Pontifications: Earnings previews for Boeing, Airbus

By Scott Hamilton

July 26, 2021, © Leeham News: Boeing and Airbus report second-quarter/first-half earnings on Wednesday and Thursday, respectively.

Boeing continues to have a rocky year. Although 737 MAX deliveries and production are picking up, 787 deliveries remain suspended. There are now more than 100 787s in inventory, with deliveries largely suspended since October. Production anomalies required rework and inspections combine to suspend deliveries.

The Federal Aviation Administration wants more detail about Boeing’s inspection and rework program. Even though the FAA restored on June 19 to Boeing what’s called “ticketing” authority to certify individual aircraft, the airplanes remain undelivered. The FAA continues to retain ticketing responsibility for the MAX deliveries.

Lowered production rate

Boeing previously announced it was lowering the 787’s production rate below 5/mo because of the continued delivery delays. Workers were diverted from the Charleston (SC) production line to the rework. Boeing didn’t announce what the new rate is—and there is no indication if executives will disclose this on the earnings call Wednesday.

The continued delivery suspension and the reduced production raise the question of whether Boeing finally is at the point of a forward loss for the 787 program. Boeing warned in several federal filings with the Securities and Exchange Commission that lowering rates risks declaring a forward loss.

The biggest risk

In its July 20 preview note, Credit Suisse wrote, “We see the biggest risk to our Q2 earnings per share estimate as coming from 787—specifically, the risk that Boeing books a first-time forward loss on the program owing to the latest production issues and decline in production rate (to below 5 in the near-term).”

JP Morgan also raised the prospect of a charge in a July 14 note.

“With 787 moving closer to a charge, we assume 72 deliveries this year. Despite coming close a few times (we believe), Boeing has avoided 787 charges for over a decade and we aren’t building anything into our model now. But lower production should pressure the program booking rate, which is already in the low-single-digits and so we cannot rule out a charge. In and of itself, this is not an issue for us beyond what it says about expectations for future production and unit cash profitability.”

Seaport Global doesn’t see a near-term risk. In its July 20 preview, it wrote, “A forward loss charge on the B787 certainly has a long-term impact. However, the program is at a near break-even gross margin already for the current block.”

Once deliveries resume and the industry finally recovers from COVID, with demand presumably recovering for wide-body aircraft, production rates should come back up to 5/mo—or even higher.

LNA doesn’t think Boeing is ready to declare a forward loss this week. It seems premature.

  • As an aside, LNA hears that China’s MAX certification flights may be coming in a few months.

Airbus, unburdened by the unique circumstances facing Boeing, already is on a path to recovery from the COVID pandemic. Airbus plans aggressive production ramp-up for the A320 while maintaining low-rate production for the A330neo and A350. Financial results for the first quarter returned to operating and net profits.

The London-based firm, Stifel, was upbeat in the earnings preview note July 23. Stifel wrote, “We look for Q2-21 sales of €13.6bn (up 64% year over year, mostly due to a soft Q2-20 comparator, which is broadly in line vs company-provided consensus of €14bn), ‘EBIT Adjusted’ of €1.8bn (or a 13.5% margin, which is 16% above consensus of €1.6bn), and ‘Free Cashflow Before M&A and Customer Financing’ of €980m, which is 10% above consensus of €880m.

“Airbus is, in our opinion, an early-stage revenue, margin and cash flow recovery story, benefiting from the faster pace of recovery of domestic and narrow-body traffic and its leading market share in that segment, and we look for validation of this thesis in the H1-21 results,” Stifel wrote.


143 Comments on “Pontifications: Earnings previews for Boeing, Airbus

    • That’s just normal supply / demand, isn’t it?

      Also I’d have thought that having a properly competitive product was lesson #1 in the “how to run a company”. Faking competitiveness with bargain discounts (which I think Boeing has been relying on for ages) is a straight road to bankruptcy.

      It can’t help that, now, everyone knows the MAX surely (please, surely) is the end of the line for the old 737 family. It must be like trying to sell of an over-large last batch of old model family saloons.

      • “Faking competitiveness with bargain discounts (which I think Boeing has been relying on for ages)”

        Historically Airbus has offered slightly greater discounts on it’s planes. Put down the hateraide for once, if you can.

  1. Interesting BNN Bloomberg article on the brain drain at Boeing — which, of course, affects the ability to produce new programs and avoid/solve problems in current programs.
    “Boeing’s Talent Exodus Threatens Turnaround After 737 Max Crisis, Pandemic”

    ““We wonder if Boeing is suffering from an engineering brain drain, as potentially too many senior engineers have left the company in recent years and recent hiring trends have not filled the gap,” cautioned Ron Epstein, an analyst with Bank of America, who was a Boeing scientist early in his career.”


    • Bryce – “[T]oo many senior engineers have left the company in recent years…” Talent turnover is a perennial consideration, but was surely also one of the major factors contributing to the 787’s troubled take-off? Since launch of the preceding 777 model half a generation of engineers and technicians had simply retired, taking away hundreds of man-years’ knowledge and experience, while new employees very often came with a computer-based education but no knowledge, assumptions were made about CFRP materials performance, much design work was farmed out to international partners, unrealistic time frames were adopted, not to mention silly marketing efforts such as committing to the July 8, 2007, (so-called 7-8-7…) roll-out date. Mind you, the aerospace media completely failed to notice the unfinished state of that first aircraft. And all was overseen by a board philosophy that many blame for having become McDD-ized.

    • Even if you retain knowledgeable and experienced engineers, they still need something to work on. Even if you hire the best and brightest of the college graduates, they still need something to work on. I had colleagues say to me that the Renton engineering team had lost the capability to design anything new because they hadn’t done a new or derivative airplane program since the 757-300 in the late 1990s. It is not a dearth of talent that is the problem. The problem is using the talent that you have. Many of us left not for financial reasons but because there was nothing on the horizon that makes us excited to show up for work everyday. There are some young talented engineers in Commercial Airplanes. Let’s just hope that Calhoun figures out how to launch a new program so that they are willing to stick around.

      • From personal experience (not me) I can also say the pressures to jump ship by Boeing engineers was major (that was at least 25 years ago).

        Other aviation suppliers were paying more.

