Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
Airbus’ A350-1000 or Boeing’s 777-9?
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By Bjorn Fehrm
April 4, 2024, © Leeham News: Korean Air confirmed an order for 33 Airbus A350 in the week, 27 of which are the larger A350-1000. The order is significant on two accounts:
First, 27 A350-1000 and only 6 A350-900, where analysts have for years asked why the -1000 isn’t selling.
Secondly, for a carrier that has a rather 50-50 fleet of Airbus and Boeing planes, its large widebody was the Boeing 777-300ER, whereof it has 27 out of 37 Boeing 777 in total. Korean Air now chooses the A350-1000 to replace the 777-300ER. Why not the 777-9?
Was this a question of availability (the 777-9 should have been delivered in 2020 but has had several delays; the present plan says 2025), or was there a technical-economic reason for Korean Air’s decision? We examine the characteristics of the two planes to find the answers.
Summary:
- The Boeing 777-300ER was an exceptionally successful stretch of the original 777-200. The 777-9 is the sequel to the 777-300ER.
- The market did not like the original A350-1000. Therefore, the present -1000 is a reconfigured aircraft compared to the original variant.
Boeing wrote off, took charges in excess of $70bn since McDonnell Douglas merger
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By Scott Hamilton
April 1, 2024, © Leeham News: The Boeing Co. wrote off or took forward loss charges of more than $70bn since the 1997 merger with McDonnell Douglas Corp. (MDC). That’s when most legacy Boeing employees and many observers view the inflection point when Boeing became focused on shareholder value vs the engineering legacy that once defined the company.
LNA has tracked Boeing’s charges and write-offs for years. We’ve also tracked Airbus’ performance since 1999 financial reporting. From then through 2023, Airbus took charges and forward losses of more than €33bn. At today’s exchange rate, this is about $35bn. During the same period, Boeing’s figure was more than $70bn, twice that of Airbus.
From 1997 through 2019, when Boeing suspended stock buybacks due to the first 737 MAX crisis, Boeing spent more than $60bn in stock buybacks to boost shareholder value, according to an analysis for LNA.
For a company focused for decades on shareholder value, the write-offs and charges is a lot of money out the door.
A detailed analysis reveals a surprising detail. More than half of Boeing’s charges and write-offs come from Boeing Commercial Airplanes–$44.66bn. More than $22bn was incurred since 2020, when the MAX crisis and the COVID-19 pandemic were in full swing.
In the charts below, LNA breaks down the charges and write-offs under each chief executive officer beginning with Phil Condit, the CEO who engineered the merger with MDC. Unsurprisingly, most of the charges came under current CEO David Calhoun and his predecessor, Dennis Muilenburg because of the MAX and the pandemic. Fixed price defense contracts also were major contributors. The KC-46A refueling tanker and Air Force One lead the way.
Bjorn’ s Corner: Engine development. Part 1. Introduction
March 29, 2024, ©. Leeham News: We finished our article series about New Aircraft Technologies last week. It dealt with the different new technologies that a next-generation airliner could use to increase efficiency and by it environmental emissions.
An area that we touched upon but didn’t dig deeper into was engine development. When airframe development historically decided how long a new generation of aircraft took to develop, it gradually changed to engine development being the more calendar-time-consuming and riskier development for the last generations. This article series will discuss why and what can be done about it.
Figure 1. CFM RISE, a new engine development for the next generation of airliners. Source: CFM.
When does a larger airliner pay off? Part 4
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By Bjorn Fehrm
March 28, 2024, © Leeham News: We are doing an article series about what drove the cross-over from Airbus A319 to A320 and then to A321. We analyzed the change from A319/A320ceo to neo last week and discussed why the neo shift for the A319 meant if stopped selling.
Now, we study the change from A321ceo to A321neo and what caused the acceleration of growth of A321 sales and deliveries as it was upgraded to neo.
