April 28, 2021, © Leeham News: Boeing’s first quarter financial results were slightly worse than estimates by Wall Street analysis.
“Boeing reported first-quarter revenue of $15.2bn, primarily driven by lower 787 deliveries and commercial services volume, partially offset by higher 737 deliveries and higher KC-46A Tanker revenue,” the company states in its announcement. “GAAP loss per share of ($0.92) and core loss per share (non-GAAP) of ($1.53) reflect year-over-year KC-46A Tanker improvement, higher 737 deliveries, and lower commercial airplanes period costs, partially offset by lower tax benefits and higher interest expense. Boeing recorded operating cash flow of ($3.4)bn.”
Boeing recorded a charge of $318m for the VC-25B (Air Force One) program. Impacts from COVID-19 and a vendor that Boeing sued (and which counter-sued) are cited as reasons.
Productions rates remain unchanged.
The press release is here.
But buried in the slide presentation for the earnings call at 10:30 EDT is a one line reference that US-China relations are a business environment watch item. Credit Suisse notes this is the first time Boeing has so referenced China in earnings calls.
First reactions to the financial reports and China are below.
Significant cash burn continues. Free cash flow in the quarter was ($3.7bn), in line with our estimate, but below the consensus estimate of ($3.3bn). We continue to view cash flow as more important than reported earnings, due to the impacts of the MAX delivery ramp, 787 delivery slowdown and accounting charges. We expect cash flow to improve in Q2 this year depending on MAX and 787 ramps. 787 deliveries are picking up, but the MAX is stalled. There were no changes to production rates or timelines. The target remains for MAX production at 31/month in early 2022, 787 production remains at 5/month, and first delivery of 777X is targeted for late 2023 (all previously announced). Defense impacted by VC-25Bcharge. Defense, Space and Security revenue was above our estimates, but margins were below our estimates, driven by the driven by the ($318m) charge referenced above. The company attributed this charge relates to COVID disruptions and performance issues at a supplier. But, there was no tanker charge this quarter.
Boeing reported Q1’21 sales/core EPS $15.22bn/($1.53) vs. Street $15.23bn/($0.97). The EPS miss was almost entirely driven by a $318m VC-25B (Air Force One) charge at BDS. Free Cash Flow burn was ($3.68bn) vs. Street ($3.94bn). Boening ended Q1 with $21.9bn of cash and marketable securities. Overall, we view this report as neutral to slightly negative, though commentary on call will be key, particularly with respect to 737 MAX and 787 delivery rates. Additionally, any updated commentary on potential influence from U.S.-China relations on deliveries and future production will also be key. Management’s presentation now references U.S.-China relations as a risk.
Commercial Airplanes: Sales/operating profit were $4,269m/($856m) vs. [our estimate] $4,992m/($840m). The sales miss vs. estimate may reflect more aggressive price discounting vs. what is in our model. Boeing noted that the 737 program continues to produce at a low rate and reiterated its goal of increasing production to 31/mo by early 2022. The 787 program transitioned to the 5/mo rate during Q1. No changes to production rate plans on any programs. Boeing incurred $568m of abnormal production costs during Q1.
Defense, Space & Security: Sales/operating profit were $7,185m/$405m vs. [our estimate] $6,586m/$527m. The EBIT miss was driven by a $318m charge on the VC-25B program (Air Force One), which was driven by COVID-19 impacts and performance issues at a key supplier. BDS began production on the T-7A during Q1 and delivered the first F-15EX to the USAF.
Other items: Boeing inserted the language “U.S.-China relations a watch item” on its business environment update. This seems to be the first time this language has appeared so prominently, and likely reflects the ongoing inability of Boeing to get the MAX approved by China’s aviation regulators. Risk was well-known to investors, however. Boeing made $1,172m of customer concession payments in the quarter.
Bottom line: Boeing 1Q21 free cash was better than FactSet consensus and our estimate, the MAX production plan was held (while investors appeared concerned it could slide), and the 787 production plan was held (while investors appeared concerned it could be taken down once more). BCA backlog grew sequentially for the first time since 2Q18. 1Q21 commercial operating earnigs is clearly still negatively impacted by the pandemic, but Boeing is seeing positive second derivative in most key leading indicators.
Details: Revenue of $15.22bn compares to consensus at $15.23bn, down 10% YOY on still-disrupted deliveries and aftermarket. Core EPS of $(1.53) includes a $318mn pre-tax charge on the VC-25B program in Defense and continued abnormal MAX production costs. The Boeing Global Services margin is up 20bps sequentially to 11.8% (240 bps ahead of our model), and BDS adjusted margin of 10.1% is 130bps better than our estimate. Including abnormal MAX production costs, which we model, the BCA EBIT loss is slightly better than our estimate. The 1Q21 free cash use is $(3.7bn), compared to our $(4.2bn) estimate and consensus at $(3.9bn), and is the third quarter of sequential improvement from 2Q20. The 787 deferred balance declined $173mn sequentially, which we estimate implies a mid-teens cash margin on what is now trough production. Boeing reiterated production rates, including the MAX gradually increasing to 31/mo by early 2022 with further gradual increases based on demand, the 787 at 5/mo, and the 777X at 2/mo (with deliveries beginning in late 2023).
Boeing burned more cash in Q1 than we expected but sees lower cash usage from here, assuming 787 and 737 deliveries ramp. The timing of China’s certification of the 737 MAX will likely play a role in the number of MAX deliveries, and Boeing is making clear today that this is a watch item. We expect the conference call at 10.30am to have affect the stock reaction.
Boeing burned $3.7bn of cash in Q1. This is worse than our forecast and consensus for a ~$3.1bn outflow. BCA earnings were well below our forecast, but we are not sure how much of that is cash, while working capital was a significant use of cash, including receivables, payables and accrued liabilities. Mgmt cited advances as a YOY cash headwind but they were a source of cash on the cash flow statement.
China is important for 737 deliveries. The earnings slides mention US-China relations twice as a watch item, references that did not appear in the 4Q20 presentation and the ability to deliver MAXs there, which requires government certification of the aircraft, [and] will likely be a key driver of the number of overall 737 deliveries this year, which, in turn, drive cash flow and the production rate. Management continues to expect a rate of 31/mo in “early 2022” while also noting that it will assess the demand environment in setting the rate, a new caveat.