        Add into more current management attacks on workers and as noted by Jeff Berner, unless you keep current with new programs, your knowledge ages out.

        In my case of the building controls world) I needed to get to schools on the next generation of controls and more so the programs they used.

        Company would not spend money on any employee so that started to lapse into a contractor (we had few enough of them I could still manage 90%).

        Max the company profits for non workers and don’t invest in the future is a fatal pattern.

  2. Further to the recent LNA article on this subject:
    Bloomberg: “Airbus SE Front Runner For Italian Airline Fleet”

    “Bloomberg reports that Airbus SE (OTC: EADSF) is the front runner to win a multi-billion dollar contract for a new aircraft fleet for Italy’s state-owned airline, following the bankruptcy of Alitalia. The deal is valued at $5.3 billion and would provide 81 new generation planes over a four year period.”

    “Corriere della Ser reports that industry sources say Airbus is favored to win the contract, although Boeing may present an “unprecedented package offer with airplanes discounted by as much as 70%.””


    So, BA still appears to be willing to throw margin in the bin in order to secure a sale. It’s sending a dangerous signal with such behavior.

  3. “Boeing could offer an ‘unprecedented package offer with airplanes discounted by as much as 70%”

    Don’t count BA out, esp. when it’s desperate or discussion of order cancellations about to finalize. All the top mgmt wants is the share price pop … for a day or two.

    • Giving away your product is not a long term strategy. I would posit that Boeing’s current market share is actually much worse than it is given the extraordinary pricing cuts they are offering to maintain their position.

      • Giving away your product has the same effect as deflation: customers adopt an attitude of “why buy it now when we know it will be even cheaper next month?”
        A Dutch auction is another analogy: everyone knows that the price will just keep on dropping if nobody bids.

        • Bryce – “A Dutch auction is another analogy: everyone knows that the price will just keep on dropping if nobody bids…” Isn’t that the point: if you want the price to fall you have to bid, very much hoping that the object (aircraft) is also attractive to someone else whose responding bid will provide you a further opportunity – unless of course no one else wants it as much as you do. But I’m not aware of many examples of new commercial aircraft being sold by auction, if only because the commitment must be made before the machine actually exiwsts. What both parties are negotiating is the price for an aircraft that has yet to be defined, and OEMs rarely build aircraft ‘on spec.’ Some speculators here may be prepared to bid for an aircraft and gamble that there will be sufficient demand on delivery day to command a profit on the accepted pre-build auction price.

          • Not sure I understand your point.
            In a Dutch auction, the price starts high and then drops against a running clock until someone stops the drop by putting in a bid — that bidder then gets the prize. The system is the opposite of a normal auction, where bidders drive up the price from a starting low. Dutch auctions are used when selling treasury bonds and agricultural produce — never heard of them being used for aircraft.
            My comment was purely intended to identify an analogy: if airlines hold off placing actual orders, and BA responds by trying to lure them with steadily lower prices, then that is effectively a Dutch auction.

      • Douglas made that misstake with the MD-80’s selling them too cheap. You need to make money up front after the first 100 or so aircrafts, hoping the planes will survive warranty after a compressed testing program and sell tons of spares and upgrade kits is a loosing game in the end. Anyway most Douglas customers today flies Airbus (and eventually the A220-300 will be accepted by them used to 3+2 seating and P&W engines. Airbus needs to pay Delta to place 7-10 of them in Tulsa flying 12-14 routes a day until AA finally get hooked)

        • claes:

          Its not the price, its the reason for the price and can you long term work out of that to a decent profit?

          While Boeing can only blame itself, it has to survive the short term in order to have a long term future if that is possible (as a commercial aircraft maker).

          Long term the after market is still relevant if you survive that long though its far less true of the engines now.

          • Boeing is sitting on a mountain of unsold inventory. It needs to convert that inventory to cash. Price cuts will generate cash in a pinch, but it resets the market to expect a lower pricing point and it is really hard to put the genie back in the bottle. Really on a lack of available AIB slots would all BA to rebuild their pricing support.

          • Casey,

            not for widebodies, the 787 is not really needed.
            Airbus could serve the widebody market alone.

  4. I’m posting this here, because Bjorn’s de-carb article is now 4 stories down. Not intended to start a discussion — just for info/curio value. It’s a statement from Boeing regarding its drive toward more ESG (Environment, Society and Governance). A bit fluffy, but ESG commitments usually are. Not entirely off topic here, because it does refer to things such as fleet renewal, advanced tech and certain partnerships/JVs, which obviously affect investment/revenue. I suspect it’s been published now as a pre-emptive move in preparation for Wednesday’s earnings call — because it’s currently very “in” for CEOs to be questioned about ESG. Certain investment funds / ETFs are now only investing in stock if minimal ESG requirements are met.

    “Boeing Releases First Sustainability Report, Charting Path to Sustainable Aerospace”


    • Bryce – “I suspect it’s been published now as a pre-emptive move in preparation for Wednesday’s earnings call…” Boeing cynical? Surely not.

      • What does the word “earnings” even mean, in a time of years of “Quantitative Easing” (free, keystroke-munny- but only if you or your large, powerful entity are already filthy rich)?
        (See Hubert Horan on the US airline bailouts of last year; and on Uber).

        A profound shaking out is going to happen-“covid™ being its precursor- but maybe not quite yet.

  5. Selling aircraft at production cost was pioneer by Airbus John Leahy and practice until 2018. Boeing complain for years and if you go back and look at Airbus margins before 2019 it was very very low. Stop complaining.

    • A huge difference being that BA now has a debt of $61B to be paid back, with nasty annual debt servicing costs. If revenue is generated without decent margins/earnings, the company will never manage to climb out of its debt pit.

      Who’s complaining? The airlines certainly aren’t.
      Just observing how a company is voluntarily depriving itself of sustenance.

    • Its not selling at cost or a low margins, its why it happening.

      Boeing has shot itself in the foot and is doing what it thinks it needs to as far a costs. Equally those are penalties for the MAX tragedy involved.

      I remember Airbus being insulted that Boeing cut margins to sell Hawaii the 787. They were spluttering, you can’t do that.

      The real questions is, can Boeing recover? The 787 issues look to be resolvable. Long term it may break even.

