Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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HOTR: Boeing continues to burn off deferred charges
By the Leeham News Team
Jan. 29, 2021, © Leeham News: With all the headlines about Boeing’s record-breaking 2020 loss and the $6.5bn forward loss for the 777X program, there was one item overlooked.
Boeing continues to reduce the deferred production costs for the 787. This is despite reducing production last year and suspending deliveries from October.
Deferred costs continued to come down quarter-over-quarter. Peaking at more than $32bn years ago, the total now is $16.6bn.
Potential forward loss for 787
However, CFO Greg Smith warned on the July 27 year-end earnings call that any production rate reduction below the 5/mo that goes into effect in March could be bad news.
“The 787 program has near break-even gross margins due to the previously announced reductions in production rates and program accounting quantity,” Smith said on the call. “If we are required to further reduce the accounting quantity and/or production rates or experience other factors that could result in lower margin, the program could reach forward loss in future periods. However, on a cash basis, the 787 unit margin has held up relatively well even with these lower production rates, and many of the underlying productivity and profitability drivers remain in place.”
COVID-Related Bankruptcies and Restructurings
Airline bankruptcies and restructurings related to the COVID crisis are updated through Jan. 28, 2021.
Click on image to enlarge.
“…or experience other factors that could result in lower margin.”
Such as:
– Severe competitor-oriented price-cutting, in a desperate attempt to pull interest away from the A330 neo (and, in the future, perhaps the CR929).
– Probable future systematic price-cutting, to try to tempt airlines into buying new airframes rather than just sticking with what they have or going to the secondhand market.
– High revision costs per frame, necessitating weeks in a hanger with stripping of interior to address problems in rear and front fuselage.
@Bryce
Might one add –
increased costs of debt servicing
increased 787 cancellations; FAA imposed re cert
777X re cert – has this been factored in as likely/probable/impossible
negative Max re cert decision in China : possible closing of China and RCEP market
As you point out: if AB was so inclined it has the planes the cash and the credit to try on a price war: one can imagine an inventive WS financing such, short one side long the other, a double win win, scoop up the trashed
That is to say: BA is in play
That has to be a pre Covd momentum figure from the jacked up production rate and that is not longer remotely valid.
They have 80 of them sitting around.
Real accounting would call that 8 -10 billion debit unless delivered.
As noted it does not account for the current issues not future actions by the FAA when Dickson is gone and they address the removal of the layers of lightening protection not approved by the FAA but ignored.
Real accounting calls planes completed but not delivered under contract as ‘cash equivalents’. They are an asset not a debit in any sort of normal world.
That would make sense, I gather they are mostly paid for at that point.
Still an albatross and not able to get them off to a customer.
From an analysis on Politico:
“Other top DOT jobs: In general, it will be a few months before Biden starts choosing and nominating other jobs at DOT, in the secretary’s office and atop the many administrations.
One door that won’t likely revolve: Steve Dickson, who heads the FAA. The job carries with it a five-year term, of which he’s served only one year.
There have been some calls from safety advocates (and at least one Democratic member of Congress) to remove Dickson and replace him with pilot and speaker Chesley “Sully” Sullenberger, but the chances of that seem slim, and Biden hasn’t addressed the issue.
In addition, despite having been nominated by Trump, Dickson has plenty of fans in the industry.
For instance: “Dickson has done a fabulous job,” Patricia Gilbert, executive vice president of the National Air Traffic Controllers Association, said in a recent interview “For the sake of stability at a very important agency, he needs to stay in place.”
Excellent article in the SF Chronicle discussing why Dickson should be booted:
https://www.sfchronicle.com/opinion/openforum/amp/FAA-needs-new-leadership-bring-in-Sully-15832537.php
The point was that Dickson is unlikely to be replaced, despite calls for that from some quarters, which are acknowledged in the analysis, yet not viewed as credible
But as with all else, we will see what reality brings over the next few months. The outcome is not determined by opinion or commentary.
@Rob
All outcome is determined by opinion and commentary
Nothing is self evidently true universally
Especially when the subject is human affairs
Especially so the appointment of a post in the executive branch
Some people like x for the job, some like y for the job : all bring forth words and try to convince and persuade those in positions of influence who in turn influence and persuade those who have the ear…and so on
This is called democracy – even if executive powers have expanded somewhat beyond, some/most consider, than originally intended in the Constitution
Making a better case, conveying a better perception advice and judgement is a duty, even when, as some say, all is the will of God
Dickson fought against a whistleblower about safety and LOST.
Sure this makes sense, it shows what Dickson is.
Turns out Dickson lost his reputation long ago.
Also remarkable is how Trump could find this clown.
Seems Biden has no clue.
@ Leon
You’ll note that the article in the SF Chronicle talks of “Dickson’s bitterly divided confirmation opposed by all voting Senate Democrats last year”.
If he didn’t get a single vote from a Democrat, his current position is rather shaky, isn’t it? 😉
Just to clarify, Dickson did not lose a case against a whistleblower, Delta did, although the case is still under appeal.
Dickson was VP at the time but had already retired and was nominated/appointed to the FAA when his testimony occurred. He testified that he had no contact with the principals (plaintiff, doctors, lawyers) during the period of the medical evaluation. The principals confirmed that under oath. But the tribunal judge said he found that evasive, as Dickson must have consulted with someone before approving the requests.
The judge was also unhappy with Dickson’s testimony that he could have denied the requests as VP, but didn’t because he didn’t view them as retaliation. The judge said he found that untruthful. But no evidence to that effect was presented.
This was a tribunal hearing and not a trial, so under the rules, the judge accepted hearsay evidence, examined witnesses himself, and made allegations of his own, separate from the charges brought against Delta by plaintiff.
In the end, the plaintiff deserved compensation because she was railroaded by the independent consulting psychiatrist hired by Delta. He diagnosed her with bipolar disorder, when 3 other doctors later concurred she had a personality disorder. His medical license was later revoked. He was basically a quack.
She was grounded for 22 months, and although she received full pay, she lost flight time, overtime, seniority, and promotion opportunities, before she was reinstated by Delta at the end of the review process.
She had continued to work for her own web & public speaking business during that time, as she has a doctorate in aviation safety. The judge gave her $500K in compensation, plus all legal and medical fees.
She started the case under OSHA as a combined safety/equal opportunity action, but it was dismissed for lack of evidence. So then she filed for whistleblower protection.
Overall the entire case is a mess, so no telling wat will happen on appeal. I don’t think Delta cares about the money, which is nothing for them, but they disagreed strongly that her evaluation was intentionally retaliatory.
This came up in Dickson’s confirmation hearing, and the vote was delayed while he was investigated by the transportation committee, They found no evidence of wrongdoing, so he was confirmed.
I think he is well respected, even by Democrats, when political theater is set aside. But we will see what happens.
Sure Dickson LOST.
“””the DOL issued a ruling which, “determined that Steve Dickson participated in efforts by Delta Air Lines Inc. management to wrongly use a psychiatric evaluation to retaliate against a pilot who raised safety concerns.” The administrative judge “determined that Delta punished and discriminated against a federally protected whistleblower…”. The lengthy decision by a department administrative law judge concluded that Mr. Dickson, as Delta’s senior vice president of flight operations, knew about and approved punitive moves against veteran co-pilot Karlene Petitt. “The ruling calls Mr. Dickson’s testimony in the case vague, evasive and ‘less than credible’.” Karlene Petitt has a doctorate in aviation safety”””
Just to clarify, Dickson ultimately got a kick in the teeth from the whistleblower case: the SF Tribune describes that in detail.
[space for discretionary vacuous waffle]
This came up in Dickson’s confirmation hearing: the only reason he was confirmed was because Republicans had a majority at the time.
Corrupt and incompetent officials who dirty their hands are never well respected, especially by Democrats — important seeing as Dickson’s nomination is political. We will see what happens.
