Boeing’s Calhoun completes first year as CEO

By the Leeham News Team

Jan. 13, 2021, © Leeham News: Today marks the first anniversary of David Calhoun becoming CEO of The Boeing Co.

Calhoun’s first year faced challenges unprecedented in Boeing’s history. There was the 737 MAX crisis. Sales of the 777X were stagnant. The balance sheet was stressed.

And then COVID exploded, all but destroying commercial passenger demand and with it, ability by airlines to take delivery of new airplanes.

David Calhoun. Source: CNBC.

Boeing’s balance sheet went further upside down. Production and quality control problems with the 787 emerged.

Finally, Calhoun was afflicted with a case of foot-in-mouth disease. This contrasted with his calm, well-received initial public face during the waning days of then-CEO Dennis Muilenburg’s stilted public persona.

Becoming the public face

When Calhoun was named chairman in October 2019, he became Boeing’s face in televised media interviews. In contrast to Muilenburg’s stiff, scripted style, Calhoun was relaxed and appeared to talk casually. There was even a sense of openness that was lacking in Muilenburg’s approach. It was a welcome change. However, Calhoun stepped in it three times in short order that made it clear he needed a bit of scripted discipline.

Calhoun initially expressed strong support for Muilenburg in CNBC interviews. On Dec. 23, 2019, the board fired Muilenburg. Wall Street analysts said repeated failed promises for RTS, poor relations with the FAA and with customers were the reasons. CNN encapsulated the issues and noted Muilenburg had become the “face” of Boeing’s problems.

Calhoun was named president and CEO, effective in mid-January. CFO Greg Smith was named interim CEO. Long-time director Larry Kellner was named chairman.

Some questioned the choice

The choice of Calhoun to lead Boeing out of its crisis drew skepticism. He had been on the board since 2009. He was there when MAX was launched. Calhoun was on the Compensation Committee. He supported cost-cutting and shareholder value, two elements that came under scrutiny in the MAX crisis. And he was the lead director. Many viewed him as an insider who was part of the problem.

But not Calhoun himself. When asked about this on his first media call after assuming office on Jan. 13, Calhoun said he was like a moviegoer with a front-row seat, but he wasn’t an insider.

By Securities and Exchange Commission’s rules, his position on the board is the very definition of an insider. Wall Street, media and critics hooted at the claim. It was the first “stepping in it” Calhoun made.

In an interview with the New York Times, Calhoun confounded some institutional investors with his criticism of Muilenburg.

“Mr. Calhoun has become more willing to criticize Mr. Muilenburg openly. He said the former chief executive had turbocharged Boeing’s production rates before the supply chain was ready, a move that sent Boeing shares to an all-time high but compromised quality,” the New York Times reported.

“I’ll never be able to judge what motivated Dennis, whether it was a stock price that was going to continue to go up and up, or whether it was just beating the other guy to the next rate increase,” he said. He added later, “If anybody ran over the rainbow for the pot of gold on stock, it would have been him.”

Once again, Wall Street hooted. They objected to throwing Muilenburg under the bus. After all, the board approved buybacks and dividends. Calhoun was part of these decisions. The board was behind returning 100% of free cash flow to shareholders. Shareholder value had been the top corporate goal since the McDonnell family and Harry Stonecipher took over Boeing in the 1997 merger. Blaming Muilenburg to boost the stock price and support the board’s objectives of buying back shares and increasing dividends was poor form.

Government bailout

Then Boeing lobbied the Trump Administration for $60 billion in government funding once the coronavirus became a global pandemic. Boeing would take a portion of this for itself and disperse the rest to its supply chain.

The Treasury Department said stock warrants and an equity position would be required as a bailout condition.  Calhoun backtracked and said Boeing wouldn’t take the money under these conditions and didn’t need it anyway. It became another example of Boeing wanting its cake and to eat it, too.

All this within the first 60+ days of becoming CEO.

Calhoun needed some scripting, after all. (Boeing canceled the post-earnings media call for the third quarter.)

Tone-deaf

Muilenburg wasn’t the only one who was tone-deaf. Calhoun was given an annual salary approaching $2 million. There was a commitment for a $7 million bonus for getting the MAX recertified. When asked why he took a salary, Calhoun said he wasn’t sure he would have taken the job without one.

The bonus was also puzzling since everyone associated with the MAX worked diligently to recertify the airplane. Why Calhoun deserved a bonus remains a question.

Given Boeing’s deteriorating financial position—and Calhoun’s wealth—symbolically, accepting any salary above $1 a year was also questionable. Lee Iacocca famously took only $1 when he was named CEO to save Chrysler in the 1980s. Boeing employees were facing cost-cutting and loss of jobs.

After the virus crisis and government bailouts looked necessary, Calhoun and Kellner gave in to pressure and suspended their salaries for the balance of 2020.

When filed with the Securities and Exchange Commission, Boeing’s financial reporting for the full year 2020 will reveal Calhoun’s compensation for the year.

It was a rough first year.

In the future

Calhoun is on borrowed time. He will be 65 in April 2022, Boeing’s mandatory retirement age. The board could extend his contract. There is a lot to do between now and then.

Over the last year, he had to use his private equity skills of debt raising significantly more than he would have wanted. It was probably quite useful in the COVID-19 pandemic. Working closely with CFO Greg Smith, Boeing has billions of dollars in debt to pay down.

Calhoun must rebuild relationships (customers, regulators) and Boeing’s reputation. Transparency has not been his strong suit, but it will be essential in the years to come.

Boeing faces the need for a future airplane program. The 737 MAX must be replaced this decade. But facts speak against this: significant layoffs without putting measures to safeguard know-how like part-time work until a recovery. Closing of the Seattle R&D center sends the wrong message.

When on the board, Calhoun was a crucial part of setting the company’s overall targets, course, and culture. As CEO, he is now first-hand seeing the fruits of this, and it’s not a pretty sight. He’s running from one major fire to the next. They are all the results of decades of GE style management, from the board down.

Many believe Calhoun played a considerable role in creating the mess he’s now in charge of cleaning up. Solving the problems requires him to make at least a 135-degree turn from the path he’s followed his entire career. And solving these issues is critical if Boeing’s going to maintain its role in the duopoly.

 

131 Comments on “Boeing’s Calhoun completes first year as CEO

  1. Launching the MAX was a good decision given the position Boeing got itself into,MCAS was not. The problem was that it sold so well that management got greedy and thought that they could regard it as something more than a stopgap.

    • “MAX: it sold so well ”

      it was shoehorned into the market at exorbitant cost to Boeing.
      They kept Airbus honest ( what an oxymoron) while having fall into a black hole.
      The MAX debacle is less of an accident than an intrinsic part of how the competitive landscape was handled. “no training, just an NG with better engines…. so much overstatement ..”

    • Launching the MAX was probably one of the worst strategic decision on a large scale I have ever seen. Instead they should have launched a successor with FBW, container capability and long enough legs to fit the full size new generation engines. If would have given them the chance to not only copy the A320 but to improve on it with latest aerodynamics and increased use of CFRP. It would of course have included a 757 successor similar to the A321XLR.
      Now the situation is really difficult. If a 737 successor (797) is launched over the next couple years it can probably be done only on the basis of conventional (kerosene) engines. If Airbus launches an A320 successor with a greener propulsion (LH2, Methane,…) a few years later and governments around the world put ever stricter emission regulations in place, the 797 will be in a difficult position.