      Airbus would (and as noted has) cut tot he bone when they needed to break into the aircraft markets.

      Its a balancing act and each one is going to play it the way they see it.

      Ironically Boeing stock is still really high.

      • Boeing will sell a lot of MAXes before the 737 line is history. Some Airlines could fly all 4 lengths before then. United being a lead candidate there. At the end of the day, the Duopoly wins. Talk about training savings and efficiencies centering on one product – well there she be.

        • > Boeing will sell a lot of MAXes before the 737 line is history. Some Airlines could fly all 4 lengths before then. United being a lead candidate there. At the end of the day, the Duopoly wins. Talk about training savings and efficiencies centering on one product – well there she be. <

          Speaking of the 737MAX, I guess?
          1)Remember notions of competition (v monopoly) as being a Good Thing?
          2)How's that aircraft doing so far; and what's your assessment of the likelihood of another, unchaperoned "incident"?

          "I get the big half." -B7

        • I could be wrong but I see little chance an airline wants to fly all 4 variants. Some like United, may be upgauging.

        • @Sam

          You mean to say that what looks to everyone like blundering around, wasting lives workforce and lots of money

          Was all done on purpose to a plan to wind up with a failed rump of a company with no viable products except a garage sale at dumpster prices

          Thjs is a duopoly?

          Well maybe it is….bye bye BA hello Comac

        • The B737 MAX 8 is a very cost efficient and fuel efficient aircraft nd it will ell. Boeings problem is challenging the A321 and the B737 MAX 10 is a couple of years away.

          The MAX’s one problem, the MCAS system has been fixed. It was initially done ineptly. Using two sensors would have been enough to avoid those two crashes even though sensor disagree alert, flight manual, training and maintained manual needed minor modification.

          At the moment the only reason the MAX is in public consciousness is Because Real Housewives star Erika Jaynes estranged husband’s Tom Giradi of Erin Brockovich fame is being sued for allegedly misappropriating Boeings settlement money for the lion air crash which had been into his firms trust account.

          • Other (more substantial) reasons why the MAX is “in public consciousness”:
            – It’s still grounded in most of Asia-Pacific;
            – The various US lawsuits filed by crash survivors and carriers are continuing;
            – The program was recently afflicted by high-profile electrical failures, which prompted a Congressional investigation into manufacturing practices at BA.
            – There was a recent controversy associated with the DPA in the MAX fraud matter.

          • @William

            Your comments about the obloquy and revulsion regarding BA and the Max is solely the result of some gossip involving a flim star controversy is short sighted to say the least

            The Max is not trusted because of BA cover ups and lies, the craven capture of the FAA, and most of all because of the deaths of a great number of people in those two accidents

            Not all the world looks through Hollywood eyes

          • William – “At the moment the only reason the MAX is in public consciousness is Because Real Housewives star Erika Jaynes estranged husband’s Tom Giradi…” You really think so? That says a lot more about the ‘public’ than it does about Boeing or Max. I suspect that, taking a broad view, more folk are aware of the company and/or aircraft than are of the people you name.

        • @ Posters to Sam1 (me.) I essentially agree with all of you about quality, engineering and so forth when it comes to Boeing. But I reiterate, before the 737 line is history, they’ll have sold 5000+ MAXes. That’s the power of the Duopoly. If they don’t, I will buy you all a pizza. Next, I know little about the Real Housewives other than it’s a classy show.

          • Sam1:

            I know nothing about Real Housewives but you are correct that the MAX will sell quite a number.

            Despite the rhetoric, its a good aircraft done bad by Boeing management. Maybe even amazing its competitive despite its outdated architecture.

            I expect on some trip South one day I will be on one and I will be perfectly happy (or as happy as we can be in the crowded day and age of not enough foot room)

            A lot of anti Boeing (and no disagreement their management has been pathetic and worse) or anti US mixed up with all Boeing project now.

            I hope to see them make a comeback. I don’t predict it, but I do hope to see it.

            Despite the Hyperbole , Boeing never was perfect, no aircraft mfg ever is. But they were far better than what management has done to them.

            Much like the Corvair, in the end it was a really good car.

          • @Sam1

            Well I bet you a pot of noodles that before we’ve all forgotten about the Max it’s unique crappiness and reputation as ‘The Aircart that Killed the Company’

            Long before then The Duopoly will have changed names

            You’ll prefer eating noodles and flying not crashing

          • @Sam1

            Ferrari and Porsche are not volume sellers. OTOH GM and Chrysler sold millions more than them but gone bankrupt.

          • Funny that just because I have clear eyes and state the facts I became “anti Boeing”!

            P.S. How about conspiracy theorists? “Anti Airbus”??

          • As it is Boeing sold about 4.500 pieces and do not expect to deliver about 700 of them. That brings it down to about 3.800.
            It may have been 5.000+ once, but than came a wave of cancellations.
            Even in a duopoly one player can seriously mess up.

        • The 737-8 MAX had a higher market and lease value than the A320neo (before the crashes) it can be implied that if it is offered at the same price as the A320neo, Airlines will favour the 737-8.

          A320neo – $42 – 50M, $310-370,000
          B737MAX-8 – $52.0M, $310-380,000

          Of course the MAX had better delivery and so could demand a premium for that but it seems at least for the B737-8 versus A320neo the Boeing has higher climb rate, lower fuel burn, faster cruise and a longer range without eating into payload/passenger numbers. (somewhat attributable to the more advanced core GE puts in the cropped fan LEAP 1B.

          The situation re sales and and per seat performance reverses with the A321neo for which the B737-9 is not large enough to compete and the B737-10 is not yet available.

          The point is Boeing has a good product in the B737-8 from the point of airline economics.

          As far as MCAS is concerned. It’s ironic that both EASA and FAA have said that that B737-8 would have met certification requirements without MCAS. Yet we had nearly a year of social media and controlled corporate media public ranting about it being an criminally unstable aircraft?

          The aircraft is certified to fly by EASA, FAA, CASA (Australia), Transport Canada, New Zealand and is certainly flying in the SW Pacific eg Fiji to Australia.

          It clearly has some issues in China but I suspect they go beyond just certification issues.