BCA loss was greater than expected. The ~$850m loss was well below our estimate for $200m. 737 abnormal production costs may have played a role. BCA R&D of ~$270m was down only ~$10m from 4Q20 and may be bottoming at this level.
BDS missed, BGS beat. Defense earnings of $405m missed our estimate by $280m due to a $318m charge on the Air Force One program (VC-25B), where issues had been in the press during the quarter. BGS profitability recovered more than expected, with the EBIT margin reaching 11.8% vs mid-single-digits in 2H20.
Of course US-China relations are a watch item: without China to sell to, BA will suffer a crippling dent in its earnings.
@Pedro posted the following link in a comment on another LNA article below.
BA hasn’t had ANY deliveries to the Asia Pacific region in months, while Airbus continues to deliver there at a healthy pace.
The company sued by Boeing with regard to contract work on the AirForceOne planes has gone into Chapter 11:
“GDC Technics, an aeronautics interiors supplier, filed for Chapter 11 bankruptcy the same day the company announced it was laying off 223 people in Texas.
The layoffs and bankruptcy filing come after Boeing Co. (NYSE: BA) sued GDC Technics for allegedly being behind schedule on two Air Force One aircraft.”
…and in other news
Boeing’s latest 737 MAX problem prompts FAA audit – WSJ
“As part of its audit, the FAA reportedly is investigating why Boeing missed that a mere tweak in production involving drilled holes wound up as the root cause of potential electrical problems, according to the report.
The audit is expected to delve into issues beyond those addressed by a typical agency review of such problems, and will examine how other minor production changes were handled, according to the report.”
Because 20 months of grounding obviously wasn’t enough time to fix the aircraft properly. Now, ever little change Boeing made to the Max will be under scrutiny. Safest…. plane…ever…lol
This is the type of mess that you get when manufacturing process changes are proposed and vetted by ex-checkout employees from K-Mart rather than qualified and motivated engineers.
God knows what the FAA audit will reveal. Airlines that haven’t yet canceled now have even more reason to do so.
> Safest…. plane…ever…lol
Confederacy of Dunces, or something darker? I don’t know.
JP Morgan’s mention of China and 737 deliveries and follow-ons seems significant.
As Pedro pointed out BA is not selling in Asia – the Max remains un re cert not only in China, and India, perhaps others
The problem being that the price of re cert involves trade and grayzone relations between US and those countries, hence the region in general, which will up the price BA has to pay for any eventual re access
Given the loss leader LUV etc prices on the Max, and with the 787 prices likely to follow, BA find they are shut out of a vital market that regaining any share of which will involve, undoubtedly, selling planes at a loss
WS end game is on view – BA crippled to the point that a break up and firesale to one of those very same Asian countries which may like importing a slice of aviation technology
Amazing someone would write that Boeing would be sold off to Asia.
US has transferred a huge amount of critical manufacture and tech to Asia over the last 5 or 6 decades
They (WS) will not hesitate to do so with a company which can not build planes in the US without loss for the forseeable future, without efficiency and with multiple production problems the company seems incapable of fixing – not to mention the corrupt regulator problem
These transfers have taken place with the sole aim and purpose of making money – and despite the harm it has done to the interests and the lives of the US
Why and how should this process be stopped?
Amazing someone would write that Boeing would be sold off to Asia.
That’s the whole plan of the advocates of the Leninist party-state system. They pop up everywhere ……where they aren’t busy doing shanzhai
US has sold off everything else – what’s so special about BA
It’s the typical dog whistle when you don’t like what you are reading and have nothing to rebut
> That’s the whole plan of the advocates of the Leninist party-state system. <
Forced polarization: "Agree with me, or you're clearly, clearly a Leninist!"
No me gusta.
The bad tempered know nothing remarks from Corporate are revealing in their stupidity
As all know offshoring was done by the US – onshoring as a cunning dastardly plot without the manufacturer’s initiative and intent is an impossibility and a childish fantasy
Now many in US talk about onshoring – the few initiatives so far have proven halfhearted – mere arm twisting of overseas companies to set up in the US – and have/will prove in efficient : e.g. Foxconn, TMSC
This is not onshoring but shouting –
& doomed to failure because local US administrative management engineering workforce skills and overall supply chain and infrastructure is inadequate to support/operate advanced industrial techniques and management as now practiced in Asia
BA is the proof : they tried to go offshore to….far away inexperienced underdeveloped Sth Carlonia : an instant disaster which rot spread back to home ops
Its simple, Boeing wants China orders and China wants no restrictions and/or sanctions on their commercial aircraft programs (e.g. engines, avionics…aka same technology on the imported 737) Also, the US could throw in the deal FAA cert for the C919 From a 30,000ft view, the C919 will be getting EASA cert so FAA cert should be no problem You don’t need US airlines to buy the C919, just base it on US content on the C919
The C919 has no certification path, EASA took a look and like the FAA threw its hands up.
Once you muck up cert (just ask Mitsubishi) tyr9ing to re-retrograde and get it is impossible as you virtually have to start from ground zero.
Very few understand the process, which is a shame as it undermines the comments to alternative facts that might be true in an alternative universe.
>The C919 has no certification path, EASA took a look and like the FAA threw its hands up.<
I'll once again take exception to that claim, and to what seems to me to be behind it.
>The C919 has no certification path …
Proclaims the “expert”!!
As expected, the new MAX problem just keeps on mushrooming:
FG: “Boeing pauses deliveries of 737 Max while awaiting electrical fix”
“Boeing is calling on the administration of president Joe Biden to reinstate trade relations with China, saying aircraft orders from that country will be key to the airframer’s long-term health.”
The Chinese must be really amused by this cabaret…
My-oh-my, more hardship for MAX users:
“Operators of Boeing 737 Max jets are being instructed to check the type’s engines for potential corrosion on components, which could result in reduced thrust control.”
Yes, the sky continue to fall. It must be down around China someplace by now.
Certainly well below the bottom of the Marianas trench.
As noted in previous comments, that is day in day out sort of thing that props up. If you read the ADs that have not been complied with on the aircraft you fly, you would stay at home.
Then ask FG why it doesn’t bother writing articles on all those other ADs
I have and do.