      • All excellent points.
        The MAX was a rushed, knee-jerk, slapdash reaction when Boeing was caught off guard by Airbus’s NEO — which secured huge orders immediately after introduction, and which Boeing hadn’t seen coming. Hardly surprising, since:
        – If a company looks in the mirror every day and tells itself how great it is, it’s never going to recognize what needs to be improved.
        – If a company obsesses about shareholder value and maximizing returns for management, it won’t have enough money left for proper R&D.
        – If management attaches little importance to engineering excellence, it won’t have any qualms about “slapping some new lipstick on an old pig” and trying to market it as a breakthrough.

        As regards your hydrogen/methane comment: maybe Musk might be interested in doing something with a hydrogen aircraft. He could buy (part of) BCA for a dollar and try to make something of it. Besos might be another potential candidate (and he’s already got a foot in WA).

        • ” Introduction, and which Boeing hadn’t seen coming. ”

          Boeing had activated their full complement of smoke and mirrors PR. ( How the NEO would just kill CEO values, NEO would only step up to the NG performance … ).

          Things began when Boeing thought that riding on the 737 grandfathering with the NG was the best idea ever. and they continued. dropping the 757 platform and continuing to build on jurassic advantages.

        • @Bryce

          The problem is Boeing’s top management regards R&D as an unnecessary expense (and to avoid at all costs – see Boeing’s 787 development debacle), not investment for future.

          To appease top management, spreadsheets have to be revised (no matter how ridiculous they become) endlessly.

          • Pedro
            January 13, 2021

            @Bryce
            “The problem is Boeing’s top management regards R&D as an unnecessary expense (and to avoid at all costs – see Boeing’s 787 development debacle), …”

            Negative pontification abounds as usual. I call ‘nonsense’ to Pedro’s claim, a recent example covered in this forum is their effort to have robotic fastener installation in fuselages of 777.

            And I sneer at people who say things like “GE style of management”, a vague simplistic term that ignores the need to be profitable to attract capital. (I note that Jim McNerney tried to get better behaviour by managers toward employees. I note that Jack Welch eliminated layers of management in GE, hence the name ‘neutron jack’.))

          • Notice GE went nowhere but down after 2000?? I guess not.

            No problem. Open your eyes and learn something. Many on the street started to agree the rotting began under Mr Welch’s watch.

          • The majority of applied “deemed good” management strategies convert “accumulated energy” into profits.
            That is what floats stock values.
            This is wagging the dog: Superficially do all the things that are expected of a super profitable endeavor and thus obscure that that warm flow of profits is nothing but converted life blood.

        • And the usual suspects blather with amazing hindsight, ignoring that some customers – like very large SWA – wanted to keep the 737.

          (I’ve criticized Boeing and SWA for not looking long in keeping with the 737. SWA goes so far as to not want greater wing span as that would necessitate greater spacing between terminal gates.)

          • good salespersons sell what the customer needs in the future
            and not what he thinks he needs by looking back.
            ( FBW would have never made it onto planes.
            customers invariably state their wishes in solutions they know about. it is high art to extract what they really need.)

      • No, Boeing was not remotely ready to launch a project, the MAX decision itself was almost brilliant (made so my its engineers).

        note to self: Don’t put a challenge to your engineers, you may get what you asked for!

        The MAX is equal with the A320NEO ( it is not with the A321).

        Aerodynamics are stuck in a rut (or hull form along with that) – as pathetic it is, when a 55 year old design is competitive with a 30 year old design, you have issues (those numbers are ball park, the A320 itself is aging)

        The A220 shows the issues, its good, but 15% vs much older designs with all the latest wing and engine?

        So the MAX was not itself a problem (MCAS that is one millionth of a part of MAX was a colossal hose up)

        Failure to develop a follow on long before was and certainly to come out with an A321 competitor.

        • Aerodynamics isnt stuck in a rut, commercial airplanes are a commodity and the optimised shape is tube fuselage and swept wing. The market is interested in fuel efficiency , which is led by turbofan development ( which involves aerodynamics inside engines too, even with the way the large fans hanging forward of the wing and wings work to improve lift). And then theres fly by wire and aerodyamics which ‘changes everything’

          The 737 is competitive with the A320 is because its wing is newer and lighter since the NG series…guess what the primary reason for that is ?
          So we should be comparing a 737 with a 2015 engine and a 1990s wing and a 1970s A320 wing with a 2012 engine.
          Boeing was always the world leader in wing design and still is.

          • When was the last time Boeing designed and built a clean sheet wing? The only clean sheet program since the merger in 1997 was the 787, and the GE style management outsourced the 787 wing . The pre-merger Boeing was a leader in wing design. The empty shell that is left is an industry leader in share buybacks, not engineering.
            I agree with the comment that the GE style management sees R&D as an expense to be avoided, that is R&D on new airplane development. In the 23 years since the merger how many clean sheet planes: 1. In the 30 years before merger: 737, 747, 757, 767, 777.
            The GE style management will spend on R&D for additional automation such as riveting machines because they run the numbers and see that these machines will pay for themselves in a short time due to reduced labor costs. The ivestment in launching a clean sheet plane will not be repaid for about 10 years, during which time the program will generate negative cash flow and reduce gains in the stock price (and management options). Ergo, no new clean sheet airplanes. Unfortunately, Airbus management is not so obsessed with short term performance, so they launch new programs and update their product line as Boeing slowly falls behind and continues the drift toward its ultimate death spiral.

          • I agree, wings and engines contribute the most to aircraft performance and the 737MAX has both new. The smaller fuselage cross section you can squeeze 3+3 pax into the lower the drag and mass. So the 737MAX with heritage from the 1960’s is hard to retire from a pure cost of operations perspective. The A220-500 will have the disadvantage of 2+3 seating and a long fuselage adding mass.
            The MC-21 with its 3″ bigger cross section really has to have better aero than the A320neo to be competetive. Maybe they have mathematicians and aero code programmers to solve that problem, We will see fuel burn numbers for the same payload/range some day as they have the same P&W engines.

          • MC-21 has a carbon fibre wing which is cured ‘out of autoclave’. So it seems to be ahead by a decade anything like that from the west.
            The first tier supplier like Spirit and others seem to be the ones who are investing in R&D on new materials and production processes, carbon composite and metal fibre composites for fuselage panels seem to be amoung them.
            Yes Boeing R&D did seem to be low in its recent years of rivers of cash flow, I thought it was around the same level as a middle ranking car company like Jaguar-Land Rover.

      • Hydrogen will almost certainly end up being a non starter for aircraft just like it is for cars, although unlike cars, batteries won’t work for aircraft. But like cars only about 25% of the input energy (solar, wind, hydro or nuclear electricity if you want low CO2 which is the whole point) ends ends up as thrust or wheel torque.

        Methane is more plausible because it has lots more energy than H2 per unit of volume allowing cryogenic tanks in the cargo hold rather than in the cabin and it has significantly less CO2 per unit of energy than kerosene. I does weigh more than H2 per unit of energy but is lighter then kerosene. That mass savings per unit of energy will (more than?) make up for the heavier fuel storage sy7stem(cryogenic tanks) than the wing structure used for kerosene. Because methane can very likely not go in the wings it does add some structural issues to the airframe though these may be small enough to not make it unusable.

        Aviation Methane or H2 are both expensive ways to reduce Aviation CO2 emissions globally which are only about 2% of the total. Much, much more valuable and cost effective and doable is to eliminate or drastically reduce the use of thermal coal burning (even if you just substitute methane for some of it) which is responsible for not much less than half of all CO2 emissions globally. Almost six billion tons of thermal coal are used globally per year (about three billion in China alone) resulting in about 20 Billion tons of CO2.