          I think Boeing will get past this.

          • @William

            As many especially Bryce have pointed out, it’s not just China that BA has Max re cert problems with

            It’s China and region, most of RCEP, and India and…..

            These are already the dominant markets for BA, and will only gain ground while traditional BA markets lose volume

            The issues in China go beyond certification in that why should they buy a crappy plane, sorry, ….what you refer to is that US warmongering and sanctions etc ect, a toothless wonder, are discouraging the Chinese from buy second rate US products, apart perhaps from soybeans and pork sausages

            Well what else has the US got to sell? Facebook? KFC?

          • “””Of course the MAX had better delivery and so could demand a premium for that but it seems at least for the B737-8 versus A320neo the Boeing has lower fuel burn and a longer range without eating into payload/passenger numbers.”””

            The MAX-8 did not have lower fuel burn than the A320neo and on long range the MAX-8 did not have more payload than the A320neo.

            “””It’s ironic that both EASA and FAA have said that that B737-8 would have met certification requirements without MCAS. Yet we had nearly a year of social media and controlled corporate media public ranting about it being an criminally unstable aircraft?”””

            EASA flight tested the MAX-7, not MAX-8 and not MAX-9. Also Boeing babysitters were flying these flight tests LOL
            EASA did not really do certification work because they didn’t get all cert documents. That’s why they made a deal and FAA allowed free choices of improvements.

          • “Of course the MAX had better delivery and so could demand a premium for that but it seems at least for the B737-8 versus A320neo the Boeing has higher climb rate, lower fuel burn, faster cruise and a longer range without eating into payload/passenger numbers.”

            so Airbus is still catching up?


    • Commentators repeatedly mistook imaginary profits as real profits when comparing BA and AB.

    • Forgot to add: in Bloomberg’s article, there’s a chart showing BA’s r&d as a percentage of sales in comparison with AB. There’s an advantage when BA’s top mgmt prioritizes dividends and shares buyback!

      • Pedro:

        Not disagreement with both statements.

        My view is program accounting is more a Ponzi scheme, I doubt any of my representatives will dream of doing anything about it.

        But then again any tool can be used for the wrong purposes.

        • According to Bloomberg, AB’s share price has outperformed BA’s by almost 100% over last five years. (+117% vs. +66%)

          • Pedro:

            Airbus stock is at $33 US, Boeing is at $225.

            While I do not understand it, particularly now that Boeing can’t kick the issues down the runway anymore, its an incredible difference.

            Partly it would be the defense end, weird stuff on financials when you would think a stock should have sunk by half.

          • @Frank Thanks. EASDY is the ADR share trades OTC.

          • Frank:

            Thank you, no to figure out which one is relevant or ?

            Never occurred to me you could have more than one stock.

    • BOE could also trim their dividend and executive bonuses. Wouldn’t that also keep cash on hand for R&D? Just sayin’

    • @Daveo

      BA had been selling 787 at hugh losses in mid 2000s to gain AB’s marketshare and forced it to launch A350.

      • Pedro – huge losses: you have examples? Airbus used to say that though everyone knew prices were discounted, it made money on every aircraft. Not Boeing, too?

  6. I find it odd that Boeing can self ticket the 787 despite the clear structural aspects (out of specification though reported not to be a failure issue)

    The MAX has not reported similar failures (one other grounding one yes) but is under more scrutiny.

    • This is Boeing background, interesting its made public. Leaves volumes out but interesting never the less.


      Anyone who has worked with feeler gauges would understand the challengers. Roughly .005 or 1/10 of a mm.

      It is the spec and what they have to meet, but for a structure, that is incredibly small.

      I would like to see some equivalents for an aluminum aircraft (MAX/767/A3330). Its getting down into machine surface specs.

      Contrast that with the 600 foot building in SFO that is leaning 14 inches as a wild off the relevancy comparison.

      • @TW

        The problem is what is produced does not meet design spec. Another case of BA shooting in its foot.

        • Pedro:

          I clearly understand and stated that. I don’t understand the intent of the comment unless you did not understand what I said.

          What is puzzling is Boeing can still self ticket a major problem when the MAX problems (to this point) are resolved.

          Logic says it should be the opposite. MAX problems were never structural (that is a more normal flight safety issue) and the software is vetted.

          • TW: The importance of that .005″ you mention depends profoundly on context. CF is relatively inflexible and tolerances have to be closely met; I’m guessing even more so in a pressurized, circular structure.

            Regarding misunderstanding of comments, I will say little.

    • ” …. though reported not to be a failure issue”

      Where did you read that???

      If it were such a minor issue, why BA (pressured by FAA?) grounded eight 787 in service and (forced) to halt delivery??

    • The structural issues of 787 means the aircraft does not meet the designed load requirement. In the long run, the gaps of improper shimming can put added stress in the structure that can cause unexpected fatigue cracks to develop and propagate. Anyone remember what happened to WN’s 737-300??

      • Pedro:

        What you don’t get is the difference between can and will.

        The FAA is looking at it, the determination is that short term its not an issue. Long term they will assess to see if it has to be corrected or it is also not an issue.

        AHJ make those decisions all the time (Remember the failing RR engine you could have two bad ones on a 787?). EASA made that call. I think they were wrong, no airplane should fly with an iffy engine let alone two.

        India on the PW A320 decided you can’t do that. Good for them.

        Equally, A380s were allowed to fly before they fixed the problem. That was assessed as not imminent structural critical failure. That looks to have been the right call.

        Just because one Condo in Florida collapsed, does not mean all Condos in Florida will collapse.

        The 737 skin issues are totally separate and different failure mechanisms.

        • Boeing grounds eight 787 jets after flaws create risk of failure


          It’s all about *risk*, not even Boeing was certain they were safe to fly that’s why they were grounded.

          Who’s not telling the truth here??

          The condo board had the engineers’ report about defects. They didn’t do anything until it’s too late. That’s the American way, the difference between can and will!!

        • “Just because one Condo in Florida collapsed, does not mean all Condos in Florida will collapse.”

          Anyone with an engineering background would agree condos with the same deficiency are at risk!!

          • Indeed, condo’s with similar structural issues are now undergoing precautionary evacuation at other locations in Florida.