Because as its noted below, the flavor of the day is poor journalism just like poor writing.
Mass hysteria comes to mind
There are issues that desperately need to be addressed but it fun for some to just run in circles and scream and shout rather than put in the effort to understand the issues and what does need to be addressed.
The US is in the position it is with the FAA because its issue have never been addressed (those who contend it was a Gold Standard are woefully ignorant of history)
You can look at the EASA and the Norwegian approval fro two bad engines on a 787 fully allowed, when there should be no known bad engine allowed.
Or why has P&W magically allowed to approved blades based on an experimental system of inspection?
Those are the questions that should be asked and answered.
Clearly a grounding issue is not routine but neither are two known bad engines or an inspection process that never got certified and now suddenly is.
And bad pilots? We have regular crashes because of bad pilots. One was in Indonesia on an A320 where the pilot got up and pulled the computer CB.
Another was in Pakistan. But no, we don’t hear about that from the Pundits do we?
No matter how good the aircraft (and they should be good and better than they are) a bad pilot will still crash them.
Two bad engines ? Is another one of your ‘sandcastles’, like the Trent 900 8 or 9% SFC improvement.
You can disagree with the assessment, but the facts are that EASA allowed known bad Trent 1000 engines (two) on the 787s.
Contrast that to the A320NEO GTF that was allowed one bad enine until India put the Kibosh to that.
A bad engine is one that you have no idea what its going to do.
RR was blowing smoke when it “assessed” the possible failures of the Trent 1000 and had to rapidly change it each time a lower time engine failed.
The engine that failed on the Norwegian 787 was the one with FEWER hours on it, supposedly it was a “safer” engine.
So it failed and suddenly you need full thrust from the engine that is closer to the , oh darn, it will fail sooner.
The good news was that for whatever reasons the higher time engine did not crater and we did not have a 787 crash.
Putting an iffy engine on an aircraft is pure stupidity.
Allowing two is insane.
And that is one of the real and serious issues in Aviation. Most authorities allow stupidity to insanity and it should not be.
While Boeing criticism is fully justified, its far from the only issue and the number of close shaves is going to bite sooner or latter.
You don’t make changes without validation, you don’t change engines without testing and you don’t allow engine makers to jump to conclusions based on modeling theories.
“The sky continue[sic] to fall”
It is down where those over 31,000 former BA employees live!!
This is a one-time inspection AD and is newsworthy only because of the Max’s history, not because there is a serious design issue there.
> This is a one-time inspection AD and is newsworthy only because of the Max’s history <
The word "only" seems out of place in the quoted sentence.
One commenter here has said the MAX v2.0MCAS is
a now very safe airplane; I don't really agree, based on what I see so far.
> This is a one-time inspection AD and is newsworthy only because of the Max’s history <
The word "only" seems out of place in the quoted sentence.
One commenter here has said the MAX w/ MCAS v2.0 is
a now very safe airplane; I don't really agree, based on what I've seen.
I think the MAX was safe, its what they have done to it that affected that (fatally in two cases)
The Grounding change is the kind of work that goes on with all aircraft, I don’t find it MAX specific though it is Boeing specific to get so many things wrong.
But the MAX grounding is not a one time inspection, its a failure of the process it occurred in the first place.
Its an easy fix and I believe FAA has concurred with Boeing on the process.
But having a grounding issue at all is a gross failure of the system.
As I have stated though, my wife was flying to the states one time and the A320 hit the headlines with a program problem that was serious and required a work around if it occurred.
They had something like 5 years to correct it. That is simply nuts and is in the same aspect as MAX pilots having to work around a AOA vane failure.
A pilot should never have to routinely revert to an off procedure, how many of those do they have to keep straight? Sooner or latter someone is going to drop the ball.
The delay was all based on it being convenient for the airlines to do the program change during a major inspection, not safety.
And too much of this is based on Airlines and mfgs profits and not on safety.
That should change.
Boeing made extensive changes on the 787 lightening protection system on the wing that the FAA seems to have approved despite the fact they are bond to propose it first, get approval before they do it.
The RR Trent 1000 debacle is an example of a non Boeing failure that was allowed to propagate and fly with known bad engines based on a complete unproven computer program (as I recall they had to change that program two or three times as failures occurred sooner and sooner than the so called forecast)
It was only a roll of the dice that they did not have a crash with two engines failing.
> I think the MAX was safe, its what they have done to it that affected that <
I respect your opinions TW, but the above doesn't make sense to me. It's the *actually existing* MAX that matters, not some hypothetical version. Do I trust that plane
at this moment? No: where there's smoke
there is fire (as we've seen).
Interesting that the order came from EASA, not FAA. Can be a one-time check or repetitive checks of messages.
Hah, how many times I heard the Corp. BA PR machine repeated the B737 MAX is “the most scrutinized plane”??
Boeing of course wants things back exactly where they were before Trump and before Covd.
Its not going to happen. Some different relationship is going to be the norm.
What China does about MAX cert will be interesting.
India is also interesting in the hold off. I gained a great deal of respect of (DGCA I believe) when they refused to let a A320 GTF fly with a single questionable engine let alone two the EASA did on the Trent 1000 debacle.
India is allowing overflights as is Vietnam I believe.
It is far better that all AHJ do independent reviews of any aircraft that is certified by any other country.
While it came at a terrible price (which Aviation has a long history of) its been baldy needed to get out of the group speak.
I am not sure they are not talking about May, but it makes sense
At least some part of the process is working right where they stopped things, reviewed it, I assume looked for other areas affected.
Its not a complicated fix but clearly they are stepping it through with the FAA.
It should not have happened, will have to see if they are correcting any of the why its happening.
The 787 seems to be back on track and I like that it was not forced through but looks to have gotten a good review of at least the problem on the joins.
That is not a rosy prediction for BCA future, but it is a change as OPUS posted and should be put into the discussion for the clues that for those of us who care about Aviation vs just bashing Boeing for bashing sake.
Like many, I would like to see Boeing become a good company again. The world needs at least two good competitors (Airbus has turned into a good one from iffy roots – but while there was and continues to be some government interferon at strategic levels, product development is not one of those area.
“…bashing Boeing for bashing sake”
Who’s bashing Boeing?
Nobody here has to bash Boeing, because Boeing does a perfectly good job bashing itself.
