, before noting it is a Max jet
https://www.theguardian.com/business/20 ... -enter-air
- dspp