@ Leon
Thank you for reminding us of that excellent extract.
The rot at Boeing is bad enough, but it’s even more shocking to see that it’s (still) at the FAA also. There is no room in such an important public body for someone with such a tainted track record: it’s time to thoroughly root out the sickness there. Of course such a prospect is a nightmare for the Boeing cronies, because of the virtual certainty that a less tainted official would make life a lot harder for the company.
All these versions are consistent with what I said. Dickson did authorize the medical evaluation and the grounding. based on the recommendations he was given. He didn’t consider them punitive or retaliatory.
The tribunal hearing judge found his testimony evasive and untruthful. His conduct in the case was examined by the Senate Transportation Committee and there was no wrongdoing or improper conduct found, prior to his confirmation.
All of this is in the public record. Not consistent with the narrative here, but truthful nonetheless.
Great if this case goes further.
If I were the judge I would ask Dickson what kind of safety issues Karlene Petitt discovered and when Dickson fixed the issues. I would expect that fixing the issues were delayed. I would ask Dickson if he feels responsible for thousands of Delta flights with questional safety and if he delayed fixing safety issues why he took the FAA job and would handcuff Dickson in court.
Then ask Dickson if he checked all cert documents before re-certification of the MAX and ask him if he knows anything about TK1951.
Asking Dickson if he didn’t learn that new software needs independent audits and why he forgot that about the software updates for the 747, 777 and 787.
Till then more is known about SJ182 and if Dickson did anything.
What could be expected other than guiding Dickson behind bars.
Stupid to take the FAA job if there is no intention to do a good job.
@ Leon
All excellent points!
Luckily, we don’t have to wait for a judge to do all that: all those questions are probably already being mulled over in Dem meetings in the halls of Congress. Seeing as the Biden administration wants to project an image of transparency and “following the science” (rather than pandering to the “Old Boys Club”), it may only be a matter of weeks before Dickson gets the boot.
Delta not implementing the plaintiff’s full safety report, was the basis of the retaliation charge & finding. The judge ruled that if they took plaintiff seriously, they would have implemented her recommendations in full (they did adopt a few, and gave her a speaking role in Delta safety seminars).
Since they didn’t fully comply, and she was referred to HR after presenting her report, which led to the medical evaluation and the grossly unjust and unfair diagnosis, the judge ruled the referral was retaliatory. I don’t disagree with her compensation, but not sure the referral was meant to be punitive.
It’s a complex case. There are over 1,500 pages of testimony in the hearings. Delta presented a sound case as to why she was referred to HR. She had made allegations of gender harassment and discrimination in her safety report. She was advised those needed to be either grieved through the union, or processed through HR.
The union declined to grieve, and her direct supervisor, the chief pilot, declined to advance the case. So HR was the only avenue available to her, as an equal opportunity complaint.
These were also the findings of the Senate investigation of Dickson, there was no misconduct on his part.
@TW:
1) Deliveries are crucial because aircraft makers get much of their cash when planes are delivered. Don’t take my words.
2) The 787s on Boeing’s hand *cannot* be delivered until inspection of various production flaws is conpleted and Boeing’s engineers figure out how to ratify the problems (with FAA’s approval).
Strictly speaking, inventory should only include those a company can realise within a business cycle or one year or less. The problem is how many of the 80 on hand (and those on production lines – though they aren’t finished goods) can be delivered to a willing customer on or before 12.31.2021.
inventory has “limited life resp value” only when the product turns undesirable or deteriorates.
Now if Boeing still books into the def cost bucket reducing it their bookkeeping must “borrow” from inventory value. It can’t have been taken from 787 sales revenue 🙂
Another point of understanding how Boeing handles the deferred cost tool.
The myriad ways of devaluing bookkeeping metrics.
Intriguing.
“Jacked up production figure” YES! in 2020 production rate was 12 787/month, most of the year, going down to 10 in october,
“not longer remotely valid” YES! in 2021, it fell from the cliff, going down to 5/month.
this reduced production level means a much higher cost of production.
in 2021, margin will probably be between 0 and $5mn/frame.
Bottom line: TW is on the optimistic side when he mentions a 8-10Bn write off.
$12-14bn would be more realistic, especially taking into account what Bryce and Gerrard mentioned in earlier posts. and they didnot mention that tooling of Everett 787 line will be scrapped in 2021, partly unamortized, must be fully written off.
when this 12bn+ write off happens, you can expect nasty side effects:
– Junk status for debt
– eviction from Dow Jones, (as happened to GE mid 2018)
– no way to finance an urgently required new product (minimum 10B)
the storm is not over!
Great point about the non-amortized Everett 787 tooling.
Woody Allen once said sarcastically:
“Infinity lasts a VERY long time…especially toward the end!”
The same applies to a hopeless balance sheet.
“Great point about the non-amortized Everett 787 tooling.”
Which is what , its only an assembly line which took average of 17 days per plane. Its not ‘production’ of sub assemblies at all, most of the wings and fuselage barrels arrive almost fully ‘stuffed’ as well as the cockpit section. Tails and such come from Henderson which still makes them for Charleston. The Dreamlifters still fly the major sections around the world.
Theres a large jig for wing and fuselage joins but that might go to Charleston to ‘speed up their line’ Other items at Everett would be still used for a different aircraft assembly when Boeing starts its next model.
That there is $12 bill of tooling for final assembly at Everett for the 787 is absurd
@DoU: Airlines wrote off billions after billions as they “store” aircraft.
This is accounting when assets lose economic value.
80 787 sitting around.
This is even higher than what’s forecasted at 60-70.
Analyst openly questions sustainability of production at 5 per month.
Softbank has wework
Boeing has rework.
from Seattle Times article
“Due to the fuselage join defects, Calhoun said that 80 Dreamliners are parked and not deliverable until they are inspected and reworked.”
Calhoun now is only speaking of a roughness issue at the 787 fuselage joint.
They are not using bigger shims anymore, only the maximum allowed shim size. But what happened with the gap that they needed bigger shims in the first place? They swept the gap under the carpet and FAA is sleeping.
The roughness issue is very easy. Same when painting, first a filler is sprayed to fill the holes.
So the 787 are repaired by making it WORSE.
Before there were no gaps, repaired there are gaps.
Designed by Clowns, guided by Monkeys, overslept by Dickson.
No, the roughness issue affects the bond strength between sections, so the bond must be broken and reformed. That’s what Calhoun truthfully said, and is what takes time.
The shim gap issue was a software limit that had been corrected awhile ago, so is not likely to be among the problems on new aircraft. But it may affect some older aircraft. That is easier to fix by refitting the correct shims while realigning the sections.
There are also assembly issues on the stabilizers, those are fairly straightforward but require removal and reinstallation.
Indeed. A thorough piece from Dominic Gates.
https://www.chicagotribune.com/business/ct-biz-boeing-787-defects-inspections-20201215-bz3kx5hrljgpva2ymv5ubxfejy-story.html
-> Boeing has expanded its examination of 787 Dreamliners after finding more widespread instances of a defect initially thought confined to the aircraft’s aft fuselage plant in South Carolina, prompting inspections at 787 component plants around the globe.
Reviews are underway at Boeing’s adjacent midfuselage plant in North Charleston, South Carolina, at the Spirit AeroSystems forward fuselage plant in Wichita, Kansas, and at plants owned by Leonardo in Italy and Kawasaki in Japan that produce smaller fuselage sections.
-> Still, it’s plain from the broadening of the issue to plants around the globe that this is not a question of sloppy workmanship or carelessness by individual Boeing employees.
Instead, there appears to be some issue with the automated robotic equipment used to fabricate the fuselage barrels, which are made by spinning carbon fiber tape infused with epoxy resin around a mold and then hardening it in a pressurized oven called an autoclave.
