Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
Pontifications: Why I’m cautiously optimistic about Boeing’s future
By Scott Hamilton
June 20, 2022, © Leeham News: Boeing still has a deep hole to climb out of. There’s still plenty of opportunity for missteps along the way. But I’m cautiously optimistic about Boeing’s future.
Here’s why.
- There are tangible things to point to that are indicators Boeing internally is now optimistic about its long flirtation with disaster.
- Despite well-deserved skepticism and concern about when, or even if, Boeing is going to launch a new airplane program, signs point to “yes.” These go beyond the usual rhetoric that often has a hollow public relations ring.
- The signs are there that Boeing at long last appears near resuming delivery of the 787, a critical step in its recovery.
- Clearing the inventory of the 737 has been infuriatingly slow. But if one had been paying close attention, this shouldn’t have been a surprise—and China’s refusal so far to authorize its airlines to return the MAX to service is but one issue.
Getting into the details
LNA has been reporting progress Boeing has made in the past year toward recovery. It’s on a hiring spree to replace and add engineers, technicians and other employees who retired took early buyouts, were laid off by Boeing, and through normal attrition. This hiring spree includes positions specifically for new airplane design.
The development of a stronger safety culture and process is a critical step. Obviously, this shouldn’t have been necessary, and it was mandated by the 737 MAX crisis. Nevertheless, it’s a step in the direction of the “old” Boeing. Engineering and safety were once the greatest brands Boeing had, long before shareholder value became the top priority of the company. I’m not naïve into thinking that emphasis on shareholder value won’t return later this decade. But maybe at long last the C Suite and Board of Directors will recognize that shareholder value ultimately is generated from great engineering and safety.
With this overview, let’s get into the details.
Tangible things
In addition to the hiring spree, Boeing has at least nine 787s and perhaps more in rework, addressing gaps and other issues that caused delivery to be suspended in October 2020. The final stages of paperwork are with the FAA for review. Lufthansa Airlines hinted it could receive its first 787 this month, though nobody confirms this.
Although supply chain shortages slowed the production ramp-up of the 737 to the previously announced 31/mo—something that was supposed to be achieved in “early” 2022—this rate still is the target for later this year. Boeing previously alerted the chain to be ready to return to rate 52 by 2025. This is the pre-grounding rate. The rate breaks created new production capacity that enabled Boeing to offer early delivery positions vis-à-vis Airbus for the A320 family. This was crucial in some sales campaigns.
Boeing announced the program launch of the 777X freighter, a derivative of the 777-9. Shorter than the -9, the 777-8F was longer than the original concept for the 777-8 passenger version. The -8P will now be the same length as the -8F.
Boeing also is developing Increased Gross Weight Versions of the 787-9 and 787-10. The IGW will benefit the -9 if Boeing launches a 787F. There has been no discussion we’ve heard of a prospective 787-10F. Notably, there is no IGW of the 787-8, a model Boeing hasn’t wanted to build for years because of its major production differences from the -9 and -10.
Intangible things
Reading Boeing is often like trying to read the Kremlin. It’s very difficult. But during the administrations of Jim McNerney, Dennis Muilenburg and Dave Calhoun, Boeing has largely kept its executives away from the press. This continues to be true, with very rare exceptions.
Setting aside the two years of the MAX grounding and COVID pandemic when no large-scale media events occurred, last week Boeing held a series of press briefings in advance of the Farnborough Air Show. Previously, for years Boeing limited the attendance to a handful of trade and selected other media. This year, between 40-50 media, bloggers, and “influencers” were invited. Only lower-level officers and program managers were made available to the press—no C Suite types—but this was the norm.
While the topics were not ground-breaking news, plenty of stories and nuggets emerged. Boeing finally felt it had something to say and to say it before a wider audience, in contrast to previous events.
A new airplane program
None of the Boeing people at the media briefings announced that Boeing will proceed with a new airplane program. Boeing isn’t ready, the MAX and 787 inventories must be reduced, 737 and 787 production must come back up to provide solid cash flow and other things must occur.
But separately from the briefings, LNA has learned enough to understand that a new airplane is in the cards. We’ve opinioned many times that we expect Boeing to announce a new airplane program in 2023 or 2024. We stand by this forecast.
Things can still go wrong
There is still plenty that can go wrong at Boeing over the next few years. This is why I remain cautious.
Regulators
Boeing must regain the trust of the regulators. The FAA is first and foremost, as it is the regulator to which Boeing must answer. As a result of the MAX crisis, the FAA stripped Boeing of its ability to certify each 737 and 787 as ready for delivery. The FAA is understaffed for this task. Boeing needs to regain authority.
Relations with Europe’s regulator, EASA, also was severely damaged by the MAX crisis. EASA required extra fixes to the MAX and it has serious questions about the 777X. Boeing must repair this relationship as well, along with China’s CAAC, Transport Canada, and others.