            As regards risk estimation: remember those calculations regarding the risk of a MAX crash, and how wildly optimistic they turned out to be?
            And didn’t we recently have a major revision of the failure probability of pairs of cabin pressure sensors in 737s?
            The FAA had better double- and treble-check any calculations regarding the safety risks of the skin issues in 787s that are already in service.

    • So you think Latam Brazil sold the A350 because they were not happy with it. Why should someone be not happy with the A350?
      Airbus is working to reduce the A350 empty weight, while Boeing is busy with themselves. Finally we came to 787 fuselage issue #6, do you think it will stop there. Even that Boeing started QC on the 787, quality will not really improve, because the 787 won’t earn money. The more time Boeing is spending with the 787, the more money they lose.
      It seems Boeing can’t fix the skin flatness. If it stays out of specs, someone should redo the calculations. The result would be a payload reduction

      • I wish I had the link, but it was recently reported the Dreamliner is at the break even point now. Calhoun said to CNBC today (Wednesday) they, not the FAA, announced the fuselage situation first, and it should be resolved soon. Then 100 stored planes will be cleared out of inventory. I don’t judge, I just report…

        • First fuselage issues became public after Muilenburg left and engineers complained.
          And now Boeing wants an algorithm shimming inspection certified, which can be used to cheat all the problems away. Same as Boeing tried in court against the victim families, when Boeing argued that the MAX was certified.

        • @Samù1

          You report, but without a link

          You take for granted that what Chair Cal says ‘must’ be true

          Then ..when is then by the way, when the FAA decides they may be ok ish to let fly, when might that be?

          Then…all the problem planes will be sold just like that

          This is a rosy and sugared version of someone’s best dreams, but…it’s not reporting

    • Many of the unfilled 787 orders are in the hands of Asia-Pacific carriers (ANA, Korean, Oman, Qantas, SIA, Scoot, Turkish, Jet, Bamboo)…and that happens to be a region that is now is a (severely) worsening phase of the pandemic. Don’t be surprised to see deferrals/cancellations, which will put further pressure on 787 production rates.

        • @Trevor

          Clever people do not want to sell a bad product, indeed can not

          As remarked about loss of engineering skill, if all you produce is low quality planes good engineers will leave

          All this is not a question of money but organisational and management talent and determination

          BA lacks all these and is content to produce clones of the old 737 which kill

        • Airbus Head of Region & Sales Europe Wouter Van Wersch came in from GECAS

          • @William

            So what?

            The point is whether BA could if they tried to hire useful people to work usefully, while busy firing those who do, moving to downmarket labour in another state, etc

            Vide the posts about all experienced engineers leaving, un replaceable and un replaced

            BA hired in people from Toyota, they thought to apply Toyota production techniques and skills so to become ‘more than perfect’ (a quote from Chair Cal)

            But this has been, by all accounts, a failure

            They hired a disgraced KPMG accountant to…well whatever, but BA accounting has not visibly improved

        • Trevor – “The Airbus team knows how to get the job done.” Does that apply whatever the quality of the product?

    • Interesting piece from Bechai, w/ him trying to explain “program
      accounting” via obscuration and euphemism; to curious affect.

      Disagree with his tortured, pro-BA conclusion, too:
      “Stock price” says little about present-day conditions.

      But a man’s gotta live..

      • Here was an interesting reply…lol

        “In other words: Even with a forward loss, the Boeing 787 continues to be a cash maker to Boeing.”
        Please help me out here – how is spending $1.25 to make $1 a good thing?
        This reach forward loss all of a sudden giving BA a clean bill of health on the 787 is a little optimistic. The loss on the program will still be there – it’s just changed names: because BA doesn’t have the cash to pay for the loss, they’ve had to go to market to get the money. That loss is now called LONG TERM LOAN or BONDS PAYABLE on the b/s.
        Along with that goes a wonderful parting gift called INTEREST EXPENSE. That $18 billion shortfall on the program they are currently carrying? At just over 4% it’s costing BA $2 million in interest a day.
        As well;
        It costs BA some $100 million to make a 787. Those 100 Dreamliners sitting on the ground cost $10 billion – inventory not moving? Since they spent all their cash on buybacks/dividends, they’ve also had to borrow to pay for these. At under 4% it’s costing them $1 million a day in interest.
        Each day that goes by costs Boeing $3 million in interest payments on the 787 program. Every 10 days costs BA the margin on one aircraft.
        Please tell me how this is a good thing…

        • Frank: thanks for all that- and your understanding is better, I think. There is an early paragraph in that Bechai piece- I didn’t have the heart to quote it- that [inadvertently] sums up that company’s plight..

          Maybe Boeing will somehow get out from behind the 8-ball, but I’m not seeing serious intent toward that goal, so far; maybe that’s not its mgmt’s goal, at all.

        • @Frank

          Once again thanks for your picking through the obscurity, deliberate obscurity, of BA accounting

          And giving the straight facts and figures

          • @Gerrard & Bill

            My pleasure guys. While I never claim to be an expert in program accounting and all it’s intricacies, there are certain fundamentals that still hold true – through all the smoke and mirrors.

    • On the other hand, fewer 787s mean more older A330/B767 or more frequencies with narrowbodies to satisfy demand. Which leads to more pollution.

      If said demand exists that is.

      • @phoenix00

        Or not – justifying a plane that can not fly due to bad design poor engineering poorer manufacture is not as easy as you try to think

        otherwise the FAA would have made the argument for you

        Perhaps think green does lead industry down some dark alleys, if there’s a demand for think green why not supply bad planes as a half way there

    • The B787 as an extremely efficient aircraft. The more that are produced and the more aircraft it replaces the less emissions there will be.

      • @William

        If the 787 is ‘extremely efficient’ how come it’s grounded?

        An efficient aircart is one that flies, or is this a mistaken notion of fit for purpose, on paper ‘efficiency’ is enough

        Although grounding the 787 does save on emissions you are not wrong there

        • I would call that seriously spurious as the 787 has flown a solid schedule through the pandemic vs other aircraft.

          The FAA has stated the fit issues are not structural (Boeing has stated it would take two out of compliance aspects at the rear for an issue, one the shims and the other the build of the shell)

          Delivered 787s are flying with no restrictions.