  2. I hope April 2022 is strictly enforced and that the continued Covid driven uncertainty means future projects are pushed back far enough that Calhoun has no significant part in them. Realistically, that April 2022 deadline looks serendipitous. Alows him time to tick off his sticking plaster tasks, with just time left to oversee a changing of the guard, timed nicely to arrive as Covid is finally behind much of BCA’s market. Give the new person a year to walk, warm, and flex, and then launch the 7307 in 23.

  3. Sounds like a combination of a mobster, politician and Mr. Bean.

    So, as discussed in the LNA article below, the big question is: where does Boeing get the money to fund any new plane program?
    – The margins on the 787 are under pressure so as to try to stop the A330 neo from getting a foothold;
    – The margins on the MAX whitetails are very low (or zero?), to try and attract buyers. The margins on the “PR” sales to Alsaka and Ryanair were also probably very thin. That sets a precedent for other MAX buyers, who can now just hold out until they too get very attractive discounts.
    – Without decent margins, and with low volume for the next few years, income will be strained to cover operating costs and debt servicing costs. Borrowed cash currently in the till is disappearing into sinkholes like compensation costs and re-working of airframes.
    – Since Boeing is already heavily in debt, this is a recipe for further balance sheet deterioration.

    So, when does Uncle Sam step in, and in what form? He might, for example, agree to act as guarantor for new debt certificates to be issued by Boeing — which would comfort bond investors that they wouldn’t lose their money. This would have minimal effect on the stock price, and is difficult to label as “state aid”. Of course, if Boeing squandered the newly borrowed money and Uncle Sam had to actually pay out cash to bond holders, the game would be over.

    • @Bryce

      I agree, as per post on the other thread : Calhoun has pulled off the feat of being less capable less likable and less trustworthy in every respect than even tractor man, who at least managed a getaway with a lot of cash

      I just can not see the US gvmt getting up the required energy to deal/map out a positive longish term solution for BA that is not just ‘kicking the can down the road’

      So what if you give them some short term money, they’ll just burn it

      WS must have some ideas up their sleeve, and are waiting for the buzzards to circle before clearing out the carcass

      There are a lot of known unknowns with BA, China Max re cert, the effects of CAI EU/China, the effects of RCEP, the victim law suits, the recent Indo crash, pax recovery, the virus

      But there are more unknown unknowns – a new virus, war with china, well maybe these are known already – a company so fragile at every level, shot through with failures emerging constantly, who knows what and when another disaster will strike

      • You guys don’t understand the US system and Boeing will go under before they take money telling THEM what to do.

        Boeing is not going under, Calhoun will get his 7 million.

        As long as he can kick the plane down the runaway long enough to get his big bucks that is what constitutes US management these days.

        The issue is US Corporations and the law, Boeing is a symptom.

        • Not to put too fine a point on Transworld’s comment, the progression of the shareholder value business model goes something like this:

          1) Find a company whose products are in transition from performance-driven to commodity-like.
          2) Install new management focused on cost cutting and extract the legacy value of the old performance-driven business model. (~$70 B in Boeing’s case)
          3) Harvest assets, reduce footprint, extract gains from suppliers, workers, taxpayers, and regulators, while diverting cash flow to shareholders, and gradually withdraw from competitive markets.
          4) Sell what’s left.

          Of course, Boeing’s Board and executives have blundered badly by failing to recognize that design and manufacture of airplanes is still very performance-driven, even if sales to airlines look commodity-like.

          A good study object is McDonnell Douglas. Just to say, near the end (step 4) MDC looked for global buyers, starting with their “equity” partners on the MD-11 program. I hadn’t heard of Evergreen in Taiwan, but they were offered a deal and declined. Boeing jumped at it.

          Keep in mind that a harvest strategy is designed to extract value, not sustain operation over the long term. Harry Stonecipher said if you can’t make high profit margins, you should get out of the business. When he approved launch of the 787, Harry insisted Boeing was not on a harvest strategy.

          That was troubling, and really cold comfort, since events over time have been consistent with Boeing having a harvest strategy, whether Harry said it was or wasn’t. I should say that another aspect of harvest strategies is that you don’t go blabbing it all over, especially when your products have 30 year service lives.

          Obviously, Boeing needs new leadership. On the other hand, if I were clinically sociopathic, and a graduate of a US business school, and I were looking for a buyer, I would need to consider COMAC, at least for the commercial business.

          • @Stan Sorscher

            Good description

            And it must be likely that the only possible solution/buyer for BCA is China

            This is presumably one of WS calling cards, neutralisation of DoD plans for War, de dollarisation, financial services, and the remains of useful US technology

          • @Sorscher: Don’t forget to load up with massive debt in step 3 to extract the maximum return for hedge fund managers/private equity fund managers/shareholders.

          • Stand Soscher:

            Well, that didn’t work with Sundstrand Data Control’s GPWS system, amazing how new competition popped up at the margin. Not that the new competition was honest nor successful.

            (I cover what I call ‘competition at the margin’ in http://www.moralindividualism.com/moinopol3.htm.

            Bombardier is an example in the airliner business, after success with its Challenger wide-body business jet it re-pioneered Regional Jets, then took the big risk of the C-Series airliner – putting a scare into Boeing, but didn’t have the pockets to carry through.
            Embraer started with small turboprop utility aircrafts, then 19 seat turboprop airliner, then 30 or so seats turboprop[p, then larger turbofan airliners.

          • Bombardier C-series scared the shxt out of BA. That’s why BA had to create an absurd excuse to file a petition against BBD.

            The genius of Boeing at the end shot itself in the foot.

    • Although the public funding argument is being pushed strongly and repetitively here, it’s a theory rather than a reality. So it follows the rules of the other theory narratives, keep repeating it to keep it alive, in the absence of any evidence or proof. We have numerous examples of this, here and elsewhere. But it remains an invention.

      • @Rob

        If you read my comments you will see that I nix the idea of public funding as a practical venture let alone a theoretical possibility

      • @ Rob
        Scott told you on Jan. 8 to “Dial it back. Drop the motive-attack”.
        You’re slipping back toward the “conspiracy theory” narrative. Please heed Scott’s directive, so as to maintain a pleasant environment here.

        There’s absolutely nothing wrong with formulating and examining possible paths for Boeing’s future: commentators and analysts do such things every single day. On a similar note, Bjorn’s entire series on hydrogen propulsion and the future of aviation is largely based on theory and conjecture “in the absence of any evidence or proof”.

        • Bryce, you hold up something that has not happened, then use it as a basis for criticism. I let it go over the course of several articles and numerous posts, as being what you assert, looking at a possible path. Also in deference to Scott.

          But when repeated constantly, as it now has been, by the same collection of actors who have been guilty of this before, it takes on the aspect of a conspiracy theory.

          It’s imperative to deal with method and motive when the arguments are invented, and a false narrative is presented. Revealing the method removes credibility of those arguments. Dial back the inventions, and there is no reason to address them.

          • @ Rob
            “But when repeated constantly, as it now has been, by the same collection of actors who have been guilty of this before, it takes on the aspect of a conspiracy theory.”

            By the same token, one could apply exactly the same reasoning to your constant stream of pro-Boeing comments and similarly label that as a “conspiracy theory”. After all, one mustn’t maintain double standards. Had you thought of that?

            Once again, seeing as it is Scott’s site — not yours — please follow Scott’s Jan. 8 directive and refrain from indulging in this recalcitrant behavior. It sours the environment here, and causes distress to other readers of this site.