It sound like they just took the corresponding metal parts tolerances and applied it onto the omposite parts. It takes lots of work and testing to derive scientifically derived form and position tolerances for this joint. Maybe NASA has done the work on similar size carbon fiber composites joints for rockets way back and never used it?
Reuters: “More than half of world’s airline pilots no longer flying – survey”
“A poll of nearly 2,600 pilots…found only 43% were doing the job they had trained for, with 30% unemployed, 17% furloughed and 10% in non-flying roles.”
https://www.reuters.com/article/us-health-coronavirus-airlines-pilots/more-than-half-of-worlds-airline-pilots-no-longer-flying-survey-idUSKBN29X2B2
Reuters: “ANA swings to Q3 operating loss on virus-related travel curbs”
“ANA Holdings, Japan’s biggest airline, swung to a slightly narrower than expected quarterly operating loss on Friday but kept its forecast for a record full-year loss as fresh coronavirus travel restrictions hit the industry.
ANA projected that international travel demand would recover to 50% of pre-pandemic levels this fiscal year, but Fukuzawa said it needs to be prepared for the possibility that could be missed by a big margin.
Japan has closed its borders to nearly all foreign non-residents in a bid to contain the pandemic.”
https://www.reuters.com/article/us-ana-results/ana-swings-to-q3-operating-loss-on-virus-related-travel-curbs-idUSKBN29Y0J6
China Update
As previously noted, becoming more apparent as well as more significant is a split between WS/business and the military industrial complex
WS in general is so much in favour of B in China that another nickname has been given them – Mandarin pre schoolers
Please find news of more companies arguing for business in China at WEF
https://www.globaltimes.cn/page/202101/1214312.shtml
One more is Ericsson’s DG who has argued against Sweden’s banning of Huawei on the grounds that China business is much more essential to his business, and incidentally Sweden’s business, than Sweden – if you see what he means: banning Huawei hurts both Sweden and Sweden’s businesses, and Sweden’s as it were sovereign interest in it’s own economy
This is not to argue that business must take precedent over all other considerations, but to state that Biz should take precedent over war mongering by means other than war
Given the robustness of China’s economy compared to the fragility of US, strength of economic relations with Russia, EU and RECEP, war via business would seem a foolish misguided
@ Gerrard
Interesting article.
Issues such as “human rights” are subjective. I’m sure the Chinese look with bewilderment at LONG lines of cars queued up at food banks in the USA, and ask why such a large percentage of the population is left in the lurch. Not to mind the number of Americans that have to juggle three “dollar-an-hour” jobs just to make ends meet. This isn’t anti-US sentiment: it’s merely an example of the old saying that “those who live in glass houses can’t throw stones”. But the US isn’t very good at looking in the mirror.
Meanwhile, China has every incentive to dump Boeing and instead concentrate on Airbus, ATR, Embraer…and its own domestic aircraft industry. The US likes to laugh publicly at COMAC…but COMAC’s planes are FBW, unlike the steam-age MAX that is “not up to modern standards”.
@Bryce
China Update
Biden administration is biden it’s time in pronouncing a ‘strategy’ on China, letting certain Trumpisms drift along denouncing others but neither doing nor saying anything much of concrete
https://www.globaltimes.cn/page/202101/1214313.shtml
Perhaps this reflects caution, perhaps internal squabbles, perhaps WS v DoD ?, or perhaps…. ?
China thinks that US has it’s hands full with the virus, sorry I should say with internal affairs (I did not say virus) and says that China can always outwait US, they may mean outwit as well as
View from Paris Update
BA gives way to Lockheed Martin for biggest defence contractor, described as an important symbol of loss of prestige
Qualifies Max re cert EU as ‘meager consolation’
https://www.businessinsider.fr/apres-une-annee-noire-boeing-nest-plus-la-premiere-firme-de-defense-et-daerospatiale-americaine
Gerald:
Peace in Our Time. Remember it. 40 million were never to get the chance.
Some of us read our history and were an extension of those who lived it and we will never forget it.
That includes the US and its actions against its own citizens, both Japanese Americans and Black People before and since.
You should read it and take the lessons imparted.
Its clear you know nothing about Boeings accounting, even though its discussed at length in LNA
“Boeing has been using program accounting “forever,” and it’s never made any secret about this. In recent years it also
has disclosed what the financial results would be without program accounting” https://leehamnews.com/2016/02/29/pontifications-boeing-and-program-accounting/
“Pontifications: Boeing sued over program accounting”
Guys, get your game hats on…the claims are getting crazier, which seems to be an american affliction…
@DoU: Great. This is Boeing’s 2019 10-K filing.
Show me where to find the “financial result without program accounting”.
So without program accounting Boeing was deep in the red and still Boeing lend money to pay dividends and Calhoun approved it.
” …has disclosed what the financial results would be without program accounting”
they were forced 🙂
a note that this information did not conform to GAAP reporting rules ( oy wey ) was added.
On one hand the assumption is that investors ( airlines, shares ) are professionals and “see through” the curtain.
on the other hand if this were the case why the guilding/pimping of information?
Third hand: this is done on purpose and works.
Investment is an emotional/gutt thing like most others.
Pedro ask Scott if he has time to hold your hand to find it, doesnt seem you know anything about Boeings accounting.
1min using google …heard of it ? and I came up with this
http://www.boeing.com/investors/accounting-considerations.page
Just for the unenlightened the unit accounting cost loss for BCA for the year 2020 was $5.4 bill while the program accounting loss was much much higher at $13.8 bill
Hmmm , program accounting makes the numbers worse , which invalidates all the claims about pumping the pillows
IS the difference perchance connected to the amount pushed into the deferred cost basket without any deliveries?
@Uwe Unit accounting means Boeing has to recognize $16.6 billion losses in prior years (currently deferred as costs for 787 program) and another couple billion deferred for 737 program.
“IS the difference perchance connected to the amount pushed into the deferred cost basket without any deliveries?”
Check the graph at the top of the post which shows the deferred production cost falling this year, like last
What does that tell you?
The crazy talk has spread from US to Europe
@DoU: From the graph posted above it’s apparent the draw down of deferred cost has slowed to a screeching halt (compare with previous years 2018 & 2019) even at a production rate of 10 a month.
How about 2021 when production will be halved?
” As a result of the planned production rate changes, we reduced the accounting quantity for the 787 program by 100 units during the first quarter of 2020. The 787 program has near breakeven gross margins due to the reductions in the production rates and the reduction in the program accounting quantity. If we are required to further reduce production rates or experience other factors that could result in lower margins, the program could record a reach-forward loss in future periods.” Boeing Aug 2020.
https://leehamnews.com/2020/08/05/hotr-boeing-warns-of-forward-losses-on-787-777x-programs/
Points to notice.. ‘787 program has near break even gross margins due to the reductions in the production rates and the reduction in the program accounting quantity.’
If theres further costs that money is declared as a ‘forward loss’, which is now highly likely this year, and that doesnt get added to deferred production cost
@DoU: Boeing Q2 2020 10Q
-> “Pre-COVID-19, we were producing at a rate of 14 per month and had planned to adjust the 787 production rate to 12 per month in late 2020 and to 10 per month in early 2021. Due to the impacts of COVID-19 on customer demand, we are currently producing at a rate of 10 per month and plan to reduce to 6 per month in 2021. As a result of the planned production rate changes, we reduced the accounting quantity for the 787 program by 100 units during the first quarter of 2020. The 787 program has near breakeven gross margins due to the reductions in the production rates and the reduction in the program accounting quantity. If we are required to further reduce production rates or experience other factors that could result in lower margins, the program could record a reach-forward loss in future periods.”
Boeing warned that, at a forecasted production rate at 6 per month, the 787 program has ‘near breakeven gross margin’.
Boeing plans to cut production to 5 per month.