All that remains for others to do is to comment on that — which not only happens here on LNA, but also on Reuters, FG, SimpleFlying, RunwayGirl…you name it. Is the whole world bashing Boeing? No: the whole world looks on in disbelief while Boeing buries itself further and further into a marsh with every passing day.
Boeing stock went down 2.4% today. Is that “Boeing bashing” or is that a real-world reaction to yet another substandard performance?
Anyone that follows the stock market knows its the trend you watch, not minute to minute or day to day, but blocks of months and year.
Yelling the world has ended over and over just detracts from any credibility you might have had .
Yes its an issue, its a serious issue, its got nothign to do with the MAX and all to do with the process Boeing is (or was if we are fortunate ) engaged in.
For a change its being handled correctly. Ground is not complicated. Making sure its not repeated all over the aircraft is.
Finding out how this got out into production is a valid issue, and why was it not caught by the FAA?
Its the kind of changes any aircraft undergoes, it should not turn into a mess so the process at least at the time allowed it.
Would it allow it now? That is what I want to know and is worth knowing.
The same on the 787 shim debacle. How did it get to where it was, why was it not caught and would it be caught now?
BA “enthusiasts” eager the co. to stick with less than a third of the NB market and likely 40% of the WB market for the near future. What hurts more, bashing by online commentators and journalists or “enthusiasts”??
You are right – Boeing is their own worst enemy – it would be impossible for anyone to invent the long list of stupidities and corruptions they are guilty of
Apart from themselves – their worst enemies are Wall Street – who see a profit in breaking up the company and selling off the pieces
To take a general view BA is merely the victim of a corrupt and decadent US economic system which systematically replaces industrial infrastructure with…..nothing much…viz AMZN warehouse slavery
Or the politics of the US which inhibits if not prohibits some kind of nationalisation and administration which would….which might just..
You know things are bad when the most positive thing a WS analyst says about your company is that the KC-46 didn’t take a charge this quarter!
But then the VC-25B stepped up to the plate…
Thanks for that link, TW.
You are welcome.
For those looking for some humor/fantasy:
FG: “Boeing aspires to split the narrowbody aircraft market evenly with Airbus after losing ground to the European airframer as a result of the nearly two-year grounding of its 737 Max.”
Yea that is pretty funny.
And Boeing can’t even say “we’re number 2, but we try harder”, as Avis used to..
Well they are number 2.
At least previously they were trying really hard to give money to shareholder (13 billion borrowed to pay a dividend)
So its all in perspective!
No evidence of *trying* from that financialized entity, though, except for Job One: further enriching the Very Few. They do work hard at that..
BTW: I first sensed this direction of “our” Political Economy around 1975, when G. Ford’s limp ‘WIN’ (Whip Inflation Now’) messaging was being catapulted to us hoi polloi..
Last one to leave turns out the lights. And they bleat now
about OMG China!!!, as though they didn’t pointedly
send all our productive capacity and Jobs there..
“Who coulda Knowed?”
Yea the pundits on China forget it was handed to them by US and Corporations not anything they did to make it happen.
Even more humor:
FG: “Boeing chief executive David Calhoun believes that the next generation of aircraft will distinguish themselves by the way they are engineered and constructed, rather than through increasingly efficient engines alone.”
Yes, that’s right: this statement came from a company that is plagued by an endless litany of manufacturing quality issues and headline-making engineering shoddiness.
@Bryce: Calhoun is right about the theory. Execution is the problem.
Ain’t that the truth.
Words are cheap, doing is hard.
Reality is aerodynamics is a mature field and the gains are incredibly hard to achieve (if the 737 can be kept competitive all these years that speaks volumes in that area)
GTF still has a lot of upside and that is why NASA models of any type of structure all included a GTF to max the gains (and most of the gains were the engine)
Is Calhoun trying to peddle Emperor’s new cloth??
Reaction from journalist upon hearing
@BoeingAirplanes reiterated today that it still expects to deliver the first 777X in late 2023.
One of the commenters in that Twitter feed astutely noted that BA didn’t say to whom the plane would be delivered, after which another commenter speculated that it would be delivered straight to the boneyard in Victorville 😉
Yes. Engineering is very important.
-Calhoun to the press
Ok, how many more engineers are we laying off this quarter?
– Inside the boardroom
BA identifies three more B737 MAX that are affected by the grounding issue.
There are over 300 additional undelivered B737 MAX the co. has to fix as well.
Boeing says “106 delivered 737 Max” are affected by electrical issue, but @cirium data indicates it is potentially over 600 aircraft when including the undelivered stockpile #737Max
No wonder deliveries have been suspended while this mess is sorted out.
Like every Boeing screw-up, it starts relatively small and then steadily expands like an oil slick.
Next question: Did this (or a similar) grounding issue play any role in the two MAX crashes? Or in the multiple AP issues reported by US MAX pilots prior to the two crashes?
Ah, sounds like identifying the difference between the truth and the whole truth: somewhat of a big difference.
And nothing but ….
BA Bad News Decade
When will BA admit to a semiconductor shortage ?
Further to last
Only a matter of time
It looks as if Boeing’s appeal to the Biden administration to resume normal trade with China has received a cold shower.
CNBC: “Biden calls for the U.S. to become more competitive against a ‘deadly earnest’ China”
CNBC: “First 100 days: Biden keeps Trump-era sanctions in tech battle with China, looks to friends for help”
The Dems do have a problem, being seen by joe public as softies, and Biden is being as rude as he knows how to the Russians and to the Chinese
But this may be is probably a smokescreen, and essentially intended for home consumption
Clearer heads know that the DoD can not take on Russia let alone China with the prospect of any outcome other than disaster
Chairman Cal is doing his best for world peace with his non combat combat plane – same is said of LM and the F35
The Dems do have a problem, being seen by joe public as softies, and Biden is being as rude as he knows how to the Russians and to the Chinese
But this may be is probably a smokescreen, and essentially intended for home consumption
Clearer heads know that the DoD can not take on Russia let alone China with the prospect of any outcome other than disaster
I’ll remind you Chairman Cal is doing his best for world peace with his non combat combat plane – same is said of LM and the F35
Today’s figures for the US Trade deficit make it clear that off shoring is continuing in all areas
Especially semi conductor, as per other article linked to already
BA will be be offshored with the rest of the economy: first industry then services then….