          • @Rob

            This is not correct

            Bryce has suggested that it is possible that the US will not let BA disappear, offer support in one form or another, and this is obviously possible and plausible

            It is not a conspiracy to state that such an intervention may be

            Merely because this possibility is entertained by other people, perhaps even people at Boeing, perhaps even people in the US Executive, does not render this a conspiracy theory

            Please moderate your language

          • Bryce, I have never seen a conspiracy theory that presented a positive message, or was in support of something. They are universally critical.

            Nor have I seen one that was factual, which by definition, is not a conspiracy theory. But nice try, in deflecting your own actions on to me. As pointed out before as one of the methods used.

            There is no comparison between a hypothetical situation you have invented, and the factual progress that Boeing has made

          • @ Rob
            “I have never seen a conspiracy theory that presented a positive message, or was in support of something”

            What you label as “positive” can be labeled by others as artificial and unrealistic. For example, publicly-traded corporations who seek in their SEC filings to present a “positive” picture instead of a realistic picture are, in fact, engaging in fraudulent behavior, which can be construed as a conspiracy to hoodwink investors. Such behavior is severely frowned upon by authorities, and by shareholders.

            Your continued attempts to window-dress your behavior represent a worrying continuation of your lack of respect for Scott’s Jan. 8 directive. You are continuing to sour the environment here, against Scott’s explicit wishes. Please show appropriate respect for LNA.

          • Bryce, let’s allow Scott to worry about my behavior. Note that he would ever need to suspend me as he has you, repeatedly. He could ask me to leave and I would comply willingly with his wishes. We are all adults here. It’s his site and his rules.

            I am souring the environment here, and making it less pleasing for you, only in that I hold you accountable to a truthful standard. And I disrupt the otherwise solely negative narrative here, but in my mind that is a good thing. Whether it is in Scott’s mind, is up to him to determine.

          • @ Rob
            I notice you offered no retort to the point made in my previous post.
            And, for the record, I’ve only been suspended by Scott on one occasion…not “repeatedly”: please stop trying to disseminate “fake news”.

            You’ve told us here before that your engineering courses won various awards in the (distant) past. However, your current behavior is not commensurate with the image of an award-winning teacher; instead, it matches more closely to that of a cowhand who has spent his week’s wages in a saloon on a Saturday evening and is now looking to start a brawl. You should be ashamed of the low standards that you are demonstrating!

            You are not making the environment sour for me: your brash display is making the forum sour for other readers, as registered in multiple comments on Jan. 8 and 9, prompting Scott to reprimand you.

            I know that it is extremely unpleasant for you to be the only person on this forum who subscribes to a highly-manipulated “positive” image of Boeing, but attempting to vent your frustrations on other readers is not going to convert them to your cause.

          • Bryce, no retort was needed, as I mentioned you compare an invention to a factual event. SEC doesn’t prosecute people for positive facts, just for inventing or representing a falsehood, as truth.

            I’m aware that no factual argument will persuade the hardcore element here. But as this is a public forum, facts can be presented for both sides, and there are readers here who are open to those arguments, even if you are not among them.

            The core issue is that you and others here have a definite agenda, that you want to be able to push without opposition. You said earlier that this is not an inquisition, that you should be free to say whatever you please. But as Scott posted in a recent article, truth matters.

            You are free to speak in a crowded theater, but not free to yell fire in its absence. The latter is a misrepresentation of the truth that is meant to cause confusion and discord and damage, and that is the issue with the agenda here.

            So to the extent the agenda is not based on factual information, or facts are taken out of context, or are willfully misrepresented or misinterpreted, I will always point that out. Believe me when I say that I’m aware of being hated here for it, just as Boeing is hated here.

            The hate itself is meaningful, in that it manifests as ridicule and sarcasm, among other similar methods employed here. These methods reflect the lack of solid basis for argument. So I try to point them out as well, as they are another indicator of lack of truth. If I am wrong in the things I say, it should be possible to show that factually.

            If Scott were to boot me, I’m sure things would settle down immediately, and the agenda could resume without interruption. I sometimes wonder why he doesn’t, as I’m sure others do here as well. It would be the simplest solution. But then there still would be an agenda.

            My guess is this is what’s happened in the past, people with pro-Boeing views are hounded out, so they effectively self-censure or self-ban. Who wants to be hated, or to deal with the abuse? That has not worked with me, for better or for worse.

            There’s a difference between variations in subjective opinion, which are expected, and the continuous drumbeat of criticism that is so completely one-sided, it must deviate from the truth to support itself. Wherever that happens, it’s a sure sign of bias.

            In the absence of bias/agenda, it’s possible to disagree without insult or injury. Certainly JakDak and I have disagreements, but we can still discuss and put forth viewpoints. Or Scott, or Bjorn, or any of several others here. So it is possible, it’s not some unattainable goal. It occurs in other forums.

            A far as Boeing, they are neither completely bad nor completely good. If it seems that I push only the good perspective, as I’m sure it must, that’s because I am constantly trying to balance the bad perspective, which otherwise would be the only one presented here.

          • “It’s imperative to deal with method and motive when the arguments are invented, and a false narrative is presented. Revealing the method removes credibility of those arguments.”

            Indeed!

        • @Bryce

          I have mentioned this before, I know it is cold comfort, but still

          The comments of CC are useful as a glimpse inside the machine, the modes and manners of the Calhoun Corporate Class

          Without such constant detailed and insistent repetition to remind one it is hard to believe that this is in fact what goes on in C-suite : it is all about damage control, nada mas

          Note : no plans nor projects, no communication of intent, a maximum of intricacy in accounting

          Intent obscure, never avowed, no measure to be given less to invite judgement, no goals to be offered for fear of failure and ridicule, all action every decision merely provisional, with no purpose than to see the day through to the bell

      • Indeed, I could point to many cases of the folly of gummint funding, I listed some here recently, and noted the type of person who wants government propping up.

        Bristol Brabazon anyone?

        (Failures of all kinds: https://www.businessdaily.gr/english-edition/20295_israel-comes-tempting-offer-elvo
        From Wikipedia: “A number of ambitious plans for company development and new products were not realized, as the state character of the company linked it to effects from government changes and mismanagement. “)

  4. Would the 787 fuselage issues have surfaced under Muilenburg, or would Muilenburg kept it secret, since he owned safety and the MAX was so safe?

  5. One fundamental, effective long term change could be to no longer base executive salaries based largely on stock awards. The fixed salaries of 1-2 million meant nothing for Muilenburg and McNerney. They made 20+ million/yr based on stock value bonusses.

    So they spend all free cash to boost stock value, borrowed money to pay dividends and dived in a pool of money themselves as a direct result. Everybody (stockowners) cheering on the sideline, missing the insight the company was getting drained.

    So create executive / CEO salaries with a good fixed part (5mln?) and bonusses based on 10 year portfolio strength, operation integrity/compliance and long term value add for the US economy. (the last one justified by huge tax cuts, DoD orders, Ex-Im Bank, political support and R&D (NASA) funding.

    • Yep , see Corporate reform.

      Not likely. But then 3 weeks ago a second impeachment was not either.

  6. Boeing hired some executives from GE Finance oprations not any Aerospace engineering program manager/cheif engineer that was more required at Boeing in hindsight. GE did some not so profitable investments/decisions after Jack Walsh left but its Aerospace operations trotted along until 737MAX and Covid-19. Had GE sold GE Capital at its peak they could have bought Boeing by now.

  7. This article looks mainly at the negatives of Calhoun’s tenure, as Scott is wont to do. But there are positives as well.