          So, yes its an efficient aircraft. Its a reliable aircraft.

          Boeing has serious issues that it did not meet the spec they certified it on and for.

          And an interesting example is the well regarded A220 with Baltic that once it touched down it shut both engines off automatically.

          Now that is an interesting feature and how many safeguard are there to ensure it does not do that in the air?

          Lets see, a structurally sound aircraft vs one that turns its engines off. Hmmm.

          • TW,

            Google ‘a220 double engine failure’ to read a very good explanation of the topic by ‘mentourpilot.com’ I never heard of him before today either but he seems to have very good deep background sources.

          • Ron:

            I did, still baffled. Like much of this, you don’t know its there (FLCH on Boeing 777) until it busts a bubble.

            What I would like to know is how in depth is the safety system that inhibits a dual engine shutdown? Like an auto fold wing system (777x). It does not give me a warm and fuzzy.

            And for those who think multiple safeties even in series can’t fail, they can and do.

            I once stepped out of an elevator, doors were still wide open and it left the floor about 6 inches behind me, doors never closed.

            5 terrified people in it holding onto the rails.

            I was the company engineer so I got it shut down and locked out to turn over to the Elevator people.

            He was stunned at how many safety interlocks had failed to allow that.

            If I had been a half step slower I would have got to experience the elevator equivalent of a French Guillotine.

          • @TW


            The old 787’s are still flying, they were cleared to fly under the old corrupt regulatory capture FAA regime

            Under the new slightly, very slightly better regime, the new 787carts being ‘made’ are grounded

            Conclusion – the old one soon will be, if the FAA is consistent logical and does not fall back into the old corrupt ways

            You, generally, are the first to attack the FAA and the first to defend them in this case of allowing the old planes to fly

            FAA can have it both ways, perhaps, everyone’s used to their…. BA can try to have it both ways, perhaps, ditto as above, but outside observers do not enjoy such privilege

          • “Now that is an interesting feature and how many safeguard are there to ensure it does not do that in the air?”

            Conspiracy theorist rushes in to spread fear, uncertainty and doubt. But “the [787] fit issues are not structural”. Haha.

            From AirBaltic, their Airbus A220 “are equipped with a system preventing engines from working too hard during takeoff or landing. The system turns on automatically only when the aircraft is on the ground.”

        • When someone claims the 787 is grounded that is truly bogus.

          It is not grounded.

          Its a shame some people can’t tell the difference in the status or the fact that currently its allowed to fly.

          The FAA may make a determination that it needs to be corrected. But the reality is as of right now, delivered 787s are fully cleared for flight.

          • What I’d like to know is what impact the “gaps” actually have. They are not considered a safety of flight issue by Boeing so presumably do not decrease strength below the required margins. So what impact do they have?

          • Indeed the B787 is not grounded. They’ve paused production while they sort out this issue, the same thing Toyota would do incidentally.

          • @ William
            BA has not paused *production* — it has paused *delivery*.
            Production is continuing at a rate of 5/mo, and new 787s are sitting on the ground (and undergoing inspection/surgery) while the present ungodly mess gets sorted out.
            Those new 787s are therefore “grounded” — albeit not as a result of a direct FAA mandate.
            So, although the entire program isn’t grounded, planes produced after a certain date effectively are grounded.

          • @Bryce

            Is n’t it curious how explaining basic facts to the ideologues is tough

            Not only do they not know the facts they prefer not to know them but reach for those nobody knows

            Thanks for your explanation

          • “””What I’d like to know is what impact the “gaps” actually have. They are not considered a safety of flight issue by Boeing so presumably do not decrease strength below the required margins. So what impact do they have?”””

            Each square inch of the fuselage barrel is carrying load. At the join the load needs to be carried over to the next fuselage barrel. If there is a gap, load can’t be carried over. Places without gap will need to carry this additional load.
            Carbon is very stiff and is able to carry much load, but it has a maximum load it can carry too. If the load is too high carbon would break.
            The gap is part of fuselage load calculations. If there would be no gap, every square inch could carry the max allowed load for a 100% fuselage load. If there are gaps the fuselage load needs to be reduced so that each square inch carries not more than the max allowed load.
            This is the reason why Boeing chose such a small tolerance. If Boeing calculated with bigger gaps, the 787 would have a lower MZFW.
            Fuselages are tested with 150% load because a 150% safety is needed. If the 787 has bigger gaps than certified, it might not reach the needed 150% safety. If it has only 140% safety the MZFW needs to be reduced to reach a 150% safety again. But the FAA is allowing less than a 150% safety now.

        • “efficient” is orthogonal to “certified and safe to fly”.

          ” 787 has flown a solid schedule through the pandemic vs other aircraft. ”
          just like all the other medium sized twins.
          nothing special. others just were too big for the deflated demand.

          so “vs which other aircraft types”?

  7. Of interest is a Reuters report I missed, just part of it quite wise

    “Reuters reported recently that BA doesn’t intend to raise MAX production until the China situation is clear. BA still awaits Chinese regulatory approval to resume flights of the plane in China.”

    India may factor in as well though the biggest MAX buyer is gone bankrupt.

  8. Program accounting works when amortize over 2000 777, 1600 747, 11000 737 and not 100 a340-600 or 251 a380.

    • Program accounting is unique to US corporations – I believe it cannot be done in Europe

      • @Pedro

        Program Accounting & Reach Forward Loss

        So many terms get bandied about (not talking about you) especially in some financial sites – here is my understanding of what is going on (and no, I am not an expert in PA);

        When a company uses program accounting, they amortize huge up front costs (in this case R&D, early expensive production models, etc) over the whole batch of aircraft they expect to produce.

        What they also do – is estimate how much of a profit they will make. This is how when early models come out, they can still claim financial success and book a profit. Why would they do this? Well – exec compensation (read: stock options) is usually linked to company performance, but who wants to wait around for the 10-15 years it takes for a fully mature product to finally run in the black?

        A reach forward loss is a little bit of a misnomer. What they are taking is a one time charge on the program – recognizing that money spent in the past, will not be covered by revenues coming in.