Does it mean Boeing can still deliver 787 with a small profit or more likely at a loss?? Which will trigger a reach forward loss??
Furthermore, with 80 787 sitting on hand, how many 787 can Boeing realistically shove onto airlines? How many buyers are in a financial position to help clear aprox. a pile of 155 (80+75) 787 by Dec 31, 2021??
Last by not least, customers like AS and WN has said they are going to use discounts/customer credits from Boeing to take the MAX off its hands and not paying Boeing further.
Its the American system, that you immigrate as poor and work your way up to middle class. If you are unluckey or lazy you are a “looser” and die early/poor. But your chances of becoming middle class is much greater than staying in your poor country, mainly due to the schools, energy, police, banks, legal system, roads, water, health care and the number of small compaines growing by using technology/software developed by goverment money that get commercial applications. Hence military high tech money is very important for the system to work. Still different from Northwestern continental Europe system.
Gerrard:
Not sure what ‘WS’ is in your post, but there are wise companies, fools, and a muddle in the middle.
Depending on one market is not wise. Even depending on one plant or supplier may not be wise – Toyota learned that when a supplier plant in Japan had a big fire, Western Digital fortunately had another plant when its big one was flooded. (Can Boeing/WA xenophobes spell ‘earthquake’?)
Many companies are pulling out of manufacturing in Communist China, because its costs are rising and as they integrate – considering all costs including flexibility such as speed of changing product.
The Meccano toy, which is now sold in the US as Erector – not the classic Erector parts, is pulling back to France as the French factory improves its efficiency.
Some years ago a maker of hard disk drives for computers stayed in the US southwest, giving an example of flexibility: to implement a change in the product it brought employees in on Saturday morning for familiarization, had a barbecue, then Monday they started making the product the new way. (That production may have since moved to southeast Asia, which is overlooked in fussing about CC.)
Hutchinson Technologies was making small parts for HDDs, exporting them to assemblers in the Orient. With good values in the company, they became very good at precision manufacture of small parts.
Speaking of outsourcing, I think you’ll find that many Japanese car brands are assembling in SE Asia, while precision parts needing precise tooling are made in Japan, such as engines and transmissions. (Of course Japanese brands are now assembling in North America for the NA market, SE Asian production is probably in substantial part for the SE Asian and ANZ market.)
And Ericsson should be aware of the risk that CC will dictate content of products, which may hurt sales elsewhere and impair product function. (A minor example is the Australian manufacturer of electronics that lost control of the firmware in a key product, probably sloppiness in the factory in SE Asia, large quantities shipped with incorrect function.)
VW probably illustrates what happens when you deal with troubled people – they are afraid of violence against their people, whether German or Chinese, if they speak out.
HSBC of course is Hong Kong and Shanghai Banking Corporation, it is Chinese by birth.
Ericsson is in a volatile business, competitive on technology and product. (Telephony through its history, including walkie-talkie radios and cellular phones.)
Your idea of Japanese cars madevin SEA of Japanese components is a bit outdated. The opposite has happened.
2011
Toyota is telling its parts suppliers in Japan to cut prices or face being replaced by overseas competitors as the yen’s value appreciates, four people involved with the discussions told Bloomberg.
Toyota, which loses 34 billion yen ($443 million) in operating profit for every 1 yen appreciation against the dollar, told parts-makers that the company will buy more from emerging markets if domestic suppliers can’t match overseas prices, according to the sources, who declined to be identified because the talks are private.
https://www.joc.com/international-trade-news/infrastructure-news/japan-disaster/toyota-tells-japanese-suppliers-slash-costs_20111007.html
That companies buys standard parts from the cheapest supplier is not new, lots of production is moving from China to Vietnam due to lower cost. So you need to automate correctly and invent new products continiously otherwise you are doomed. Just look at the US where lots of jobs moved south to Mexico. Even the high tech LEAP-1 fan blades are made in Mexico as well.
This will have big impacts on immigration as low skilled jobs will disappear quickly and lots o jobs require advanced blue color skills/university degrees that many immigrants lack, hence the US and Western Europe will see big changes and urging/forcing immigrants that lack the skills to move back.
Good point about unskilled immigrant labor.
Some groups like to proclaim how the US has always welcomed immigrants with open arms — but that was back in an era when most industries predominantly employed relatively unskilled laborers. Think of railroad construction, loading/unloading work, mining, lumbering, agriculture, etc.
Nowadays, the world has completely changed. The only economic activity in the US that still employs relatively unskilled laborers is agriculture (and, to an extent, cleaning/housekeeping services). Even construction has become more technological.
In the EU, seasonal immigrants are predominantly needed for agricultural and horticultural work, such as harvesting crops that can’t yet be harvested by machine. Some also work in the hospitality industry — most back-office (housekeeping) and a few front-office (if they have language and IT skills).
The labor market involves matching available skills to demand. That balance has shifted dramatically in the past 100 years.
The continued run down of deferred costs a “built-in” feature of program accounting, whenever Boeing pushes a 787 out unless cost of production sky rocketed.
During 2020, 787 was still produced on two lines at a high rate of around 10 to 14 a month!
How about 2021??
Regarding cash flow, I would pay attn to Smith’s comment in Dec 2020. PDPs in 2021 will be “atypical”, unlike what’s seen in previous years.
I think its about what I said, they did a force fit production wise.
Bait and switch tax scheme.
Taxes are calculated according to IRS rules not Boeings.
As Boeing uses a different ‘accounting method’ for its Defense business – similar to what say Lockheed uses, its clear Boeing is doing it for commercial reasons which in my view is to obscure its real costs from its suppliers – large businesses themselves, Airbus and even the airlines.
No one has challenged the so called rules.
Like Prime Mortgage, it should have.
Trump pulled the same thing and they changed the law though they could have taken it to court and tried him and we might well have gotten a conviction and changed history.
When you pay huge dividend and stock buy backs I wold not want to be the one defend production accounting before a jury that this is nothing more than a pyramid scheme.
Taxes are calculated according to IRS rules.
If only that’s true.
Corp. abuse IRS rules.
WSJ: Tax-driven deals to Move Corporate HQs Outside …
Bloomberg: 50 Largest Stashes of Cash Companies Keep Overseas
While the 1% evade taxes, the burden inadvertently falls on the 99%!!
April 29, 2020
In October [2019], the company said it would be cutting the rate of production to 12 per month in late 2020, a cut it later deepened to 10 per month by early 2021.
The production cut to 10 per month will now take place this year. Boeing currently produces 14 787s per month between its two sites.
https://charlestonbusiness.com/news/aerospace/78432/
How can 16 year old 787 program still have deferred costs with almost 1,000 deliveries with 500 left on order. They are 2/3 thru the production run
Sounds like a good question to me.
Dave Pritchard:
Likewise, how can Boeing lose $22.5 Billion on a jet (i.e., the 737) that they have been building for 50 years?
It easy, screw it up big time.
If you act like a drunken pipleine worker (and yes I was one so I can say it) and piss your program away, then your $5 drink can indeed cost you the whole 1$10,000 you have in your pocket.
I had a roommate that did just that. Went into town and got rolled. He had 5 grand on him.
He wanted to go back with a gun and find the people who did it and shoot them.
I just laughed at him and told him, no one to blame but yourself. Go to work and earn it back and don’t do it again. Like Boeing I am sure he did it again and again (I moved onto another job and never saw him again)
If your program has cost of 10 billion and you spend 30+ billion on it like the 787, then yes, you are in arrears and probably forever at this point (if they build 2000-2500 maybe they will break even)
I forget the cost of the MAX, 5 billion or so, but they have now spent 20 billion on it.