    Under his leadership, Boeing has yielded the discussion of regulations and approval, for both the MAX and 777x, to the regulators, rather than contesting and competing with them in the news cycle, as Mullenburg had done. This has resulted in improvement in the relationship with the FAA and other regulators.

    Boeing also has ceased the forgiveness vs permission model with the FAA, wherein they would act first and inform later. There has been no further instances of that under Calhoun’s tenure.

    Boeing has also been forthcoming with the discovery of other flaws and problems, self-disclosing rather than waiting for them to be discovered, as had happened in the past. And was instrumental in cooperating with the various investigations, especially with the DoJ.

    Calhoun’s predictions of what would happen with the MAX have also been much more realistic than they had been previously. The certification flights took place in early summer as he said they would, although it took longer for the actual certification. That part was out of his control, but the MAX was ready when he said.

    Further in response to problems in the KC-46 program, when Collins was still pushing their software vision solution, the Air Force went to Calhoun and got what they wanted and needed. That relationship has improved, as has the KC-48 program overall. The Air Force said he was a man of his word, and that the program has been turned around.

    Calhoun has made policies clear, that working against or deceiving the FAA or ODA representatives, in unacceptable within the corporate culture. And that quality control is the responsibility of everyone.

    And Calhoun has been working to institute the safety management systems as recommended by FAA, and incorporated into Congressional legislation, to develop transparency around safety issues.

    So while many of Scott’s points are valid, overall there has been improvement at Boeing under Calhoun. Whether there could have been more improvement under another person, is an open question. We can speculate and debate that, but can’t know the answer. But he should be given credit for the positives, as well as blame for the negatives. That would be a fair assessment.

    • @Rob

      Few would agree with you about the practical extent of the improvements ‘under’ Calhoun

      He was on the board since 2009 and the most insider of insiders who presided over the Muilenberg disasters, he is as much responsible as anyone and more for the steep descent of this company into the ground

      The company is bankrupt, can not sell, in all likelihood, planes at a profit, has hefty if unspecified cost wise repairs on 787 which will not be ready for sale, even at a loss, until year end, cash burn at $5B a month – all the other problems listed by Scott…

      And things are getting better ? That’s a no

      • Gerrard, these are your opinions, to which you are entitled. I gave factual statements as to the positives, that are verifiable. The improvements I listed are real. You are free to disagree with the facts if you wish.

        • @Rob

          I do not give opinions

          Read the article and say these are opinions – these are the facts

          The facts are real, you would prefer to emphasise that Calhoun was not quite as perverse/stupid as his predecessor in continuing to lie to the FAA, and call this an achievement?

          He was not quite so aberrantly misguided in attempting to hide the fully apparent flaws in the Max: this is an achievement?

          The fact is – meanwhile – BA is bankrupt: or would you deny this

          What other facts in the article above would you deny

          • Rob: You cherry pick sources as well as twist reality into 11 different dimensions.

            You live in one of those self reinforcing bubbles.

            Ultimately the description is a gross distortion of facts.

            As the commies figured with a captive audience , Any lie told often enough become the truth.

            Its not that you are wrong, its just you are in the wrong place for that to work.

          • TW, I fully agree that LNA is the wrong place for that to work. But it does work in the real world. If there was agreement on the assessment of Calhoun presented here, he would be removed. But there is not. Which is my basic point.

          • @TransWorld

            I’d rather see Rob’s cherry-picked information than opinions masqueraded as facts from the anti-Boeing crew.

          • Gerrard White
            January 13, 2021
            @Rob
            I do not give opinions”

            ROFL, that’s your fantasy.

            With TW in one of his strange moods.

            Quality needed.

        • @Keith Sketchley

          You are very free with your opinons on people

          Please keep to the facts

      • @Rob

        I said cash burn at $5B a month, I mean to say cash burn at $5B a quarter

        The rest stands

      • Likewise at Boeing, it was a team effort. I doubt Calhoun had much to do with getting the max back in the air other than staying out of the way.He will still get a massive bonus for it,while the lads get the sack.

      • Scott, I apologize if I attributed words to you, that were not your words. But my basic point stands, balancing and tempering facts are still important, even when presenting criticism. Whoever’s words they were, they needed to include some positive words as well. Those words do exist, and are truthful and justified in the context of the article.

        • The Civil War was lead by many years of balancing and tempering.

          Funny how that played out again last Wds.

    • @ Rob
      Poking scorn at Scott is hardly justified (or polite, seeing as it’s his site): there are many analysts who consider Boeing to be in deep trouble…and, de facto, a large part of that mess can be attributed to Calhoun.

      Airlineratings.com
      https://www.airlineratings.com/news/dreamliner-defects-see-analysts-slash-boeing-outlook/

      Fitch ratings agency:
      https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-boeing-to-bbb-outlook-negative-29-10-2020

      When you say that “overall there has been improvement at Boeing under Calhoun”, that certainly does not apply to the cashflow, balance sheet, order backlog or 777X program outlook…or, indeed, to Boeing’s image, in view of the newly emerged QC issues with the 787, the recent DoJ fine, and the lambasting by the United States Legislature.

      • In fact the only people that think (and we can make a good argument they don’t believe it) that Boeing is just fine is the Boeing Board and Rob.

        And he is not even getting paid for it.

        Oh yes, those who do so want to tear Boeing down. Jason Miller comes to mind.

        • Seriously, Rob is not paid for all his efforts? Neither directly nor indirectly? Absolutely sure? That is really hard to believe.

          • Gundolf, that argument has been raised before and refuted, as you well know. It’s the basest form of debate, and is the province of those who cannot conceive that a viewpoint other then their own could have any merit. But if you wish to add your name to that list, so be it.

        • @TW: I believe you should at least give Albert an honourable mention. 🙂

          • Depends what you mean by “just fine”, that’s subjective. I’ll back up Rob because, despite his apparent bias, he consistently brings in facts that can be checked.

    • ‘Calhoun has made policies clear, that working against or deceiving the FAA or ODA representatives, in unacceptable within the corporate culture. And that quality control is the responsibility of everyone.’

      This is a very low bar to set for the CEO, perhaps it shows how far Boeing has fallen. Given his long association with the company and pivotal position on the board i don’t think this really rings true. Where was this concern or guidance in the past? The board had consistently divested the company of money for many years through high dividend payments and buybacks during his tenure.

      You are now telling me that Calhoun is some saviour because he is requiring something that should have been fundamental for many years. The concept that employees need to be told not to deceive or work against regulators as a cultural shift is quite terrifying. Don’t these employees have some professional ethical code associated with their professional standing as engineers or pilots?

      • Sowerbob, I said nothing regarding Calhoun being a savior. I agree that he has made basic changes that any other person also would have done. Nor did I claim that the article’s points were invalid, or attack Scott.

        I pointed out that the points raised were not the complete picture, and that remains true. I pointed out that there has been improvement at Boeing, as a result of Calhoun’s leadership, and that is also true.

        But that can’t be tolerated here, because it goes against the anti-Boeing narrative that binds people together. So it will be attacked and criticized, as always, and as expected. I know what the response will be when I write the words, it’s very predictable and never varies.

        But please notice, Calhoun remains the CEO, and continues to try to improve things at Boeing. And will for the foreseeable future. Despite everything that is said here, which in the end, does not alter the reality

        And whatever he achieves, will be dissed here as being non-supportive of the narrative, which holds that Boeing should and will collapse/fail. But he will contribute to Boeing nonetheless, and be valued by those in reality, who understand. Just not here.