        For example, in Q4 2020 BA took a charge of $6.5 billion on the 777X. That means that they are admitting that this money is unlikely to be recovered by the program, at the end of the run.

        Boeing is also trying to cover some $18 billion on the 787 program that it is down, with the final 500 deliveries it has on it’s books. The accounting block used to be 1600, but got trimmed to 1500 – meaning each aircraft has to produce more of a margin in order to cover the shortfall.

        As I pointed out earlier, because BA had to go to market and borrow funds for the $18 billion deferred production balance AND the $10 billion it has costed to produce the inventory of 100 Dreamliners it is now sitting on – at around 4% borrowing costs the bill to Boeing is about $3 million a day in interest charges.

        10 days go by and there goes the margin of one 787. Margin they need to pay off the $18 billion. It’s all about the time value of money.

        Don’t even ask about the 737 Max. It is down billions in a niche where the margins on a per unit basis is low single digits.

        • Frank:

          Thank you, very good explanations.

          One aspect, as Boeing has delivered 1000 x 787, does that not leave the 18 billion pay off for the 500 not delivered?

          That is being imaginary and discounting the 100 sitting there loosing money.

          Did Boeing in fact borrow 18 billion?

          • @TWA

            Boeing has long term debt of ~$60 billion. Total liabilities of $170 billion. In amongst that $60 billion is also the $6.5 billion for the 777X & the 737 Max debacle.

            They don’t disclose the minutiae of what funds went where, but if they are still down $18 billion and they have no cash to pay for things – they are borrowing money.

            500 units left to cover $18 billion makes a margin of $36 million per airframe needed to zero the balance. Each day that ticks by costs them $3 million in interest expense on the program & inventory. Time value of money.

            Let’s use an example;

            On Planspotters, you can check out the production list of 787’s. Here is page 20 of 22:


            Top of the page shows deliveries happening in the March/April 2020 timeframe, as shown by when airlines have been taking them into their fleets.

            ‘On order’ in the status column, means that they are working on a plane and it has not been delivered, nor fully paid for.

            Look at the first aircraft – Air Europa #988. Not delivered. It is a leased plane, but since delivery has not taken place, the bulk of the money has not been transferred to BA. #987 & 989 has and both are in service since Mar 2020.

            Boeing has put together that aircraft and paid it’s suppliers, paid it’s employees, paid the utilities, paid the taxes and everything else required to make it. Yet there it sits. It cost Boeing (conservatively) $100 million to put it together. If they got some $40 million in PDP’s, they are probably owed around $100 million when it gets delivered.

            We are in August 2021 now. That’s 17 months since the other two got delivered. Boeing is borrowing money to finance all it’s operations, including putting #988 together.

            4% interest on that $100 million has cost them ~$6 million. One aircraft.

            Every day that goes by, TW – is less of a profit made they can make on a 787. Less chance they will clear the balance, less money to pay off debt, more burden on the rest of the company to cover the shortfall. Stealing from Peter to pay Paul, if you will.

            Any company – that is forced to hold inventory, is losing money. it’s not imaginary. The costs add up each day, on every undelivered aircraft.

            Increased costs = less profit.

          • @Frank

            Thanks again, indispensable to have clear explanations of this obscure misleading accounting system

        • @Frank

          It’s insane for BA to inflate its profits by $18.5 billion from its 787 program.

          “At March 31, 2021, and December 31, 2020, commercial aircraft programs inventory included the following amounts related to the 787 program: deferred production costs of $14,803 [million] and $14,976 [m], $1,795 [m] and $1,865 [m] of supplier advances, and $1,857 [m] and $1,863 [m] of unamortized tooling and other non-recurring costs. On March 31, 2021, $11.557 billion of 787 deferred production costs, unamortized tooling, and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders, and $5,103 [m] is expected to be recovered from units included in the program accounting quantity that represent expected future orders.”

          • @Pedro

            It all comes down to the c-suite boys 1) trying to please wall street & 2) wanting to get paid

      • The US actually has worked intensely on “tightening up” international accounting frameworks and uptake of same by other nations.

        And after achieving that stayed with GAAP and those nice warts special to that system like program accounting and a range of other bookkeeping beautification measures.

    • :: production “basket” ::not the issue.
      program accounting adds an interpretive+”explanatory” layer to raw numbers.
      ( basic idea of real reporting on numbers is a conservative assessment, isn’t it? )
      Program accounting turns into a major lie when up front assumptions for the project run founder.
      The 787 is a perfect example of this lie: up front outlay exploded but bookkeeping numbers still shew the initial profits as “take away”. ( add in that the deferred cost is handled as positive asset. )

  9. In the past, new Boeing engineers learned their job-related skills by participating in [successful] programs – building a network of relationships and learning problem-solving skills.

    The work experience of most engineers remaining at Boeing is with programs that had very weak problem-solving skills, weak leadership, weak coordination, and relatively low levels of trust.

    It’s possible that their “learning” will be to know what bad problem-solving skills look like, but that’s not the same as gaining experience with a well-run program.

    • > The work experience of most engineers remaining at Boeing is with programs that had very weak problem-solving skills, weak leadership, weak coordination, and relatively low levels of trust. <

      Thanks for that comment, esp the quoted bit. Time will tell, but I think you're quite right. That company needs to now show they can do even *basic things* right (other than enriching the Very Few).


    • I recall reading along time ago that the strongest predictor of success for a program was if those running it had been part of a successful program when younger.

      There are many ways to get it wrong and far few ways to get it right!

  10. Boeing defense is 45 percent of the business. That is why the stock can never be compare to eadsy. I am a share holder in EADSY AND BA .

    • Defense contracts are the U.S. equivalents of government subsidies. Q.E.D.

    • Socialism for the Rich, then.

      “Privatize the profits, and socialize the losses..” (see US Covid bailouts 2020 without equity positions in bailed-out corporations for the taxpayers).

      Is this a Great Country, or what?

    • @Daveo

      Sorry, I beg to differ;

      In 2018, the last full year before the 737 max grounding and Covid, here are the numbers:


      Total Revenues $101 billion

      Commercial $61 billion
      Defense $23 billion
      Global Service $17 billion

      Total Earnings from Ops: $12 billion
      Commercial Earnings: $7.9 billion
      Defense: $1.6 billion
      Global Services: $2.5

      BCA was responsible for 60% of revenues and 66% of profits.