Dave: That’s because Boeing extended 787 program’s block size from time to time in good years (in order to fatten the profit booked per aircraft):
As reported after Q2 2018
“For the Boeing 787 program, the accounting block currently stands at 1,500 units, up from 1,400, 1,300, and 1,100 units earlier.”
https://seekingalpha.com/article/4190295-boeing-787-going-to-zero
By 2019, the block size was further increased to 1,600
https://seekingalpha.com/article/4296615-boeing-787-curve-is-flattening
then reduced to 1,500.
https://seekingalpha.com/article/4381078-boeing-787-financial-engineering-nightmare
As said before the accounting block is like an escalator – which mirrors the orders in hand and expected in near future- but like an escalator it can go down slightly when the market softens.
I don’t think that at the time 1500 was wrong. Franky at the time I would not be surprised to see 2000 (Covd may change that but long term what is there to contend with it?)
The shame is if done right its a damned good airplane.
If my calculations are are right, if Boeing had taken the 30 billion on the 787 program and invested it at 3% interest, they would make 72 billion in 30 years.
At 16 years they are still in the red 16 billion.
As far as I am concerned, that is how you calculate success.
If you can’t beat a safe investment you have totally hosed up and they are hosed up on two programs now, and past 747 not to mention the other programs such as KC-46.
Simple assessment puts it in perspective. Only real talent coudl hose it up like that.
“How can 16 year old 787 program still have deferred costs ”
The answer is in your question, they are mostly costs spent long ago but still on the books….its what deferred means
Surely you know something like factory built say 20 years ago- and the money all spent- still has deferred costs still ‘on the books’ . Its the way accountants do things.
Sigh. Factory is classified as property, plant and equipment (fixed assets).
BTW, there’s probably a write-off once production at Everett is moved.
Have you heard of IP and computer software….not a ‘fixed asset’
How longest that software can on on the books?
Ddeveloping a plane requires a lot of software and IP and testing and so on.
Boeing isnt moving from Everett, they learnt the hard way about ‘blue skies’ locations…low wage and non union locations can end up with ‘fast food attitudes’ to work speed, attendance and quality
What accounting is that??? Your invention?? Sigh
Investopedia:
“While software is not physical or tangible in the traditional sense, accounting rules allow businesses to capitalize software as if it were a tangible asset. Software that is purchased by a firm that meets certain criteria can be treated as if it were property, plant, & equipment (PP&E).”
Software for the say 787 isnt really ‘packaged software’ bought off the shelf. The planes software alone would have comprised 1000s of progranms over 100s of applications for every thing from changing the ceiling lights colour to critical flight control software. The CAD software is an ‘application’ from DS but highly modified to suit Boeings requirements and used for the very early ‘what if’ stages right through to FAL assembly . That sort of heavy weight software can be depreciated over 15 years
Its a lot lot bigger than your ‘little’ desk top applications bought online and just a few tweaks and its up and running.
Same principles. Sigh.
“Not fixed assets”?
Anything to back up your claim??
Comment from an analyst on SA
· Ingredients have been added that make a reach-forward loss more likely, but models still give a positive but weakened indication.
· Deferred production balance declines could be significantly lower than in previous quarters.
· Boeing 787 role as a main cash growth vehicle for Boeing ·Commercial Airplanes is reducing with little other comparable viable vehicles for now.
Over the past couple of quarters, the program margin has started to come down and those margins now stand at near breakeven levels …
https://seekingalpha.com/article/4400486-boeing-787-dramatic-turn-of-events
The table of aircraft coming free due to bankruptcies is interesting. But what would be more interesting is knowing how many of those were latest generation and thus a drag on new aircraft sales by Boeing and Airbus.
Interesting question, but perhaps less relevant than one might think.
Up to two years ago, there were plenty of “premium” carriers that were flying 25-year-old wrecks…in fact, several still are today (e.g. old 767s and 757s in US fleets). So if the secondhand pool contains some “used but young” (e.g. 10 year old) airframes, it won’t be an impediment to many airlines to fly them.
Any airline that survives CoViD will be in a severely weakened financial state: beggars can’t be choosers.
Unitl airlines are required to disclose their carbon emission, say per available seat mile, I believe it’s coming, starting from Europe.
Good point.
One way to get a good score in such a system is to ensure very high load factors (à la Ryanair) –> bye bye VLA!
See Judson Rollins’ interesting post in the podcast just below.
Bryce:
An old airplane is not a wreck.
A new airplane can be a wreck.
Its in how its taken care of.
Emerging LCC waiting on the wing to scoop up jets for pennies. Happened before, will see if it repeats again.
I see the spreadsheet of the Airline bankruptcy/ court restructuring list doesnt mention the large chinese airline holding group HNA
https://edition.cnn.com/2021/01/29/business/hna-group-bankruptcy-intl-hnk/index.html
‘The Hainan Provincial higher People’s Court has issued a notice stating that creditors have applied for the group’s bankruptcy as they cannot pay off their due debt. As well as Hainan Airlines, HNA Group has control of 13 further airlines and a global fleet of 900 aircraft. Hainan Airlines has confirmed it is operating as normal, for now.”
https://simpleflying.com/hna-bankrupt/
While HNA group is bigger than the airlines it owns, it would mean those
directly owned carriers wont be getting any cash flow from its owners to cover deficits. Other airlines like say TAP or the US Comair were equity stakes
Report: Hainan Airlines has said it is maintaining usual operations
Reuters:
-> Creditors of China’s HNA Group have applied to a Chinese court for the company to be placed in bankruptcy and restructured, potentially giving a fresh start for the remaining assets of the once-highly acquisitive conglomerate.
-> Its largest creditor is the state-backed China Development Bank (CDB), which also chairs the company’s creditor committee. CDB did not immediately respond to a request for comment.
CAAC News, the news portal run by China’s aviation regulator, said HNA would reduce debt through measures such as converting debt to equity or rollovers to guarantee investors’ interests. It also hopes to attract fresh equity from new strategic investors.
-> Last week, the company said it was moving to the next stage of resolving its multi-year liquidity crisis as the government-led team had finished its due diligence.
Remember, United, Delta and American all gone thru’ bankruptcy before.
OTOH https://viewfromthewing.com/the-american-airlines-bankruptcy-scenario/
China Update
War Coming
Blinkin says ‘The reality is the world simply doesn’t organize itself’
https://asiatimes.com/2021/01/new-biden-era-of-confrontation-in-the-south-china-sea/
HNA Banruptcy declared Friday
« As of June 2019, HNA Group’s total assets were worth 980.62 billion yuan ($151.77 billion) with its gross liabilities hitting almost 706.73 billion yuan, according to financial news site eeo.com. «
https://www.globaltimes.cn/page/202101/1214363.shtml
Ultra Low Cost – Spring Festival break : Air tickets now cheaper than train
http://www.eeo.com.cn/2021/0129/463049.shtml
There’s too much at stake in the South China Sea to allow China to continue its overly-pretentious claims there. Their recent posturing is only serving to (further) rally international support for Taiwan and other smaller nations…so they’re actually just shooting themselves in the foot. That’s one turtle that would do well to withdraw back into his shell.
Other than that, it seems that most countries are willing to engage constructively with China, despite the situation in HK and Xinjiang.
Engage with China constructively is an oxymoron as it is a massive chasm larger and wider than the grand canyon.
EU and the term constructive are engagement are diametrically opposed. Its an elitist sell out (and yes the US has its share of that)
Funny they are the same ones screaming like a two year old that the UK has to give them their shots even though they signed their contract 3 months late (oh, and rather than recognize the trails data done by other Western countries, we have to delay it doing our own).
Really, you don’t understand contracts and you just singed an agreement with China? Me thinks any EU resident may want to start learning Mandarin.
Contracts are first come first serve unless the contract says otherwise and then the reality of who controls the factory kicks in.
Sadly the EU is completely comfortable with dictators who have veto power on anything the EU does, so I can see the alignment with China.
I am seeing why the UK wanted out. That is a train wreck in progress.