CAAC lifted its grounding order last year. But the airlines still need the authorization to return the MAX to service. Apparently, this hasn’t been forthcoming. With the lockdowns ordered by Beijing in its zero COVID policy, passenger demand doesn’t support additional capacity. Political implications between Beijing and Washington appear to continue to be a factor. But returning the MAX to service will come. Then, the 140 or so MAXes in storage ordered by Chinese airlines and lessors can be cleared out.
Advanced design and production
The production moonshot is a big risk. As outlined in our June 23 post, converging all the advanced manufacturing and digital design processes into the next commercial airplane, whatever it is, won’t be a cakewalk. Conceptually, the new production ambitions are similar to those intended for the 787 in 2004. The effort proved disastrous. While Boeing has more experience now in various aspects of advanced design and manufacturing, and these are being employed in the Defense unit, migrating these to a commercial program remains the biggest challenge.
Product Strategy
Officials believe they have a great, unchallenged product strategy vis-à-vis Airbus. This isn’t just marketing hype. Those inside Boeing actually believe this (though there are some realists as well). But the market speaks with orders and dollars, and the numbers paint a different story. In fairness, there are some apples-to-oranges comparisons being made by both sides.
Boeing likes to dismiss the A321XLR as a niche airplane (it has more than 500 orders). But there are more than 4,200 orders for all models of the A321neo vs fewer than 1,000 for the MAX 9 and MAX 10. There have been 4,922 orders for all MAX types. Airbus reports a total of 8,086 orders for the A320neo family. That’s a 62% market share.
Boeing retains an advantage in the widebody sector. It has a backlog of 914 777 Classics, 777Xs and 787s. Airbus has a backlog of 614 A330neos and A350s. Boeing’s market share is 60%. (Freighters are included; Boeing’s ASC 606 deductions are excluded for all models because Airbus doesn’t similarly report “soft” orders.)
While Boeing officials profess optimism for the future of the 777X passenger model, many observers, including LNA, believe market fragmentation since the 2013 program launch sharply reduced the future demand for the 777-9. The ultra-long-range 777-8, with just 32 orders, is the true definition of a niche airplane.
Indecision
Boeing’s years-long indecision about whether to launch the NMA, pre-dating the MAX and COVID crises, led some customers to order the A321XLR. Some of the 1,000+ MAX orders Boeing boasts about now were tied to customer compensation due because of the MAX grounding. Others were because Airbus has few production slots for the A320 family until 2027 or beyond. Boeing was able to offer delivery slots as early as 2023 in some cases. So, while the 1,000+ orders are positive, some are due to extenuating circumstances and not clean wins over Airbus.
But has Boeing’s indecision gone away? Obviously, there is a lot of work that must be done on a new airplane and the customers must be surveyed again. The supply chain must be cut in. Very little of the latter two tasks has occurred, based on our discussions with these sectors. Time is getting short for a 2023 announcement, which we see anywhere from the Paris Air Show to the end of the year. Boeing should be in the marketplace and with the suppliers now to meet this timeline. But practically, now is premature given the status of the 787 delivery suspension, the slow MAX production, and the slow clearing of the MAX inventory.
And then there is the not-so-little need to retire debt. LNA doesn’t see funding a new airplane program as insurmountable. Once cash flow returns to some semblance of normal, paying down debt and topping off R&D spending is feasible. Raising equity funding is also a possibility.
So, the bottom line is I’m optimistic about Boeing’s recovery. It will take years and there’s much that can upset the applecart. But that’s where the caution remains.
A very comprehensive overview of the current issues at BA 👍
Question: are there any figures/estimates floating around for the to-be-expected total rework costs *per frame* for the 787? Including the in-service fleet that will have to receive extra checks/rework during regular maintenance? It would be interesting to know to what extent rework costs will eat into margin.
Also: it should be noted that Spirit recently revealed that it’s only expecting a rate of 2 p/m on its 787 line for the near future. That’s meager when one considers that the 787 is needed to slow the present cash burn.
“Boeing retains an advantage in the widebody sector. It has a backlog of 914 777 Classics, 777Xs and 787s.”
In fairness, that backlog is somewhat inflated by about a year’s worth (~100 planes) of undelivered 787. Plus knock-on effects, as deliveries for 2022/23 and probably 2024 as well will be below what was originally planned.
Point being: Just looking at the backlog to calculate market share may give you a slightly slanted picture or how well-positioned Boeing is.
Similar story for the 737 MAX I think (with over 300 planes built but undelivered), although for the 737 MAX/A32xneo comparison you used total orders to calculate market share, rather than backlog.