Summary:
- The increase in sales and delivery of the A321 when it went from ceo to neo has less to do with improved operating economics than other factors.
- One of these factors was it filled the MOM (Middle Of the Market) gap that Boeing identified 10 years ago.
Select Boeing performance under David Calhoun
David Calhoun, president and CEO of The Boeing Co.
March 26, 2024, (c) Leeham News: For more than a quarter of a century, Boeing’s Board of Directors focused on stock price and shareholder value as the top priority for the company’s performance.
Jim McNerney was CEO from 2005-2015. The stock price peaked at about $149 during his tenure, never reaching the $200 per share goal allegedly set by the Board.
Dennis Muilenburg followed McNerney. The stock price peaked at about $422 under his leadership. Even after the second 737 MAX accident on March 10, 2019, and its global grounding three days later, the stock price remained about $320. Muilenburg was fired in December 2019 and David Calhoun assumed office the next month. Three months later, the COVID-19 pandemic erupted. Boeing’s stock price plummeted, along with the rest of the stock market for the next two years.
By Nov. 2, 2022, market recovery–and Boeing’s–was such that the company held its first analyst-investors day since 2018. During the event, Calhoun announced that Boeing would not “introduce” a new airplane until the middle of the next decade (ie, around 2035). Analysts loved it–stock shot up in the following week.
But Calhoun failed to right Boeing’s ship. Production, delivery delays, big write-offs, losses at the commercial and defense units, and finally safety concerns at commercial dominated his tenure to date.
On March 25, Boeing announced Calhoun will retire by the end of 2024. Chairman Larry Kellner will not stand for reelection to the Board. The CEO of Boeing Commercial Airplanes, Stan Deal, retired effective immediately. Investors initially boosted Boeing’s stock price on the news, before falling back to the pre-announcement level.
How did Calhoun do during his tenure to date? Below are two charts: one reviews the stock price; the other reviews the write-offs and charges.
Update: Calhoun to retire, Deal out, Pope in, Kellner leaving, Mollenkopf new chair at Boeing
By Scott Hamilton
Analysis
David Calhoun
March 25, 2024, © Leeham News: The changes at The Boeing Co. and at Boeing Commercial Airplanes today speak to the depth of the crisis at the company following Jan. 5’s accident on Alaska Airlines Flight 1282. But it also speaks to the thin bench for executive ranks at the corporate and division levels.
President and CEO David Calhoun will step down at the end of the year. No successor was named. Board chairman Larry Kellner will not stand for reelection at the annual shareholders meeting. Board Member Steve Mollenkopf was named non-executive chairman. Stan Deal, the CEO of Boeing Commercial Airplanes, is out, effective today. Stephanie Pope, who was named EVP and COO of The Boeing Co. in December, takes over from Deal as CEO of Commercial Airplanes.
Pope’s move drew immediate rebuke from a Wall Street executive. Pope “has absolutely no qualifications to hold the job of head of BCA,” the executive wrote LNA in an email. Pope’s another MBA finance executive without production or product development experience. Her job before being named COO was CEO of Boeing Global Services. She followed Deal, who left BGS to become CEO of Boeing Commercial Airplanes.
Related Article
Boards are invested in the CEOs until they’re not
Boeing’s thin bench was outlined in the related article above. The leading personalities are detailed in this article.
Breaking News: Calhoun to retire, Deal out, Pope in, Kellner leaving, Mollenkopf new chair at Boeing
Boeing press release; LNA take to follow.
Boeing Announces Board and Management Changes
- Dave Calhoun announces intent to step down as CEO at the end of 2024; Calhoun will continue to lead Boeing through year-end
- Independent Board Chair Larry Kellner announces his decision not to stand for re-election at annual meeting; Steve Mollenkopf appointed new chair
- Stan Deal to retire; Stephanie Pope named Commercial Airplanes CEO
ARLINGTON, Va., March 25, 2024 — Boeing [NYSE: BA] President and CEO Dave Calhoun today announced his decision to step down as CEO at the end of 2024, and he will continue to lead Boeing through the year to complete the critical work underway to stabilize and position the company for the future.