    • @DAVEO

      Sure, but even DoD have figured out BA can not make airplanes

      Look at the KFC66 mess – the aircarts BA do supply lose money for BA

      BA loses money on defence as on civilian planes, the only difference being that their civilian planes kill people while their military planes are not fit for combat

  11. ..the timing of that one commentator’s suspension and its colleague’s ineluctable rearrival..

    “Boeing is the Finest Entity ever known to humankind;
    and if you disagree, we’ll™ need to unperson you..”

  12. A re-cap of some important stock-related ratios prior to the earnings announcements this week:

    P/E ratio (should nominally be <25, and positive)
    BA: -196 (negative 196)
    AB: 27 (positive 27)

    12-month PEG ratio (should about 1, and positive)
    BA: -49 (negative 49)
    AB: 0.78 (positive zero point 78)

    Sources: Nasdaq, Zacks, Bloomberg

  13. The article above contains an aside about MAX re-cert in China, so hopefully this post won’t be construed as off-topic.
    The US and China have just concluded a very icy meeting of high-level diplomats, at which many barbs were exchanged. The outlook for US/China commerce is not rosy:

    CNBC: “U.S.-China rivalry may solidify ‘like a hard concrete’ after latest meeting, says analyst”


    • @Bryce

      Icy yes, but these two seem to know they both need to keep talking – it seems as if most are confident there will be a summit

      If the Max is to re cert, amongst other China concessions, Biden is going to have to hand over the Hauwei daughter, and rein in the warcart talk

      Biden has a habit, as all US Pres, of talking big for home consumption, but of being slightly more practical when face to face

      He knows his electorate depends on buying the cheap China imports, and his industry depends, the DoD depends, BA depends…..and so on

  14. EADSY profit margins 2018 was 4.79 at 12/31/2018. So much for the Boeing giving away their plane.BA margin was 15.8 percent. Boeing dug themselves in a hole and will have to crawl out of it. Before MCAS they totally outclass Airbus in revenue and profit. Just read the 10k.

    • @Daveo

      Uh, no. Where are you getting your info from??? Certainly not from the reports.

      End on 2018 BCA sold for $60.7 billion and had $7.9 billion in profit for a margin of 13%.

      AB sold for 48 billion Euros and profited 4.3 billion Euros for 9%.

      Mind you – BA was able to use program accounting to show profits on programs that clearing weren’t in the black.

      Easy with the fake numbers….

      • @Fransk

        Thanks again for explanations

        Other people can not get their head around this willfuly corrupt accounting system put out by BA

        And prefer to take refuge in fantasy – after all this is what BA does

        • @Gerrard

          At the end of the day, if you were an exec and wanted to make as much money as possible – would you put up much of a fuss, if the gang got together and decided to play smoke and mirrors?

          Let the next guy in the chair take the heat…

          • Frank – I say, you’re assuming much cynicism among BA execs: are they all like that? Perhaps someone here can tell us what has been the overall effect over, say, 20 years of using program accounting compared with more conventional accounting standards – please?

          • @Frank

            Agreed – this shady and bendable accounting system serves no good except to obscure the reality

            Some here go so far as to call it a Ponzi, and as used by BA it certainly does look as shady, and as of course previously arrested and charged

            It is likely that the purpose served is a part of that which BA management seem to have been doing for a while now- hollowing out the company, loading it up with debt, returning all cash and then some to WS speculators, leaving it just viable enough for some kind of PE takeover/buy out, when it will be stripped to the bone

            It is impossible to be that incompetent by mistake

          • @Pundit

            Well Frank will be able to light you up on accounting methods

            I could say that the advantage of conventional accounting is that it is slightly less easy to manipulate in ways that get the company arrested

            But why not ask newly appointed accountant to BA BoD Lynne Doughtie, who had to leave KPMG in disgrace over a fraudulent scheme she there supervised

            If anyone knows the ins and outs it is she

    • BA inflated its profits by $25.7 billion as of y.e. 2018. Q.E.D.

      Have no idea why commentator still repeats false narrative.

    • I used up one of my account access to do so.

      There is no explanation of how it can shut both engines down and I am appalled it can even automatically shut one engine down.

      Isn’t that what a pilot is for, engine starts to do what its not supposed to, pull lever. If that does not shut it down punch the fuel shutoff.

      I worked on Marine vessels. The prime directive was that there NEVER was to be in place an automatic engine shutdown feature (main drives)

      You could put flashing light, audible buzzers and have someone drop an anvil on top of the Bridge to let you know you had one with an issue but you never had an auto shutdown.

      The commander on the Bridge was the sole judge of that.

    • It wasn’t a double engine failure, the engines were shutdown by the control system after the aircraft was safely on the ground when the undercarriage weight sensors detected the aircraft was safely on the ground. The aircraft had already taxied of the run way. More like an undocumented feature.

  15. FG: How A220 programme proved sound investment for Airbus

    -> [W]hile the A319 and the 737-700 each managed to secure close to 1,500 orders, neither of their re-engined counterparts – the A319neo and 737 Max 7 – has been able to replicate these figures. The CSeries, however, took over 400 orders under Bombardier and Airbus has added another 337 gross orders in the three years since acquiring the programme, now the A220, in mid-2018.

    -> Scherer believes the A220 hands Airbus an advantage in the current circumstances. While Airbus cut production rates of other aircraft in its portfolio, he points out, there was no such reduction for the A220 – the airframer only “adapted slightly downward the positive slope” for the type’s ramp-up.

    Airbus vice-president of programmes Philippe Mhun says the A220 was the “most active fleet in its segment during the crisis”

    -> Carriers such as Air Canada, Delta Air Lines and Swiss were operating almost all their A220s by June, while keeping substantial numbers of A320-family jets parked.

    -> Radical interior reconfiguration is less of a consideration at the regional end of the scale, but Airbus believes the basic A220 already provides advantages by offering a tailored five-abreast aircraft rather than further stretches of narrow four-abreast regional jets or inefficient shrinks of larger six-abreast models.

    • @Bryce

      Thank goodness someone has confirmed that I am not talking out of my a$$

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