« The US trade deficit in goods with the rest of the world in March exploded by 24.6% from March 2019 and by 38% from March 2020 to $91 billion, another worst-ever milestone, in a long series of worst-ever milestones, according to the advance estimate by the Census Bureau today.
Trade deficits are not a sign of a growing economy, or any kind of economic strength, but a sign of rampant offshoring of production by Corporate America of consumer and industrial goods to cheap-labor countries. Trade deficits are a drag on GDP:
Imports from the rest of the world jumped by 8.9% from March 2019 and by 20.6% from March 2020 to another huge worst ever level of $233 billion.
Imports are a negative in the GDP calculation and are drag on GDP. But they do stimulate the economies of other countries. »
I hope Leeham News and Analysis writes an article with an overview over where the 737 MAX actually is certified. A map would be great, with green and red countries and jurisdictions.
I also wounder how many 737 MAX have actually been updated with in accordance with the new certification requirements from FAA, EASA and other regulators.
The 737 MAX and the A32Xneo were launched only months apart. An objective article, with hard numbers, concerning competition between the flagship aircraft families would be great.
I think your first suggestion is great.
Small extra item: I think you should add orange to your color code, to indicate countries that only allow over-fly (e.g. India and Vietnam). Perhaps also grey, to indicate countries that are going to decide on a “per airline request” basis (such as New Zealand).
Agree on the Map/Graphic a great idea as is the adder for fly over.
New Zealand using an airline by airline approach is new (any link?)
I don’t think its worth another color as I doubt anyone else will do it that way.
Regarding New Zealand, see the last sentence in this link:
“The CAA will not issue a blanket approval for the Boeing 737 Max to fly into New Zealand but will work with any future operators on a case-by-case basis to clear flight operations into NZ.”
AFAIK Singapore’s regulator CAAS is still “working towards lifting its suspension”
“We will need to be assured that all aspects of the safety of Boeing 737 MAX operations have been addressed.” Tay Tiang Guan CAAS Deputy Director General
Apparently they are not in a rush.
SIA still has over 31 B737 MAX due to be delivered.
Well the Wiring Ground issue does nothing to getting that to happen.
Much bigger spread than that. A320 neo first delivery to carrier was Jan 2016.
Max was May 2017.
For the other questions look up the search box to see previous neo and max stories or the ‘tags’ at the footnotes for above story
Notice how she used the word ‘launch’?
On 1 December 2010, Airbus launched the A320neo “New Engine Option” with 500 nmi (930 km) more range or 2 t (4,400 lb) more payload, and planned to deliver 4,000 over 15 years.
On August 30, 2011, Boeing’s board of directors approved the launch of the re-engined 737, expecting a 4% lower fuel burn than the Airbus A320neo.
9 months…which would be months apart.
>The 737 MAX and the A32Xneo were launched only months apart. An objective article, with hard numbers, concerning competition between the flagship aircraft families would be great.<
Agree- that's a fine idea. Most pertinent planes at the moment
in a pressured industry.
Bloomberg has an excellent summary of yesterday’s BA Q1 results:
Cash burn since first MAX grounding is now $30B:
“Once a prodigious cash generator, Boeing has burned about $30 billion since regulators grounded the best-selling Max in March 2019, after two crashes that killed 346 people. The cash consumed is roughly double what it would cost to create an all-new jetliner from scratch, one of the tasks ahead for Boeing as it tackles a massive rebuilding effort and heavy debt load.”
Interesting — yet another reach-forward loss:
“The company’s contract to provide the next U.S. Air Force One aircraft is in a reach-forward loss position, Boeing said in a regulatory filing. That means estimated costs exceed the revenue Boeing expects to receive from the $3.9 billion contract.”
China: postponed MAX re-cert and C919:
“In an ominous sign, Boeing’s expectation for Max certification in China, which once seemed to be just weeks or months away, has slid to the second half of the year.
The Biden administration risks hurting Boeing, and U.S. exports, if the matter drags until China’s homegrown C919 makes its debut, said Ferguson, the Bloomberg Intelligence analyst.
“There’s a limited amount of time to get planes into China,” he said. “And Airbus is doing it.””
400 planes stored is a lot of cash to come. Remember ‘cash on hand and equivalents’ $22 bill…equivalents is planes built but not delivered.
as for credit availability
‘The company refinanced $9.8 billion of debt in the quarter. Additionally, the company increased its revolving credit facilities by $5.3 billion to a total of $14.8 billion, which remain undrawn.’
as for 737 production and deliveries
‘Since the FAA’s approval to return the 737 MAX to operations in November 2020, Boeing has delivered more than 85 737 MAX aircraft and 21 airlines have returned their fleets to service, safely flying more than 26,000 revenue flights totaling over 58,500 flight hours (as of April 26, 2021). The 737 program is currently producing at a low rate and continues to expect to gradually increase production to 31 per month in early 2022
777 and 777X production rate is 2 per month
Those 400 stored planes will only generate revenue if/when they’re actually sold.
The MAX whitetails have been available since the FAA un-grounding in November last year but there seems to be very little (or actually no) market interest. Nobody will take them for a price higher than the recent bargain basement sales to Alaska/Ryanair/Southwest, so BA shot itself in the foot there. In many cases, if a new buyer is found, the interiors will have to be stripped and replaced by the buyer’s own house style — those costs will have to be borne by BA. And BA will also have to pay the costs of re-commissioning after long storage — including the new engine corrosion inspections. In the meantime, those stored in boneyards are costing monthly fees paid to the boneyard owners.
As noted by Bloomberg’s reporter:
Boeing is at a reach-forward loss on the fixed-price development contract. This means estimated costs are gonna barrel past the revenue BA gets from the Pentagon for the new presidential 747 jumbos.
That is correct. Our own Scott had investigated the cost to refurb an aircraft from one airline to another and after talking with lessors, came up with a $5-7 million price tag, depending on how much work had to be done. We’re talking about moving electrical, plumbing, lavs and a whole host of other stuff.
Inventory built and sitting there, is never good for any company. It’s even worse during a downturn and to add insult to injury, airlines know they have these planes sitting there, collecting dust and costing BA money to keep them fresh. No one is going to offer them good money for these jets…
Boeing has to make airlines an offer they can’t refuse, kinda like SWA.