In terms of their product portfolio, I think Boeing is doing fine with the 787 – I think they should go and cancel the 787-8, though. As you pointed out, it’s very different from the -9 and -10 and seems a bit like the 767-200: The original seller, but soon outdone by its bigger sibling. Maybe they’re holding off on cancelling the -8 until they’ve launched their new plane (once they do indeed proceed with that) which I’m sure will, in its bigger version(s), encroach heavily on 787-8 territory anyway.
As for the 777X – I’m sceptical about its prospects, actually. Just like the A380 a decade ago, it seems the 777X is just a bit too big for today’s world, not helped by the delays the programme has encountered already. I think there’s a chance the 777X will become the next 747-8 in that the freighter could become the much bigger seller over the pax version.
The article avoids any mention/analysis of the current high-inflationary environment, and the expected sharp downturn in the travel industry. Although this will affect all OEMs, it will represent a particular challenge for BA, which is desperate to replenish its cash reserves and thus can’t afford a slew of cancellations/deferrals.
Presumably LNA intends to handle this subject in a separate, paywall article?
How about titanium supply issue (BA only)??
And the economy is slowing – the best time to launch a billion dollar new jet program?? Time to kick the can …
Pedro:
Actually it is the best time to do it and have the product available for the next upturn.
Except that BA doesn’t have the money for such a program — you keep forgetting that.
@Bryce
Remember that development costs and the early 70s recession/oil crisis nearly bankrupted Boeing?
‘As of March 31, 2022, our unused borrowing capacity on revolving credit agreements is $14.7 billion, unchanged from December 31, 2021.’
Boeing filing 10Q with the SEC , 2022
Unused credit is exactly what it sounds like, and $15 bill is a lot of credit waiting to be tapped for ‘ a new project’ , maybe ?
You keep forgetting that
I guess we have poster here clueless about “window-dressing”.
@ DoU
Tapping any unused credit will precipitate a rating downgrade, with far-reaching consequences.
You keep forgetting that.
You apparently forgot “revolving credit facility” is a form of short or medium term financing, NOT long-term financing. Lol
-> Boeing Co (NYSE: BA) has entered a new two-year revolving credit facility agreement for $5.28 billion with a group of banks …
Credit rating agencies are monitoring debt/ebita, drawing down credit facilities while BA is experiencing cash drain (last quarter), weak performance (low delivery #) would likely result in credit downgrade (to junk nonetheless).
The revolving credit facility is basically a big credit card, this is not new, Boeing had a multibillion revolving credit facility for years. It serves as an backup if cash becomes necessary.
@ Jacques
It also charges interest based on the levels at the time of drawing funds. Those levels are now prohibitively high for a weak company like BA.
->*Investment-grade* rated companies use revolving credit facilities as backstop financing, with these facilities *remaining undrawn for the most part*.
..If an upturn can be expected, and if one has the right product for that new environment.
And if one hasn’t run out of cash while waiting for the upturn…
Not when you have $15 bill of unused credit line that hasnt been tapped.
You keep forgetting that
@ DoU
Perhaps BA should just go ahead and tap that extra credit: the resulting rating downgrade would finish the company off, and put an end to the uncertainty.
“A fallen angel is a corporate bond that initially had an investment-grade rating but was downgraded to high-yield, or “junk” territory. (The opposite of a fallen angel is a “rising star,” or an issue that was upgraded from junk to investment grade.)
Fallen angels may experience even greater price declines because there are fewer buyers of high-yield bonds than investment-grade corporate bonds. Some investors, such as many pension funds or mutual funds, are only permitted to own investment-grade bonds, so once an issue gets downgraded to junk, they have to eventually sell. The same is true for bond mutual funds or exchange-traded funds that track an investment-grade index. If a corporate bond loses its investment-grade ratings, it gets kicked out of the investment-grade index. Therefore, any funds that track that index need to sell the issue, as well. This forced selling can lead to even greater price declines.
Historically, corporate bonds with lower credit ratings have a greater likelihood of default, as the chart below illustrates. The cumulative default rate rises significantly when dropping from a BBB rating (investment grade) to a BB rating (high yield).”
https://workplace.schwab.com/content/what-happens-if-corporate-bond-is-downgraded#:~:text=Some%20investors%2C%20such%20as%20many%20pension%20funds%20or,or%20exchange-traded%20funds%20that%20track%20an%20investment-grade%20index.
That could have been in the background of the 787 project ( the housing bubble crash aka GFC was a life bomb with provisions for triggering )
over promise on everything, get sales like mad, enter crisis that reduces pressure from customers to deliver (up to here it worked rather well) and go into full production in the following rise while Airbus threshes ( in what ).
Reality was the inverse: Airbus managed the GFC quite well while Boeing flapped around in circles.
“Officials believe they have a great, unchallenged product strategy vis-à-vis Airbus. This isn’t just marketing hype. Those inside Boeing actually believe this (though there are some realists as well).”
