737 rate on on cash flow: The Seattle Times has a good article that described the impact on cash flow the decision by Boeing made to boost 737 production to 52/mo in 2018. The rate hike comes at a time when we believe production rates on the 777 Classic will be bottoming out to perhaps as low as five per month, which of course will negatively affect cash flow at Boeing.
We expect Boeing to further increase production rates of the 737 in 2019. The 777X production will just be in its infancy, with entry-into-service planned for 2020. (Information continues below the picture.)
The decline in production rate of the 777 Classic, which we think will happen in 2017 and a like rate reduction for the 747-8, which we believe will occur as early as 2016, represents the reason why Wall Street analysts are turning more and more bearish on Boeing stock.
Although cash flow currently is decreasing as research and development funding declines, we believe Boeing will have no choice but to launch a new airplane to replace the slow-selling 737-9 and meet the increasing demand for a 757 replacement. The Airbus A321neo outsells the 737-9 by about 3:1 and field performance of the 737-9 is inferior to the A321neo, further inhibiting sales. We expect additional PIPs (Performance Improvement Packages) to the A321neo that will increase its desirability over the 737-9.
With a near-dead 737-7 MAX (only 55 sales to two airlines), and the recently launched 737 MAX 200 (which wags are already calling the MAX 197) that will be a high niche airplane, Boeing faces a MAX airplane that will largely become a 1.5-airplane family. Thus, not only will R&D spending have to increase for a replacement for the 757 and 739, a replacement for the 737-8 and MAX 200 will be required on its heels. We see Boeing completely abandoning the 100-149 seat sector (more about this soon).
How Chicago ATC event unfolded: Bloomberg news has a good piece about how the fire at the Chicago Aurora Air Traffic Control Center unfolded and the minute-by-minute impact on air traffic.
New PW Chief: A new CEO of Pratt & Whitney’s commercial engines has been named, reports Reuters.