While internationally the South China Sea is going to be a drawn line, what China is doing to the Uighurs is someplace between the US Japanese Citizen Internment Camps and the Nazi in WWII.
Are we going to war over that? No.
Should be constructively engage in the face of that? Hell no. If there are no lines then there is no law and there is no democracy.
Are “you” also going to engage with Israel (Palestinians), India (Kashmiris) and Myanmar (Rohinga)?
These regular political rants are starting to sound like something from the Representative Of Boeing.
@TW: “Funny they are the same ones screaming like a two year old that the UK has to give them their shots even though they signed their contract 3 months late …”
I think clarity and facts are imp.
“EU’s contract with AstraZeneca — which Brussels published on Friday — states that doses for the bloc could indeed come from a supply chain that includes UK-based plants. Equally, the U.K. is receiving doses from Europe as well — a person familiar with the matter said that the U.K. is still receiving small numbers of vaccines made in European plants, and that its initial doses had come from Europe too.”
Wildly off topic, but there is a similarity with the aircraft industry, the vaccines, precursors, intellectual, hardware, etc come from all over the place.The EU is playing the nationalist card in a desperate attempt to distract from their own incompetence
The HNA bankruptcy is bad news for Airbus orders.
However, in a semi-capitalist/semi-communist economy such as China’s, such matters are easily resolved by intervention of the state — particularly for an industry as vital as aviation.
Cathay will probably be next.
https://www.bloombergquint.com/business/cathay-still-mired-in-covid-trouble-with-traffic-down-99
The 1500 aircraft 787 accounting block was essential for creating free cach flow, buy back, exec bonusses during the tough years. The Quaterly free cash flow reports created a lot of confidence.
I have been participating in discussion and technology message boards from the early 1980s and I must say I have never seen a topic that generates as much inchoate rage as that of Boeing’s choice of accounting method, a choice and method that is perfectly legal, well-documented, and understood by Wall Street/City/Bourse analysts. It really doesn’t affect anything that is in the control of anyone other than those who buy/sell Boeing stock, but it just drives a percentage of aviation enthusiasts crazy. Weird stuff.
Presidential pardons are also “perfectly legal”…but that doesn’t mean that they’re approved of 😉
Yes it’s perfectly legal to milk a company to death, wall street understands this.
sPh:
It has never been challenged.
At best its a pyramid scheme and a tax dodge.
Prime Mortgage was the same thing. It was not challenged.
It possible it could be ruled legal, but that does not mean its not a pyramid scheme and or tax dodge. Legal is not the same thing as legitimate.
The evidence is there, Boeing pays NO taxes and it pays huge dividend and does share buy backs.
If you don’t have profits, then you could not do those things (actually they were doing to borrow 13 billion to pay a dividend).
What Boeing does is walk a line that the law language will be specifically changed that stop their behaviour or it gets challenged.
The US just passed laws on shell companies to stop those same issues as it was so deeply corrupting that even republicans agreed it needed fixed.
Equally Trump slipped in a tax dodge some years back and rather than pursue him, they changed the law as not to allow it specifically.
While I doubt we will get there, laws can be written to stop tax dodge behaviors .
Why this was not taken to court is a failure of leadership.
But there is also a new sheriff in town and we will see.
And we can see how it relates to a Pyramid scheme. As long as you have new money coming in (product) then you can kick the financial can down the runway forever.
However, Boeing has no new product and the train comes to a washed out bridge and the trial wreck begins.
We are seeing that now.
Its the one reason Boeing might com out with a new aircraft so they can keep the can kicking going.
But as long as Calhoun gets his payout he does not care.
sPh:
To add in, this country does not belong to Boeing. It belongs to We The People.
Boeing acts like they own it, they do not. They have corrupted the system (and granted they are not the only ones to have done so).
But in the end, its We The People, not We the Boeing.
sPH, I hope you are uninformed, otherwise you would be misinforming others. E.g Muilenburg salary 2018, like his predecessor.
As Chairman, President and Chief Executive Officer at BOEING CO, Dennis A. Muilenburg made $23,392,187 in total compensation. Of this total $1,700,000 was received as a salary, $13,076,350 was received as a bonus, $0 was received in stock options, $7,330,916 was awarded as stock and $1,284,921 came from other types of compensation. This information is according to proxy statements filed for the 2018 fiscal year.
https://www.salary.com/tools/executive-compensation-calculator/dennis-a-muilenburg-salary-bonus-stock-options-for-boeing-co?year=2018
There is/ was a malicious incentive to boost short term stock value above anything. deferring costs using unique accounting practices helps free cash flow enormously, short term. And WS convinced many short term “free” cash flow is all that really matters.
It totally drained Boeing.
As I was sayin’…
sPh, you are speaking in the reasonable language of financial understanding used by most of the world. That isn’t the language spoken by those with these viewpoints.
Further if you point out that the reality and outcomes do not match their language, then you get the conspiracy theories and accusations of criminality in response, along with ridicule for not accepting their views. Those responses are necessary to sustain their beliefs.
I no longer answer the financial posts because in the end, they have no bearing on reality. They serve the intended purpose of bashing on Boeing, as a form of fulfillment. Waiting for Duke to realize this as well, although his efforts at correction are both educational and valiant, and are appreciated. I’ve learned a lot from his responses.
sPh, you are speaking in a language of financial understanding that is used with reasonable responsibility by most US companies. That isn’t the level of responsibility shown by Boeing.
Further if you selectively ignore reality and outcomes to match a denialist narrative, then you get lots of published analyst reviews in response, along with reproach for not reading more broadly. Those responses are necessary to rebuke beliefs that Boeing is anything but a “Zombie Company”.
Some commentators no longer answer the financial posts because in the end, they can’t offer any counterargument that has a bearing on reality. They serve the intended purpose of revealing the dirty laundry on Boeing, as a form of diligent exposé. Waiting for others to realize this as well, although misguided efforts at correction are both amusing and revealing, and are appreciated. I’ve laughed a lot at such responses.
flat learning curve..
The method is used extensively in the resource industry. And if anything with mines there is even more room for manipulation (do you get the high grade now and maximize short term profit, or dilute it with lower grade to maximize life and total ore extracted). But program accounting does not ruffle many feathers there. The idea of profitability as something calculated over the life of the mine is just so baked into the assumptions.
Reuters:
Bolsonaro thanks China for fast-tracking COVID-19 vaccine supplies
Active ingredients of AstraZeneca’s vaccine come from China??
No
China has developed its own vaccines and local production and its having them made in Brazil as well.
‘Sinovac: Brazil results show Chinese vaccine 50.4% effective’ [but you really compare different trials of vaccines]
https://www.bbc.com/news/world-latin-america-55642648
Astra Zeneca is a different source for Brazil
JetBlue starts service of A321LR (London) and A220-300 this year.
Other airlines will be under pressure.
JetBlue was bitching recently that it couldn’t get slots in London.
Looks like “some entity” is trying to protect British Airways 😉
https://www.flightglobal.com/networks/jetblue-complains-it-is-being-locked-out-of-london-slots/142089.article
Boeing’s unfilled orders for 777 (including 777X and 777 freighter), after ASC606 adj. is 232 only.
777X block size is 350??
Thats because Boeing says the block size is both existing orders and possible new and top up orders but only for ‘foreseeable future’.
This is one of the reasons for the over ordering boom of the last decade, when airlines were encouraged to order many more years ahead and in larger quantities than had been usual. Boeing could feed those back into the production block for its more desirable models
LNA: There are now just 191 firm orders for the Boeing 777X.
Boeing last week reclassified 118 777X orders from firm to iffy (LNA’s term) due to the accounting rule called ASC 606. There were 17 iffy 777 orders before last week. The ASC total is now 135. After the adjustments, Boeing confirmed to LNA there are 191 firm orders for the X, down from 309 previously.
350 block size looks more and more like a pie … in the sky.