What a mess.
“”400 planes stored is a lot of cash to come””
If I were an airline, I would think long if I would want a plane where mice lived for over a year. If I find poop traces I will not take it. Can’t check every inch of the plane, if there are poop traces there will be biting damage.
400 planes stored is a lot of poop to come …
Plus: the hot, dry air in deserts causes all sorts of seals and other rubber components to dry out, and it causes grease and other lubricants to out-gass and change consistency.
Plus: insects love to nest in any small opening they can find. The Pitot tubes are (hopefully) covered over, but there are lots of other openings gaps and folds all over a plane.
A Transavia 737-700 had to make a precautionary landing in Amsterdam the other day, just after taking off from Rotterdam. One of its altimeter instruments wasn’t working properly. It was on its first flight after removal from 8-week storage. Link is in Dutch.
Cash and cash equivalents refers to the line item on the balance sheet that reports the value of a company’s assets that are cash or can be converted into cash immediately. Cash equivalents include bank accounts and marketable securities, which are debt securities with maturities of less than 90 days
Cash and Cash Equivalents Do Not Include
There are some exceptions to short-term assets and current assets being classified as cash and cash equivalents.
Inventory that a company has in stock is not considered a cash equivalent because it might not be readily converted to cash. Also, the value of inventory is not guaranteed, meaning there’s no certainty in the amount that’ll be received for liquidating the inventory.
Thanks for this explanation as to what accounting regards as cash equivalents
Certainly white tail maxes would not be on anyone’s list of assets – whether they can be sold at any price even negative is still uncertain
They are more of a liability than an asset
Some of those aircraft have been sitting there since Mar 2019, costing Boeing money – not only in needed maintenance to keep them in flyable condition, but in interest expense, as well.
Boeing had to spend, let’s call it $30 million an airframe, to make that plane. Even at 1% borrowing costs, each month that goes by adds ($300,000 / 12) another $25,000 to the total cost of that jet.
It’s also been 3 weeks since BA has ‘paused’ production. In a week it’ll be another month added to the bill. Time really is money.
Thank you for this-
So Max White Tails costs per unit per year are
Financial : at approx $300,000 per year minimum, likely more
Maintenance : ? per annum ?
Refurb : $5M-$7M (one off)
Loss of value : ? per year ? (accountants call this depreciation I think)
So how long is it before even LUV’s discount record is beaten ?
As what it’s shown by WN et al. airlines take delivery of B737 MAX only because of massive compensation showered by BA. No wonder another quarter of cash drain of $4 billion!!
BA’s cash on hand at quarter end fell $3.7 billion to $21.9 billion, net debt increased by nearly $4 billion since last quarter to $41.7 billion.
Money for new jet development? Where does it come from??
” Additionally, the company increased its revolving credit facilities by $5.3 billion to a total of $14.8 billion, which remain undrawn.’
So cash equivalents plus credit available but undrawn is $36 bill…
So plenty there for that over say a 5 yr cycle
Apparently BA is drowning in debt. Result this quarter is adversely affected by increase in interest expense.
Apple just announced “blow-out” earnings.
We have poster here trying to downplay BA’s excessive debt by comparing it with Apple. Nice try! 😂😂
Airbus expects an EBIT Adjusted of €2 bn.
BA refuses to give out forecast!!
What happened to free cash flow …. werent you using that rather than a non number of ‘adjusted EBIT’
“Grumpy is one of the seven dwarfs in Disney’s 1937 film Snow White and the Seven Dwarfs. True to his name, Grumpy is grouchy, overbearing, and short-fused. Often portrayed with a scowl and crossed arms, he is frequently annoyed by the other dwarfs. “
As noted by LHN:
More cancellations are flooding in
“Boeing logged just 12 net orders in February and 40 in March. More cancellations are due to be announced; Turkish Airlines recently said it would cancel or convert to options 50 of its previous MAX orders, and ch-aviation says a single unidentified customer cancelled another 45 in March. Aeromexico swapped MAX orders for other MAX orders, saving $2bn in the process – a revenue hit for Boeing down the line”
No wonder BA has to paddle so hard – gaining massive orders by fire sale – against tides of cancellation, but moving backwards.
Good summary- one quibble : re cert was never weeks or months away
This was always a key advantage and opening for China in the ongoing ‘war’
Chairman Cal figured that out – Has he also understood that BA is a sacrificial offering?
Biden Dems care only about locking out the Trumps this year next year for ever – BA as other industries are pawns in this game : onshoring is bla bla
I agree with your comment concerning China re-cert timing.
I suspect that Bloomberg may have been making a (sarcastic) reference to past “feel good” prognoses generated by the BA PR Dept. In a similar vein, we all remember how “The Burg” told us on a weekly basis that US MAX re-cert would be occurring “next month”.
The key question now regarding China is:
– Will Biden withhold US aeroengines in an attempt to thwart COMAC’s advance? I suspect we’ll know the answer to that in a few weeks: you heard the frigid language in Biden’s address yesterday (reported by CNBC in the links posted above).
– And if he does: what will China’s countermove be? Will it involve rare earth metals, for example?
I think the Biden grandstanding is well understood by DoD and by China: makes everyone’s job easier
When you can not produce cars because you forgot to secure a supply of chips etc – and when your…well etc… various DoD complaints about the uselessness of the US industrial base
As with the chips any aviation sanctions merely encourage development of local tech, plus AB seems to be in a position to develop a more interesting and useful relation with China and with APEC
WS and BA might have overplayed their hand – it’s possible that BA really is not worth saving/selling
No US engines for Chinese copy planes ?
No rare earth metals for US high-tech industries?
The only treatment which works with Corporate PR is the one you adopted with @Rob
& should be effective with the new rep –
U.S. airlines only make up 18% of its backlog of commercial-jet orders … a similar position to that at Airbus. And the outlook for travel demand outside the U.S. is deteriorating, according to the April forecast by the International Air Transport Association. This saps the appetite of overseas airlines to take on planes, particularly if delivery delays allow them to cancel purchase commitments.
In the first quarter, BA reported a core loss of $1.53 a share. Analysts had predicted a 90-cent shortfall, based on the average of estimates compiled by Bloomberg. Revenue fell 10% to $15.2 billion, about $100 million more than analysts expected.