        • By picking on small parts of what I wrote you conveniently ignore the main thrust. Simply Calhoun was fundamentally involved in the previous workings of Boeing that seemed to positively endorse wrongdoing (working against and deceiving the regulators at every level). In that context he is an ‘insider’. To suggest he is in a position to change the culture in any meaningful way is risible. How can any level of Boeing management or workforce take this seriously rather than as vacuous utterings to appease the external stakeholders. To truly improve its culture Boeing needs a new board, CEO etc who are not tarred by the previous regime.

          I note your new defence is centred around accusing anyone who disagrees with you as having a specific ‘anti Boeing’ narrative. Highlighting glaring weaknesses in the senior management is not the same thing.

          • Claiming that an anti-Boeing narrative does not exist here, is truly risible. Claiming that Calhoun could not effect change, is not risible, in fact he already has, as described above. Those are the facts, which you have yet to dispute.

            You just prefer the negative narrative to the positive facts, which you see as being mutually exclusive. They of course are not, the CEO and board are neither totally good nor totally bad. There are both positives and negatives involved, which is my whole point here,

            But the narrative requires them to be totally bad, so the good points must be discredited, along with anyone who puts them forward. Which is more or less standard procedure here.

      • FYI, few engineers at Boeing will be licensed Professional Engineers as that is only required in WA for engineering management at some level and not necessarily all, AFAIK. (It’s been years since I checked.)

        Pilots of airplanes are licensed, pilots working in simulators might be pilots no longer licensed for medical reasons but I’d expect most are currently licensed so they can do some of the flight testing.

    • I think this does nicely balance some things. I think we would all like more sweeping changes, but at a baseline a company like Boeing needs regulators and customers to trust and support them, and this does seem to be changing. The company is no longer in a nosedive, but is not yet back to climbing so to say. It’s right to hold him accountable for strategic blunders, but on operating measures they are slowly improving. If I had to guess this was his task: stop the bleeding, punt some decisions until this is done. It’s also worth mentioning that strategically large companies get very risk averse, a challenge for a company like Boeing is how to overcome this in an industry that demands innovation.

  8. A normal commercial company with high debt, low margins and no new products in the pipeline doesn’t survive. My financial analysis tool classifies Boeing as a “SuckerStock”, which is the lowest grade for a company that hasn’t actually gone bust. $40 billion at 5% is £2 billion a year out of cashflow just in interest payments, never mind where the $40 billion to repay the debt comes from (assuming they take up all their current facilities and don’t take on any more). Boeing has made overt government subsidies impossible because of the fuss they created with the WTO cases. But Uncle Sam can’t afford the ignimony of Boeing going bust, so a way will be found. Maybe go back to the 1950’s model and have the goverment fund a new military transport airplane, then buy two airframes and turn over the rights for commercial exploitation of the design to Boeing for $1? Anyway, I’m not buying shares in Boeing any time soon.

    • Your analysis of the stock chimes perfectly with what financial analysts on CNBC say on a regular (almost daily) basis. Those analysts aren’t interested in hot air and smoke screening: they look at balance sheets, debt load, market share and revenue outlook — and on that basis they put Boeing into the “dunce’s corner”.
      Just as with the collapse of Russian Railway stock/bonds after the fall of the Soviet Union, and the financial ruin that that caused for many Russian pensioners, I’m sure there are very many Boeing stock holders who are in a state of shell shock and denial now that their investment is staring into the abyss. After all, it was viewed as a “safe and solid investment”, and was probably a cornerstone of many 401(k) portfolios. One should remember that, in 2009, the Irish government nationalized its largest banks, and shareholders lost their entire holdings — so, although rare, such things do happen.

      • Bryce:

        Over here Penn Central, Savings and Loan and Enron would resonate.

    • Boeing could make use of the Primary Market Corporate Credit Facility (PMCCF) under which the US Fed will lend to major corporations stressed as a result of business conditions brought on by COVID. Basically free money for 4 years and no need to give-up equity. However this program rules out stock buy-backs and dividends.

      https://www.brookings.edu/research/fed-response-to-covid19/ see PMCCF.

      • @jbeeko

        It is a moot point as to how many of BA problems were brought on by the virus, or rather by measures taken by the administration to attempt to control the virus

        It may not be said that the Max crisis was virus caused; nor the 787

        Nor the neg debt brought on by the return of all income to Wall Street

        No one can deny, however, that the very worst of company behaviour became very much worse under the circumstances of the virus, which brought out the worst in Boeing as in so many

        The PMCCF facilities apply to highy rated corporations, BA is a step away for junk bond status

        Nonetheless, BA might be eligible for a billion or two : but this would be to throw good money after bad

        To set BA ‘right’ it would take injection of many tens of billions, plus above all new management, new legal team, new…..you name it

        To give the current management money would be unwise

      • Repay in four years?? BA issued bond that doesn’t have to be pay back in full until *2060*.

        That’s “long-term” planning (I mean dollars and cents only)!!

    • “$40 billion at 5% is £2 billion a year out of cashflow just in interest payments”

      Are you sure you are an experienced investor ?
      You should know that corporate bonds of investment grade companies and those with large ‘cash positions’ like Boeing are more like 0.75%-0.8% interest rate. Its not 5%!
      The annual interest payments are around $300mill plus . Easily managed by a $100 bill company like Boeing.

      • @DoU

        You miss the point – BA does not qualify for either PMCFF money, nor for new bond issue

        Due to Fed stimulus money is cheap, but not free – credit rating is involved – BA floated the idea of another issue was turned down

        No large corporation can survive with junk status

        BA cash flow is massively negative – even without a new plane project

        How to raise a lot of capital – $50B? $80B – to ‘relaunch’ is their dilemma, let alone survive – perhaps you have an idea of how either/this might be achieved

        • What @DoU doesn’t get is the street doesn’t treat BA as investment grade anymore! Take a look at the spread when BA issued its massive 25 billion bond in April, 450 basis points above Treasurys. So it would be close to six-percent interest, shoker! Not whatever <1% some posters dreamed up.

      • Boeing is paying around 5%. There is plenty of validation for that around – see Forbes for example, here: https://www.forbes.com/sites/jeremybogaisky/2020/05/01/boeing-25-billion-debt/?sh=3a3618c841f8. Boeing’s historic weighted average interest on debt is 4.64% and you can find that here: https://www.stock-analysis-on.net/NYSE/Company/Boeing-Co/Analysis/Debt. The yield on the benchmark 10 year US Treasury Bond is currently 1.1% and you can find the yield curve here: http://www.worldgovernmentbonds.com/country/united-states. The US goverment has had the ability to print as much money as it likes since Nixon took the US dollar off the gold standard in 1971, see https://www.federalreservehistory.org/essays/gold-convertibility-ends. Boeing doesn’t have the ability to print its own money and it’s somewhat unlikely that Boeing is borrowing at lower rates than the US government.

        Incidentally, the Forbes article puts Boeing’s total debt at $54 billion and says that is 22 times EBITDA. So, Boeing’s earnings are 54/22 = 2.5 billion pa. The interest on $54 billion at 5% is 54 x 0.05 = 2.7 billion pa. So, if Boeing takes up all of its debt facilities, it will pay more out in interest each year than it earns. If the Forbes figures are right, Boeing needs to get its earnings up fast or it will die. Or maybe, like the Irish banks, Biden will nationalise it without compensation to the shareholders. Anyway, I’m still not buying shares in Boeing.

  9. I guess we can all see where Boeing is and most agree how they got there.

    More interesting will be to see how Boeing / Calhoun get out of this mess, reduce the debt, update the portfolio and restore marketshare & relationships with customers, suppliers, employees, authorities.

    Calhouns short term priority might be survival and restoring deliveries 2021-2022.