China Update
Domestic travel down 75% for Spring Festival
https://www.globaltimes.cn/page/202101/1214444.shtml
University of Washington IMHE Encouragement for US to do the same in face of similar ‘Internal Affairs’ problems
https://www.globaltimes.cn/page/202101/1214443.shtml
Hope for Boeing Peace with China – agreement on currency appreciation may suit both – Plaza II would build on RCEP and CAI – US needs inward investment – WS and SV pressure to break tech export controls
https://asiatimes.com/2021/01/plaza-accord-ii-currency-a-catalyst-for-us-china-deal/
That AsiaTimes article is extremely interesting.
Ominous that foreign investment in US Treasury Bills fell to zero in 2020.
Time to “follow the (economic) science”.
As regards US domestic air travel, the Biden administration would do well to heed the content of the GlobalTimes article. The epidemiological evolutions currently in the EU are emerging stateside and will have free reign in a country in which there are minimal movement restrictions (relative to the situation in the EU). Time to “follow the (epidemiological) science”.
After the recent discussion here on TA Flight 1951, it so happens that Mentour Pilot has just done a video that walks through the events leading up to the accident.
It’s done from the perspective of the crew, and with a simulation of the flight deck instruments. Helpful in understanding what happened.
https://www.youtube.com/watch?v=eMUBzS0n_Cw
After the recent discussion here on TA Flight 1951, here’s an interesting NYT link that walks through the various equipment shortcomings associated with the accident.
Disturbing evidence for a Boeing cover-up and inappropriate interference in the accident investigation. Helpful in understanding what really happened.
https://www.nytimes.com/2020/01/20/business/boeing-737-accidents.html
The NYT article put forth opinions which are adopted only in part by the accident report. Otherwise rejected by the Dutch safety board, as being not representative of reality.
As opposed to the video which is based on the accident data, and presented and explained quite truthfully and well by an experienced 737 pilot and instructor. There is no equivalency.
The reason I put forth pilot viewpoints on this, the MAX training, and the trim wheels, is to underscore the fallacy of the “blame the pilots” narrative. These are 737 pilots, they are not assigning blame to the accident pilots, they are explaining and demonstrating the reality of operations, and what actually happened.
The repetitive answering of fact with opinion is essential to the narrative here, which is not factually based. It’s part of the elevation of opinion over truth.
The Mentour Pilot article put forth opinions which are irrelevant to the accident investigation. Issues initially suppressed in the Dutch safety board are now being exposed as more representative of reality.
As opposed to the link which is based on analysis of factors inconvenient to Boeing, and presented and explained quite truthfully and well by an experienced accident investigator. There is no equivalency.
The reason I put forth investigator viewpoints on this, and the Sullenberger comments on the MAX training and trim wheels, is to underscore the fallacy of the “blame the pilots” narrative. These are experienced aviation professionals, they are not gratuitously assigning blame to the accident pilots, but are instead explaining and demonstrating the reality of operations, and what actually happened.
The repetitive answering of fact with manipulated opinion is essential to the narrative here, which is not factually based. It’s part of the elevation of opinion over truth.
Interesting analysis of the dreary outlook for Boeing on the investor website Motley Fool:
“The Scariest Thing in Boeing’s 10-Year Forecast:
Even if aircraft demand meets Boeing’s somewhat bullish targets over the next decade, the aerospace giant has no obvious path to get back to its 2018 level of commercial jet deliveries.”
https://www.fool.com/investing/2020/12/06/the-scariest-thing-in-boeings-10-year-forecast/
Boeing has cut itself into a corner. Boeing has cut the talent necessary to develop the next new aircraft. Dream of reversing 787’s outsourcing development model is gone.
“Will the last person leaving – turn out the light!”
“Instead of pouring money into that, Boeing is cutting costs and shrinking to survive the dramatic contraction of its business.
CFO Smith said on the call that Boeing last year reduced research and development and capital spending by $1.3 billion.
And he said it sold or closed properties totaling more than 240,000 square feet and has identified an additional 5 million square feet that could be disposed of over the next few years.”
The Dutch aviation website “Luchtvaartnieuws.nl” is reporting that
“Boeing is seeking solution to problem of paint delamination on 787 wings”
“SCHIPHOL – Aircraft manufacturer Boeing is seeking a solution to a problem involving paint delamination from wings of the Boeing 787 Dreamliner. The problem has been identified inter alia on several KLM 787s. The problem is particularly prevalent on Dreamliners that have already clocked up a few years of service.”
SCHIPHOL – Vliegtuigbouwer Boeing zoekt naar een oplossing voor het loslaten van de verflaag op de vleugels van de Boeing 787 Dreamliner. Onder andere enkele toestellen van KLM hebben daar last van. Het probleem doet zich vooral voor op Dreamliners die al enkele jaren rondvliegen.
Main item today on Singapore’s Straits Times: international air travel increasingly grinding to a complete halt.
“Canadian Prime Minister Justin Trudeau has announced that some flights from Mexico and Caribbean nations will be suspended. International travellers must take coronavirus tests when they enter Canada and will have to wait up to three days for results in an approved hotel at their own expense.
Restrictions in France and Germany begin this weekend.
Starting on Sunday, France will ban most travel from all countries outside of the European Union. Except for cross-border workers, travellers from EU countries will be required to present a negative test before entering the country, said Prime Minister Jean Castex.
In Germany, non-residents from several countries – Portugal, Brazil, South Africa, Lesotho and Eswatini (formerly known as Swaziland), Britain and Ireland – will be restricted from entering the country, even if they test negative for the virus.
The US is also extending its ban on travel from Brazil, Britain and 27 European countries.”
https://www.straitstimes.com/world/countries-tighten-borders-as-coronavirus-virus-variants-spread
@Bryce
Confirmation of closed down airtravel
https://www.globaltimes.cn/page/202101/1214422.shtml
As noted domestic also discouraged by 70%
In other news China says that internal affairs are going much better, unwelcome incidents are on the down and down, and that they have the answers should other countries try and export their own brands of internal aff, especially those imitation Cuban cigars
Pronounced Geopolitical shift in EU towards Asia, quotes CAI but also the now infamous poll conducted by the European Council on Foreign Relations, 6 in 10 in favour
https://www.globaltimes.cn/page/202101/1214456.shtml
Boeing may still be ok ish if WS has the better in the internal Biden Admin power struggle
@Bryce
Forgot to include this comment – an opinion piece which takes the BBC to task as clueless re. collectivist spirit of the people of China
Which has as roots an old village communalist culture now with expanded horizons but which has remained in force, in spite of a frantic consumerism to make an anglo groan or is it green with jealousy
So that not to travel is not considered a deprivation nor a misery but an affirmation of the long standing interests of the group over the whims of the individual – as one can only understand the conditions of health as communal rather than individual
https://www.globaltimes.cn/page/202101/1214405.shtml
@ Gerrard
Not surprising. The UK has one of the worst CoViD performances in the world; the BBC seems to be attempting to compensate for that using an artificial narrative of “yeah, but at least we don’t have government repression”.
Yeah, right: Ask the citizens of Scotland and Northern Ireland about how they were pulled by London out of the EU against their will. And ask the Scots how they feel about the fact that Boris is arrogantly dismissing any talk of a new independence referendum.
People in Singapore (nota bene a former Brit colony) are just as self-disciplined as the Chinese, as are many other peoples in Asia. This has more to do with fundamentals of Confucianism, and associated movements such as Buddhism and Taoism: it has nothing to do with Government coercion.
Those who live in glass houses…
https://en.wikipedia.org/wiki/Confucianism
@ Bryce
It is curious how simple minded notions of culture and identity come to the fore when alternate notions or practices attract attention by virtue of their success
The very same who will bathe in sentiment when appealing to the memories of a shared common tradition to shore up/distract from perception of failure
Respect for the individual, superiority of ‘democracy’, pale soliloquies to the benefits of freedom of expression, valiant scolding of the tyrants
All to be canceled or censored with indecent haste when it might appear suitable to cry out Fire ! we must do something !