“Cash flow failed to meet expectations while liquidity fell and debt remained high,”
BA is facing reduced demand due to the pandemic’s impact on longer-haul travel, and a growing price tag for 787 retrofits due to production defects embedded in dozens of the advanced carbon-composite jetliners.
On the heels of Boeing’s quarterly loss of $561M, Airbus reports a quarterly profit of $439M.
And while Boeing bled cash with negative free cash flow of $3.4 billion, Airbus had positive FCF of $1.4B.
Well done Airbus.
Not so fast … Airbus guidance for the whole year ( not just a single quarter) is
‘break even free cash flow’
Airbus expects an EBIT Adjusted of €2 bn
BA refuses to give out forecast.
Free cash flow for the year 21 is still predicted to be ‘near zero’
You were the one going on about FCF before…volt farce
Its a struggle for all the manufacturers
AB is going to ramp up production of A320 and A220. Unlike its competitor, known for “pilfering from suppliers”, inflates its FCF by delaying payment to creditors by up to 120 days.
Combines with a conservative approach, that’s why AB forecasts breakeven free cash flow.
What’s your forecast of BA’s EBIT??
There is also the A350 freighter program which will cost an estimated $2-3 billion, which they are going to take FCF and plow back into.
Good thinking – take profits and re-invest them back into the company. Much wiser then spending them on share buybacks.
@ Frank (and others)
Any theories as to why the rumored A350F is going to be a slight stretch of the -900, and yet shorter than a -1000?
Something to do with getting an optimized whole number of freight containers in?
Perhaps in some way related to center-of-mass optimization (e.g. vis-à-vis loading/unloading)?
And/or for reasons of weight/range optimization?
“”Any theories as to why the rumored A350F is going to be a slight stretch of the -900, and yet shorter than a -1000?””
It’s not easy to put big cargo doors into the existing carbon fuselage, so new cargo door sections will be included.
The 777-8F is also between the 777-8 and 777-9. It was a choice between range and payload, and Boeing chose payload. I presume Airbus pursues the same rationale.
“”It was a choice between range and payload””
The A350F will have 90t payload, likely with the 319t MTOW of the A350-1000. Range is not so important, cargo doesn’t care about stops.
Cargo doesn’t care about stops but the airlines do. Added cost, added crew time, etc.
It depends on the Cargo operation. The Package Freighters can bulk out before they weight out.
FedEx does a mix of using the 777F to make faster delivery (at a premium I believe) and supplementing or replacing MD-11F on routes.
One reason the 747-8 did not have the range (Emirate for sure) wanted was the Cargo side (heavy mostly except UPS) was fine with fuel stops.
Unless you are a higher value cargo ops like UPS and FedEx, then fuel stops are not the cost factor that being able to make on long trip per Passenger ops which don’t like fuel stops.
Only FedEx and UPS wanted the A380F because of the bulk vs weight, there were no other orders (5 lease firm orders so likely for DHL ops via one of the Atlas type ops)
Boeing had no issue getting the Freighter Door into a 777-200 fuselage.
I’ll re-phase my original question, and also broaden it to include the 777F.
In the case of both the A350F and 777F, the manufacturer has the choice of taking (as-is) a smaller existing model (A350-900 / 777-8) or a larger existing model (A350-1000 / 777-9), and just modifying the chosen model to include cargo doors, strengthened floor, etc. However, instead, both manufacturers have opted to produce a new model with a fuselage length that is intermediate between the existing options. I can only assume that this choice is (predominantly) driven by a desire to fit in an integral number of freight containers. Or can someone come up with another driver?
Context: In the case of P2F conversions, the converter just deals with the fuselage length as-is. So why can’t the OEM do that when developing a cargo version of an existing plane?
Your link appears to be corrupt. This one should work 👍
“The 737 MAX’s electrical issue first surfaced in early February when a newly produced jet wouldn’t start for Boeing pilots after it rolled out of the factory”
No wonder BA rushed out for more debt in March. Culture of concealment??
Blame the pilot!
FAA has to mandate a third one on jumper seat for safe flights!
Three pilots is good – must greatly reassure the pax and LUV and Co are delighted to play the generous employer
But did not BA have some kind of elaborate drone like auto pilot from Centricom system softwared up to prevent all these human failures?
Whatever happened to that scheme – perhaps @RobBot will tell
That’s really scary, because it indicates that the problem would have gone undiscovered if the plane had just started up as normal. You then have a hidden issue just waiting to cause a future problem at an unpredictable moment.
I would expect the FAA to determine *exactly* when this inadequate grounding design first started to occur in delivered planes, and the NTSB to examine to what extent this issue may have played a role in the MAX crashes. I’m surprised that there hasn’t yet been a broader grounding.
@ Bryce @ @Gerrard White. Your constant brow beating at Rob, and, increasingly DoU Doesn’t contribute to anything close to what this board is about. C’mon, Hamilton, as much as I don’t like to show my presence felt, these dudes stifle the conversation. Sorry, that’s how I see it.
@Ravioli: Each has been suspended in the past for going too far. So has Rob. I won’t hesitate to do so again.
@ Ravioli Kaye
Can you point out when/where I last said something about Rob?
As regards DoU, he (politely) gets back what he gives. Perhaps you should look at the extent to which his posts “stifle the conversation”, and the extent to which others are attempting to “un-stifle” that same conversation. His posts regularly snap at @Pedro, and he’s increasingly resorting to conspiracy theories — including using the label “Leninist” to tar people who don’t share his views on China. A quote from above:
“That’s the whole plan of the advocates of the Leninist party-state system. They pop up everywhere ……where they aren’t busy doing shanzhai”
That particular sneer prompted reactions from various commenters other than the ones you have (very selectively) identified.
I’m very much in favor of maintaining civil comments here. Please check your facts before finger-pointing.
Comments to @Rob are in the past – he rain into trouble and was suspended, one must assume partly at least due to the failures you attribute to me and to Bryce alone
As for DoU he appears to have inherited @Rob’s enthusiastic use of conspiracy theories in attributing any views that differ from his as the result of a Marxist Leninist plot à la reds under the bed throwback
While the politics of industrial policy and of infrastructure are relevant to a discussion of the aviation industry the use of political slanging and name calling is merely an attempt to avoid discussion and is an indication of rabble rousing
See my post on the Strategic Competition Act 2021 below
Boeing better get their employees (FOD; QC “issues”) and suppliers (“20% discount; terms-dating) firmly onboard if they’re serious about competing with Airbus- and not via further ultimatums and threats.