    The big question is if longer term changes can be pushed out, without creating even bigger long term damage.

    • No, you assume the goal is to fix Boeing.

      Calhoun goal is to get his money while the getting is goad and if Boeing collapses as he walks out the door, as long as his money is secure, he is good.

      • His 2 predecessors left company with steep bank accounts by outpromising the public and draining the company. Calhoun was a ally of both. But there is little left to drain & promise.

    • The agreement settles the “qui tam” civil suit by the plaintiff against Insitu, with Insitu not admitting fault and the plaintiff dropping the related retaliation complaint. The settlement does not address the retaliation at all.

      The settlement amount is $25M to be paid to the federal government, which includes $12.8M in restitution for overcharging the Navy, and $4.6M as the plaintiff’s share, with the remainder as penalty.

      While Boeing did not participate in the fraud, according to the plaintiff they did not accept the compliant and did retaliate against him. So the result seems fair, given what occurred. Obviously the government substantiated the complaint.

      The contract in which the fraud occurred was for $78M. In 2019, Insitu received another contract for $390M.

      • Seattle Times:

        Boeing to pay $25M to settle fraud case at drone unit Insitu

        The whistleblower gets $4.625M plus legal costs. *After he made an internal hotline complaint, Boeing Ethics identified him to Insitu’s HR department.

        “Within a few weeks, I was terminated.”*

        I guess that’s what some posters’ idea of “shared responsibility”.

        Boeing ethics are alive and well. Lie, mislead, and deceive.

  10. I don’t know if Boeing will launch any new aircraft soon, but they should be talking about some things in the near future. Keeping their bread and butter freighter market rolling may require a 767-4F with a newer engine. How long will the 777F last before it is time to switch to a 777-8F? Try to increase the capability of the 737-9 with a 737-9er that has more fuel tanks and the landing gear of the -10.

    • I agree that Boeing is king of the freighter segment (did you see that Rob? I do actually say positive things about Boeing). But all the freighters are old models — untainted by the ultra-low quality and image of Boeing’s newer passenger models.
      However, with the huge glut of relatively young second-hand passenger planes on the market, P2F conversions are eating a large share of the new freighter market.

      • Actually that was meant to be a reply for Scott for something stupid I said before!
        I will read your link, but I think $50 billion from uncle Sam is the most likely outcome.

      • Wall St whispers ???
        More likely a target for ‘pump and dump’
        Wall St activity is the target of literally 100s if not 1000s of stock tipping sheets like this., and it doesnt seem they ask money for their insights which again raises a flag about ‘cheap advice’
        This one is written in Sweden, a long way from any US financial centre but you have to ask do they have a history of being right, and much more than just ‘tossing a coin right’.
        The style of writing is interesting in that it bags Boeing ( and quite rightly so) but spends a lot of effort in saying so. And if a ‘possible’ defense only Boeing is a good investment, why bother when theres Lockheed or Northrop to choose from.

        • @DoU

          What is the difference? P and D are whispers first then a chorus : this is not advice this advertising

          It is doubtful that anything WS sells could be called ‘advice’ in the sense that it was advisable for anyone but the person selling it

          Money, and ‘fees’, are made by breaking up companies, why not break up Boeing

          ‘Investments’ are for the suckers, n’est ce pas

          By the way : Capitalism is global; they are everywhere the WS whisperers, even now in China

  11. Such a break-up / spin-off is perhaps the only viable route.
    BCA could be allowed to go bankrupt, and then try to rise from the ashes under the umbrella of a more competent acquirer: there’s no other realistic way for it to continue operations under its crippling debt load.

    • Its not crippling. Bond rates are around 0.75%. Covid has impacted a lot of major companies and those like Boeing or Airbus and other airlines are all in the same boat.

      • @DoU

        Boeing rating is one level above junk

        Crippling in that sense, if BA tries to sell more it’ll be junked

        That is crippling

        • BA withdrew its forecast that it would stop burning cash in 2021, confirming (indirectly) continued cash bleed this year.

      • @ DoU
        The interest rates you quote are plucked from thin air. 5% is a more realistic figure. Higher rates are standard for a borrower with a low credit rating (almost junk in Boeing’s case).

        https://www.forbes.com/sites/jeremybogaisky/2020/05/01/boeing-25-billion-debt/?sh=3bf83e7d41f8

        https://www.reuters.com/article/us-boeing-debt/boeing-raises-25-billion-in-blowout-debt-sale-eschews-government-aid-idUSKBN22C3SJ

        Also, don’t forget that, in addition to the painful interest payments, the principal / borrowed sum has to be repaid at some stage.
        As the Forbes article says: “Boeing Is Now Owned By The Banks”

        • GE doesnt have a stellar credit rating anymore either along with a vast swath of US industry .
          Those higher interest bonds only one for 10 yrs at 5.15% others are for extremely long maturities at 0.5% premium over Treasuries, the figures say some out to 2060!!!
          And the reason for the the high yield, just like the Ford $8 bill at the same time was they were unsecured bonds, ie without assets pledged to cover them.
          https://www.shearman.com/news-and-events/news/2020/05/boeings-record-breaking-$25-billion-bond-offering
          So ‘owned by the banks’ is misleading when there is no security offered, its just a piece of paper if a default occurs

        • From BA SEC filing:
          Interest rate of the 25 billion raised range from 4.508% to 5.93%. Annual interest payable close to $150 million.

          What @DoU doesn’t know is BA is rated at the same level as Nissan Motor. Yeah the one also involved a scandal, losing money and facing a questionable future.

          -> Companies have been borrowing at a rampant pace since the Federal Reserve pledged unprecedented support to the credit markets, and strong demand has brought borrowing costs down toward pre-pandemic levels.

          -> Those initial risk premiums are more in line with junk-rated companies, and will “get the greed juices flowing,”

          -> Boeing included a provision in its bond sale that pledges to increase the interest rate for each downgrade into speculative grade.

          -> BA’s bonds, however, have traded lower, with debt maturing in 2050 and 2059 quoted at less than 80 cents on the dollar, according to Trace. Notes due next year are trading close to par.

          Market’s reaction is Fear!

          • Oops.
            Annual interest payable close to *$1.5 billion*, not 150 million.

  12. Calhoun does not appear to be the right man. I’d say Covid-19 first; and then the product line are the challenges. They need an exceptional person to lead the company. A guy with brains and a soul like Alan Mulally. I don’t think this board is capable of finding him. Fortunately, commercial aerospace is a duopoly, so Boeing should be able to stagger along…

  13. Strategy is incredibly difficult, it’s more common to get it completely wrong or right at the second attempt.
    With that in mind it would be interesting to look back at what people said over the last decade.
    The markets never spotted or didn’t care that there was anything wrong.
    Many commentators (including here) have completely changed their tune. I’ve tried to look for a few quotes but the only one I can find is O’Leary in 2012 discribing the A320 NEO as a dogs breakfast drawn on the back of a fag packet!

    • Yes. Thats a good point. For some reason the Boeing analysis of the then just announced A320 neo in 2010 was way off target with its improvement in fuel efficiency
      The only way to explain it now was their internal analysis was correct but management chose to blow a smokescreen.
      However your O’Leary comment is the reverse of what he said
      “Although he said Airbus’ A320neo “does credibly deliver” on its promised fuel savings, the 737 Max “as a product, is rubbish,” according to a report from Bloomberg.
      This isn’t the first time O’Leary has voiced his opinion on the 737 MAX, Boeing’s new engine variant of the 737.”
      https://www.bizjournals.com/wichita/blog/2012/03/ryanair-ceo-737-max-is-rubbish.html

      • And if you were thinking of buying a apron full of them would you praise it or perhaps talk about how the competitors product is a better one?

