Odds and Ends: Big week for EADS, Boeing
It will be a big week for EADS and Boeing on a variety of topics:
- January 26 is Boeing’s year-end earnings call. More guidance on 787 deliveries and speculation of potential writes-offs mounts.
- On #1’s former, we think 787 deliveries will be stretched out, even after first delivery, due to the increasingly-talked about skip-in-sequence delivery stream. Boeing officials, readers may recall, are openly talking about skipping the first completed block of airplanes for retrofit (this would be 7-25 or so) and skipping to the next block (26/27 or whatever) for first delivery and delivery stream. The first block would likely start seeing deliveries in 2012, under this scenario discussed by some Wall Street analysts, notably at Credit Suisse.
- On the latter point in #1, there is increasing speculation that there could be write-offs for the 787 and 747-8 programs. We’re not sure Boeing is “there” quite yet. We certainly don’t expect at this time a forward loss on the 787, but test planes 4-6 might see a write off. It is widely believed the 787 accounting block will be around 1,000, but this won’t be set until first delivery. A forward loss, if any, would likely be computed at that time. As for 747-8, this program is stagnant. Although there were two cancellations, from Guggenheim Partners, in the fourth quarter, these airplanes will almost certainly be assumed by Korean Air Lines, for which they were intended anyhow. But there are no new orders. Boeing’s CEO, Jim McNerney, on previous earnings calls, said the program would be profitable if some 350 747s are sold (this after a previous write off of more than $1bn, it will be recalled). We think this is wishful thinking. Wall Street seems to as well, expecting another write-off.
- Will Boeing also talk about production ramp-up for the 787 on Wednesday? In all likelihood, the question will come up from analysts or the media if Boeing doesn’t volunteer it first. Readers will remember that Boeing previously projected a rate of 10/mo by year-end 2013. Given the new delays from the Nov. 9 fire on ZA002, this is almost certainly unlikely.
- But Wall Street was increasingly doubtful Boeing would hit 10/m0 anyway, and based on information, we agree. Jim Albaugh told employees recently that Boeing plans to deliver 660 airplanes in 2013. Based on previously announced production rate increases for 737, 747, 767 and 777, the math says Boeing will only be at a rate of 5/mo for the 787 in 2013. If Boeing loses the tanker contract and the 747 rate doesn’t go up because of poor sales, then the math says the 787 rate will be 7/mo in 2013. Either way, this isn’t 10. At best 10 will be more likely slipped to the end of 2014 and perhaps even 2015, unless Boeing can pull off a miracle.
- With all that for January 26, the very next day EADS and Boeing have an important day in Congress when Sen. Carl Levin (D-MI) holds a hearing on the USAF screw up over the tanker. USAF has to demonstrate the error was innocent. EADS has to demonstrate it handled the error correctly. Boeing certainly appears to have done so, but is it culpable in leaking information to its favorite (and previously paid) analyst, Loren Thompson, that was confidential? Or did Thompson, who has good connections in the Pentagon, get tipped off from there on confidential information? Enquiring minds wants to know.*
- Sen. Maria Cantwell (D-Boeing/WA) charged that EADS had the material for more than a month, based on “a reliable source.” Was this source from USAF? Boeing? Or an EADS employee? EADS denies Cantwell’s charge. This needs to be sorted out at the Levin hearing.
- We say (as we have before) as pox on everyone. All parties involved, from the USAF to the offerers to Congress, in the entire sordid tanker mess should be embarrassed.
- The expected Final Proposal Request (FPR, pronounced “fipper”) date of Jan. 21 came-and-went. This is the date when the best-and-final offers would have been due to the USAF on tanker. This is now not expected until February, which means the contract award is not expected until March. We’ll see.
- An article of interest: Two Boeings.
*”Enquiring minds want to know,” misspelled from “inquiring,” is the slogan of the supermarket tabloid National Enquirer, noted for its sensational story-telling. It seems highly appropriate here.
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Boeing’s report on Wednesday will certanly be an eye opener for investors. But I doubt there will be any large sell off of its stock because of it.
Of more immidat importance is the Senate Hearings on Thursday. This could become the Congessional death nail for the KC-X. Then again, it could also amount to nothing more than political posturing by both Boeing’s and EADS’s supporters.
I know it’s not the subject of your blog, but “enquiring” is the “correct” spelling a couple of tanker loads east past the Atlantic.
what can we say–we’re American–
http://en.wiktionary.org/wiki/inquiry#Usage_notes
involved indeed.