Here’s an interesting list of all the (currently known) MAXs affected by the present electrical issue grounding, together with their locations.
“Most affected is Southwest Airlines with 32 aircraft, followed by American at 18, and United with 16. Multiple airlines have just one affected aircraft, like Belavia, which took delivery of its first 737-8 MAX just a day before Boeing announced it had found this issue.”
The COVID situation in India has gotten so dire that the State Department is actually letting the families of consulate employee evacuate back to the US, citing that US citizens report being denied admission to hospitals due to lack of space.
Fall of Saigon 1975??
The US and India chose exactly the wrong timing to try and talk up Quad against China/APEC
FONOP and Max re cert nix, spat over Russian S-400’s spannered up the works, now COVID flare puts Quad into re cert
More Bad BA
787 Deferred Production Balance Blues
« In Q1 2021, the deferred production balance decreased by $179 million. Using two models I estimated the reduction to be much higher, but this was caused by incorrect parameter tuning.
Either way, production still is profitable but inventory burn has been reduced due to delivery delays driven by quality issues on the Boeing 787 as well as the pandemic. Going forward, I believe it’s still possible for Boeing to reduce the deferred production balance and thereby improve its balance sheet but the road toward that point is getting more complex with all added uncertainties. And despite the fact that the Boeing 787 is still bringing in a significant cash flow when deliveries do occur, if production rates will decrease further it’s difficult to see a path ahead where Boeing zeroes the balance absent of an accounting charge. »
This article from last December throws a very interesting light on Boeing’s current woes in China:
“Boeing jet sales to China ‘highly complicated’ by company’s arms sales to Taiwan, experts say”
“Shi Yinhong, a professor at Renmin University who advises the State Council, China’s cabinet, said the current relationship between Boeing and China is “highly complicated” because Chinese authorities are “very unhappy” about Boeing’s involvement in US arms sales to Taiwan.
The Chinese government announced in October that it would impose sanctions on Boeing’s defense unit over the Taiwan weapons sales, but did not set penalties on the firm’s commercial aviation business. However, political considerations are usually the driving force behind China’s trade decisions.
“This is not a simple matter of the [passenger jet] market, this is a very complex matter of national security and the personal safety of Chinese citizens. The Chinese government will certainly take very cautious steps in dealing with Boeing’s continued large-scale sales in China,” Shi said.”
Very good link
It is not understood quite how wide are the ramifications of all the war talk coming out of Washington – certainly BA is one of the sacrificial goats : hence Chairman Cal’s plea
The link illustrates how thorny and complicated this issue is.
I’m not sure what the value is of Boeing Defense sales to Taiwan, but I doubt it’s anywhere near the value of potential Boeing Commercial sales to China. It might thus be an idea for Boeing to leave Taiwanese defense sales to Northrop Grumman and Lockheed Martin, so as not to shoot itself in the foot on the Commercial side.
Airbus would want to be similarly careful. Airbus Defense doesn’t supply any products to Taiwan, but it recently emerged that certain (unspecified) countries in Europe are helping Taiwan with a submarine project.
Thorny is the word – meddling with Taiwan is not going to be possible- it is claimed, by both island (officially by KMT but faintly) and mainland to be part of China, although they disagree as to which is the capital
The DoD report Sept 2020 already quoted makes this clear, even if an Admiral has since been excitedly ‘woofing for carriers’, that China already here holds a very clear advantage
« China has already achieved parity with—or even exceeded—the United States in several military modernization areas, including:
Shipbuilding: The PRC has the largest navy in the world, with an overall battle force of approximately 350 ships and submarines including over 130 major surface combatants.
In comparison, the U.S. Navy’s battle force is approximately 293 ships as of early 2020.
China is the top ship-producing nation in the world by tonnage and is increasing its shipbuilding capacity and capability for all naval classes.
Land-based conventional ballistic and cruise missiles: The PRC has developed its conventional missile forces unrestrained by any international agreements. The PRC has more than 1,250 ground-launched ballistic missiles (GLBMs) and ground-launched cruise missiles (GLCMs) with ranges between 500 and 5,500 kilometers.
The United States currently fields one type of conventional GLBM with a range of 70 to 300 kilometers and no GLCMs.
Integrated air defense systems: The PRC has one of the world’s largest forces of advanced long-range surface-to-air systems—including Russian-built S-400s, S-300s, and domestically produced systems—that constitute part of its robust and redundant integrated air defense system (IADS) architecture. »
Yet for the US to pull off some pretext for war other than Taiwan looks all but impossible…another Tonkin fakery would not pass… ? The Spratleys ? Covid ? (only joking)
Bad BA News
Contrary to Chairman Cal’s express pleas the Biden Admin has pressed on with some kind of War with China is Imminent policy : The Senate Foreign Relations Committee by a 21 to 1 vote sent the Strategic Competition Act 2021 to the vote
This makes the case for War with China, although it is uncertain as to how much the bill is for domestic consumption only, how fierce opposition to war is within the US élites, and as to whether DoD thinks there is a serious chance to avoid quick catastrophe and defeat
See DoD report on China September 2020 which emphasises constructive negotiations
« Pursuit of a constructive results-oriented relationship with China is an important part of U.S. strategy in the Indo-Pacific region. The 2018 National Defense Strategy seeks areas of cooperation with China from positions of U.S. strength, with a long-term aim to set the military-to military relationship on a path of strategic transparency and non-aggression, and to encourage China to act in a manner consistent with the free and open international order. »
The Senate bill contains provisions for so many reports to Congress on the actual state of affairs that either current ignorance of the ‘enemy’ is indeed the case else excuses are built in
For an official/legal statement on policy the language used is at times vulgar if not populist
This bill has been very seriously under reported (especially in the mainstream press) given the far reaching implications of such a comprehensive official statement of modification of US attitude and policy
One result is certain : BA can exclude any possibility of max re cert in China, and among other APEC countries, probably : together with the prospect of very reduced sales of all planes : in favour of AB and local