Board Chair Larry Kellner has informed the board that he does not intend to stand for re-election at the upcoming Annual Shareholder meeting. The board has elected Steve Mollenkopf to succeed Kellner as independent board chair. In this role, Mollenkopf will lead the board’s process of selecting Boeing’s next CEO.
In addition to these changes, Stan Deal, Boeing Commercial Airplanes President and CEO, will retire from the company and Stephanie Pope has been appointed to lead BCA, effective today.
Exclusive: IAM to seek Boeing Board seat
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By Scott Hamilton
Analysis
Jon Holden, president of the IAM 751 union that assembles Boeing’s airplanes in the greater Seattle area. Credit: IAM 751.
March 25, 2024, © Leeham News: Boeing’s largest union, the IAM 751, will seek a seat on the Board of Directors in its contract negotiations that began on March 8.
The union assembles Boeing’s airplanes in the Renton and Everett (WA) factories.
LNA wrote in January 2020, when David Calhoun became CEO of The Boeing Co., that labor representation was needed on a Board of Directors that was filled with politicians, defense and finance people—but none versed in safety or even commercial aviation production. Commercial aviation was Boeing’s largest profit center for decades before the 2018-19 737 MAX crisis began.
The day Calhoun assumed his position on Jan. 13, 2020, LNA published a list of things facing the new CEO. Among them was a need to reconstitute the Board. Included in this was a suggestion that members from the IAM and Boeing’s engineering and technician union, SPEEA, be appointed (among other specific ideas).
About half the Board has changed since then, resolving some but not all of the issues raised—but neither the IAM nor SPEEA have representation on the Board.
Related Articles
- Boeing Board needs a major shake up (Jan. 13, 2020)
- Culture change needed at Boeing; labor talks could lead the way (Jan. 29, 2024)
- Boeing labor contract is opportunity for overdue culture change (Seattle Times, March 15, 2024)
On Jan. 29 of this year, LNA opined that the forthcoming labor contract negotiations with the IAM 751 was a good opportunity to begin changing the culture at Boeing. The following March 15, The Seattle Times editorialized the same theme (also citing our report in the process).
The administrator of the Federal Aviation Administration, Mike Whitaker, slammed Boeing’s culture in a March 19 interview with NBC Nightly News.
“There are issues around the safety culture in Boeing. Their priorities have been on production and not on safety and quality. So, what we really are focused on now is shifting that focus from production to safety and quality,” Whitaker told news anchor Lester Holt.
Bjorn’s Corner: New aircraft technologies. Part 51. Wrap up
By Bjorn Fehrm
March 22, 2024, ©. Leeham News: Last week we did the first part of the Wrap-up of our 50 article series about the New Aircraft Technologies that can be used when replacing our present single-aisle airliners.
Now, we summarize the last 25 articles in the series, which covered how to develop, produce, and support a new airliner.
Figure 1. The Program Plan for a new airliner. Source: Leeham Co.
When does a larger airliner pay off? Part 3
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By Bjorn Fehrm
March 21, 2024, © Leeham News: We are doing an article series about what drove the cross-over from Airbus A319 to A320 and then to A321. We started with the ceo range last week. We could see why the A320 was a better choice than an A319, with only a few more passengers per departure required to close the operating cost difference for a route, whereas the A321, being a larger jump in capacity, did not have the same per seat mile economics until traffic increased substantially.
Now we study the change to the neo generation and try to understand why the A319, a popular model as a ceo variant, did not sell at all as a neo.
Summary:
- The A319ceo had a suitable capacity for routes before 2015. It also had a passenger mile cost advantage over the A320 for thinner routes.
- After 2016, when the A320neo entered the market, the A319neo didn’t sell at all, despite the continued existence of thin routes. We explain why.