        CEO’s know every public statement will have an effect. So what effect would O’Leary want?

        • Seems too obvious. When customers came up with that approach I used to say ‘ If its a better product, go ahead and buy it’.

      • “”the 737 Max “as a product, is rubbish,” “”

        But that’s what O’Leary wants, the cheapest of the cheap.

    • “We have 50-60% of the global fleet, the market grew 5% over the last 25 years, the stock is at record height, free cash flow is what really matters and everybody loves Boeing! ”

      Over the last decade that proved good enough to seduce observers to not look at growing debts, aging portfolio, tricky accounting, quality issues and key customer flipping to Airbus.

  14. @BRYCE, @ROB:

    Grow up and knock it off. I’ll throw both of you off.

    Hamilton

    • You don’t have to throw me off Scott, I’ll leave willingly. I defended myself here against attack. I’ve been incredibly patient about that in the past.

      Today I pointed out that the repetitive comments on a Boeing government bailout were not based on any substance, and that there were positives as well as negatives for Calhoun’s tenure as CEO. That should not be cause for what was said in response.

      A rational response on Calhoun, would be as Zoom said, the points are valid, so we list them side by side and let people make up their own minds. No need for conflict.

      Or on the Boeing bailout, a rational response is to admit it’s a hypothetical, so we don’t push it forward as if it’s the likely or only possible outcome. Again, no conflict.

      Both positions are true and verifiable in reality. Neither would be controversial in the mainstream. So I don’t accept the equivalence between Bryce and myself. But as I said, your site, your rules.

  15. “And then COVID exploded, all but destroying commercial passenger demand and with it, ability by airlines to take delivery of new airplanes.

    Sorry Scott, IMO the above doesn’t truly reflect what happened last year.

    First, the WB market:
    Airbus 82 -53%
    Boeing 114 -55% (B787 -66%)
    Boeing has roughly 70 787 waiting for “enhanced fuselage inspection” at the end of 2020 after manufacturing flaws are discovered.

    The NB market:
    Airbus 484 -30% (incl. A220)
    Boeing 43 -66%
    The 66% drop in 737 delivery is mainly because of unprecedented grounding by regulators around the globe that prevented delivery for a substantial part of 2020.

    • @Bryce

      Good link

      Re Sir T and the Max

      Where opinion is fact : when the market lays down the line

      Sir T may not be accused of being anti Boeing, and if others agree with him that does not make him a conspiracy theorist

      Ditto- WS marks BA’s credit ranking to one thin line above junk – is WS anti Boeing ? Is the investment community conspiring ?

      This is market fact

      Another is that a lot of commentors here as elsewhere have said much as Sir T has said, without his authority perhaps, but just as matter of fact

      PS Sir T did not once mention covid (as reported by Reuters)

      Although he did in this report

      https://www.arabnews.com/node/1792471/business-economy

      In which he anticipated much pax take up by year end for Emirates at least

      ““We’re in a good place with the fleet that we have, albeit not as highly utilized as it was prior to the pandemic, to start operating again as soon as the doors open with regards to accessibility to the markets,” Clark said.

      Emirates, which reported a $3.4 billion half-year loss and received $2 billion from the Dubai government to help it through crisis, will report a full year loss for the year ending March 31, he said.

      The airline is expected to return to profitability in the year ending March 31, 2023 and as it stands does not need any more financial assistance from the government, Clark said.”

      • @Bryce

        PS Sir T did not once mention covid (as reported by Reuters, above)

        Although he did in this report

        https://www.arabnews.com/node/1792471/business-economy

        In which he anticipated much pax take up by year end for Emirates at least

        ““We’re in a good place with the fleet that we have, albeit not as highly utilized as it was prior to the pandemic, to start operating again as soon as the doors open with regards to accessibility to the markets,” Clark said.

        Emirates, which reported a $3.4 billion half-year loss and received $2 billion from the Dubai government to help it through crisis, will report a full year loss for the year ending March 31, he said.

        The airline is expected to return to profitability in the year ending March 31, 2023 and as it stands does not need any more financial assistance from the government, Clark said.”

    • “”Emirates boss says Boeing must recognize top-down role in MAX flaws””

      No excuses.
      And Calhoun is producing 777-9 whitetails for one year.

  16. For those who have difficulty grasping/believing the extent of the financial mire that Boeing has created for itself, this link (for example) illustrates the extent to which financial analysts examine Boeing’s health (and compare it to its competitors). Little wonder that Boeing’s credit rating is one level above “junk”.
    Note that it was already insolvent in Dec. 2019.

    https://www.stock-analysis-on.net/NYSE/Company/Boeing-Co/Ratios/Long-term-Debt-and-Solvency

  17. There have been starking similarities, pertaining to eerily similar cultural shift away from technology and quality over decades, between Boeing and a great organization which is the Navy. The father of the nuclear navy, H.G. Rickover, tried his best to draw attention towards this cultural shift underway within the Navy led by the line officers but his efforts ultimately proved to be futile. The parallels have been analysed and covered really well in the following e-book series. Recommended for those looking for a deeper dive..
    https://www.amazon.com/Airbus-vs-Boeing-Narrow-Body-Cliffhanger-ebook/dp/B08HKJ7TF3

  18. I always wonder how ppl can say Boeing needs a new plane/family.

    They have a pretty new, modern and very well selling one, their newest (B787) where the development and deferred cost almost killed the company.
    They were literally a fire over the ocean short of a disaster.

    They have 2 re-engined families, both on state of the art technology. One was grounded, the other one is 2 years late already, had a busted fuselage and other issues.

    They have yet to end 2 programs B747 and B767, with the later being built as F and tanker, another development disaster costing $$$.

    It’s absolutely unclear what kind of plane they should build, they have a SA, a smaller WB and the largest twin WB available.

    They have tons of problems with their planes, tech, dev. etc.

    Before you ask Boeing to build a new plane, ask if they can.
    All their later developments ended in more or less failure till disaster range.
    Do they have the engineers, the culture, the knowledge, the processes, the management, the planning, the know how and the understanding of the market, is there enough demand, etc. to develop a new airplane?

    If you look at Boeings last 15 years, hell no.

    B787: Late, huge cost overrun, poor quality and a grounding.
    B748: Late, cost overrun, and far off demand.
    B737Max: Disaster.
    KC46: Late, poor quality, cost overrun.
    B777x: Late, already some issues, cost overrun and far off demand.

    Boeing needs to fix its problems first, and then build another plane.

    • “It’s absolutely unclear what kind of plane they should build, they have a SA, a smaller WB and the largest twin WB available. ”

      Indeed, thankyou for injecting common sense into the subject that is fraught with pontificators who do not have a stake in the outcome.

      Thomas Sowell once remarked that the dumbest way to make decisions is by people who do not have a stake in the outcome.

  19. “But not Calhoun himself. When asked about this on his first media call after assuming office on Jan. 13, Calhoun said he was like a moviegoer with a front-row seat, but he wasn’t an insider.”

    Illustrates a challenge of board members – how much to get involved. They should each have a sub-role and do walkthroughs, and ‘pack drills’ when there is a problem (dig deep into it).

    I’m about to write to a board member of a security software company to tell her of the company’s web site mess that is affecting sales and customer login, which motivated me to avoid recommending their historically good product to other people. I will as usual play skip tracer and get it into her hands outside of the troubled company.

Leave a Reply

Your email address will not be published. Required fields are marked *