Regarding the 777X: “Boeing making design modifications to 777X”
“Boeing’s latest 777X delay results partly from modifications Boeing is making to the jet’s design, including to actuator controls, so as to meet regulators’ “expectations”.
The company is “making prudent design modifications as necessary”, Boeing chief executive David Calhoun says of the 777X development programme.
Boeing is working on “firmware and hardware changes” involving actuator controls, Calhoun adds, saying the move “reflects expectations of global regulators”.
…
Boeing has not disclosed more details about the 777X design rework, and the Federal Aviation Administration declines to comment.”
https://travelandaviation.com/boeing-making-design-modifications-to-777x-news/
Calhoun :
“We’re working closely with global regulators on all aspects of 777X development,” said Calhoun. “This involves listening to all their feedback and applying lessons learned from our experiences on the 737 Max program recertification and applying it to our 777 certification plans. It also involves making prudent design modifications as necessary to meet the various global regulators’ expectations.”
https://www.ainonline.com/aviation-news/air-transport/2021-01-27/boeing-moves-777x-eis-target-late-2023
Global regulators (JATR members) have been clear about the 737MAX Boeing / FAA certification process. See their #1 recommendation. ( it’s not about 737 MCAS).
Apply JATR recommendation to the 737MAX parallel 777x certification process & the application of the changed product rule to the 777x certification process.
The denial, hide & ask-for-prove, see separately brigade has been out there to suppress questions, doubts about the aggressive grandfathered certification process on the 777x, since FAA approved the certification approach in 2014.
Specialists already in 2014 were amazed by the changed product rule strategy for the 777x : “The U.S. regulator has shown “a surprising amount of flexibility” allowing significantly updated aircraft with new engines and wings to be grandfathered, said Hans Weber, president of Tecop International Inc., a consulting firm that specializes in aircraft certification.”
https://www.wsj.com/articles/SB10001424052702303948104579534233968514184
But specialists & supporters are two different groups. Questions, doubts were dismissed and Boeing, the #1 exporter, had strong government support and got away with about anything.
Until the MAX crashes, MAX grounding. EASA and other authorities took an in-depth look into the Boeing / FAA certification process and as result decided to review the 777x certification on their own.
https://www.businessinsider.nl/boeing-777x-certification-review-faa-europe-uae-737-max-2019-11?international=true&r=US
Approving the 777-9 EIS will be for EASA. They are the launching customer’s regulator. And Boeing is less cozy with EASA as with FAA, as congress noticed in 2017 already.
Since 2015 Congress has been pushing FAA to reduce EASA validation of FAA certification of US aircraft and products. https://www.gao.gov/assets/690/683649.pdf. I guess that has been postponed now.
Thanks for this comment and those links.
@keesje
Very useful summary of the situation, clarity: compare to Calhoun’s bumbled doublespeak
The JATR recommendation #1 was summarized as below in the report. It doesn’t indicate that the changed product rule should not be applied to the 777X. Rather it establishes the methods that should entail. Here is the summary from the report:
— Changed Product Rule revisions should take into consideration the following key principles:
• A comprehensive integrated system-level analysis recognizing that in this complex interactive system, every change could interact with other parts of the system.
• The assessment of proposed design changes on existing systems at the aircraft level includes using development assurance principles, system safety principles, and validation & verification techniques. The level of assessment should be proportional to the impact of the change at the aircraft level.
• The consideration of training and qualification of flight and maintenance personnel, as well as detailed explicit procedures for the safe operation of the aircraft.
There is no discussion or plan at present to alter the type certification of the 777X, even though the certification plan has progressed (4 aircraft, 275 flights, 750 flight hours).
What we’re hearing, are the things for which Boeing, FAA, EASA, JATR seem to be consistent and aligned. The flight deck design, human factors, control systems, control actuators (may have to do with folding wings, which are a new feature). Looking at how changes are integrated into the aircraft as a whole, as a holistic method.
If could be that if redesigns are extensive enough, it may bring the amended type certification into question. I’m sure if that happens when the TIA is issued, we will hear about it, as it would reset the certification.
From an Aviation Week podcast on 777X certification:
“It’s really just become the poster child as I’ve said in the story really for this new approach. So, that’s really the background to what’s going on. The other side of course is from the FAA. They’ve put together this team of experts, the technical advisory board, and that’s been providing feedback to Boeing on a day-to-day basis looking at the certification plan. And there’s a lot of new things to look at in the 777X. You’ve got this folding wing, for example, that we talked about earlier.
It’s not so much the nuts and bolts of the system that they’re worried about, it’s more the human factors. How the crews will react, whether it’s something they’d forget about or lose sight of. It’s those sort of things. So if you put all of those inputs together, you’ve suddenly got a certification plan which almost doesn’t really bear any resemblance to what would have been crafted say two or three years ago.
It’s really looking at fault tree analysis. Every aspect of the entire design has been rigorously looked at whether it’s software, hardware, systems, design, operational procedures. It’s a complete go through of the entire program. And inevitably that stretched things out.”
It’s not a new approach. It’s about repairing short-cuts of the old approach. Hell will freeze, before Boeing / FAA would admit that.
Guy Norris telling Boeing and FAA got corrective actions from outside, and are now complying, would be an earthquake.
Guy is highly respected, he wrote many books about Boeing. He gets into the chalets, HQ for exclusive executive interviews and support, unlike e.g. Dominic and Scott.
https://www.amazon.com/Boeing-777-Technological-Jetliner-History/dp/076030890X
Keesje, with any bit of luck Dickson will soon be dumped (after all, he didn’t get a single Dem vote at his nomination hearing) and replaced by someone of greater integrity. If/when that happens, the days of “cut-and-paste” certification at Boeing will be numbered.
However, such an event would cause a seismic shock in the parallel universe of the Boeing cronies — hence the denialism.
[Edited]
It’s unlikely that the 777x certification is going to be overturned. The process changes that are predicted to cause that, are already underway now, and have not had that effect.
EASA and other regulators will do their diligence and check all this work, which is a good thing. They are probably already involved in that now, in an advisory role. But if Boeing and FAA have covered their all their bases and done their work well, there won’t be much for them to find or challenge.
That is the overall goal here, and both Boeing and FAA are focused on that outcome. It’s likely they will succeed. Time will tell, one way or the other.
[Edited.]
It’s quite likely that the 777x certification is going to be overturned. The process changes that are predicted to cause that have just gotten underway now, and wil get fresh impetus under the Biden administration.
EASA and other regulators will do their diligence and check all this work, which is a good thing. They are probably already involved in that now, in an supervisory role. If Boeing and FAA had covered all their bases and done their work properly, rather than trying to rely on “Old Boys Club” tricks and short cuts, there wouldn’t be much for them to find or challenge — but the reality is different.
That is the overall goal here, and both Boeing and FAA will be forced to focus on that outcome. It’s likely that that will result in nasty surprises, cold showers and delays. Time will tell, one way or the other.
@ Keesje
Thanks for that excellent summary.
Apart altogether from the required hardware and software modifications, more stringent certification, delayed EIS and reduced orders…there’s now also the excellent RASM-based argument from Judson Rollins as to why the era of the VLA is over.
Boeing is just throwing good money after bad.
at this point I really doubt they can even break even on this program on a production basis I guess the long term service business will have to close the gap. A330 NEO will put a lot of pressure on the 787. 777X will have a hard time competing with A350 and their single aisle has A220 A320 and A321 to compete with with A322 in an advanced state of design waiting in the wings. They are in a tight spot. Building MAX just to get one lousy contract will go down as one of the worst decisions in corporate history.