A topic that amazed me over the years. I really hoped behind the curtains Boeing executives and stake holders had down to earth marketing & strategy advisors showing them realistic scenarios and developments. Obviously overestimation of its own capabilities while underestimating those Airbus was the culture. Groupthink all over the place.
Because we “own” WB, the A350 replacing the 777 becomes an unacceptable observation. Work-around presentations everywhere.
“A topic that amazed me over the years. I really hoped behind the curtains Boeing executives and stake holders had down to earth marketing & strategy advisors showing them realistic scenarios and developments. Obviously overestimation of its own capabilities while underestimating those Airbus was the culture. Groupthink all over the place.”
I find that amazing as well.
But it seems to be a common thread with Boeing – when they were still mostly engineering-driven, they didn’t want to believe Airbus was on par with them (let alone better in some aspects). And as a shareholder value-driven company, they still believe their own hype (“the NEO will only just about allow Airbus to finally match the NG”) and keep getting caught by it.
Amplified by internet echo chambers.
-> Repeat a lie a thousand times and it becomes the truth (in their heads!)
> Because we [Boeing, in their own minds] “own” WB, the A350 replacing the 777 becomes an unacceptable observation. <
Well said. So far I'm not seeing any kind of appropriate humility (e.g. "we're #2- we try harder!") from Boeing.
We'll see how it all plays out.
“None of the Boeing people…announced that Boeing will proceed with a new airplane program”
I would presume that others , especially suppliers, might be more forthcoming. I understand that Spririt has been working on fuselage structures with new materials and technologies. They could well be others , including in Japan and even suppliers to Embraer.
I’d be interested in thumbnail descriptions of Boeing’s present relations with their suppliers,
as compared to Airbus’s.
Of their comparative workforces, I will not speak.
We *know*, as a matter of fact(???), NMA/NBA etc. is already severed apart to subcontractors???
https://www.spiritaero.com/pages/release/spirit-aerosystems-announces-collaboration-role-on-airbus-wing-of-tomorrow-program/
https://www.spiritaero.com/pages/release/spirit-develops-new-carbon-fiber-fuselage-panel-to-support-lower-cost-higher-production-volumes-for-aircraft-manufacturing/
Enough?
Thanks very much for those links, A.T.
Most likely is aircraft structures designs being made and 3D models sent to Electroimpact for review and test on how fast and accurate their robots can build it to what cost. Boeing gets the results and redo the design to cut cost and time. Managers can let this procedure roll on for quite awhile. All the 2500-4000 components with their CMM’s to be installed are likely evolution of the 787 boxes that are lighter, cheaper and smarter. Boeing most likely gets stuck in requirement creep as customers wish lists are enforced by regional sales managers (payload, range, noise, emissions, 787 commonality for pilots and cabin and expensive spare parts , container type and number, toilets and galley types, ….) easily it never to converges until a chief engineer decides what will be very expensive extras from the Udvar Hazy selected design and tell UAL to stop and place launch orders instead….
Two things: your comments seem consistently predicated on events
and resources remaining roughly
the same as they’ve been for the
last sixty or so years; they won’t be.
Secondly, things cannot be “smart”,
as mentioned in your comment above.
Actually, when I see that term used,
I want to *run* the other way, and fast,
because it generally has some connection with further limiting human
autonomy-as if there isn’t enough of that
coerciveness in our lives already. !
Please make “smartness” (like your surveillancePhone) go away..
I don’t agree with everything Chris Hedges says here- he’s too doom-pornish
for my taste, in general- but he makes many valid observations here. I think:
https://consortiumnews.com/2022/06/20/chris-hedges-the-triumph-of-death/
Caution: one could be convicted of WrongThink for reading this..
This is very comforting, too:
https://consentfactory.org/2022/06/20/the-federal-republic-of-new-normal-germany/
What is being “normalized” today
is wrong, wrong, wrong.
There, I said it.
“normalized Germany.”
reading that is like taking drugs via intermediary.
What he describes is the Pravda side of things.
Media in Germany work as a (mostly US oriented ) Phalanx today.
See the reaction after Sigmar Gabriel, ( former minister, SPD lead ) voiced concerns about ambassador Melnyks (foot stamping) overbearing demands.
Ask around and expressed views are quite a bit more cynical. ( why support the most corrupt state in Europe the US has set up over more than a decade to piss on RU? )
@Bill, the “smartness” is in the software how it interacts with the other boxes. There has been some years since the 787-9 was designd and its system can be improved, just look at the cabin air system with electrical driven compressors that feed regular Air cycle machines. The heavy electrical power system and its Ham Sundstrand boxes to connect APU, Engine starter/generators would be made smaller, simpler and smarter today.
Thanks for your clarification, claes- you
have tech expertise, and I don’t.
That word will continue to set my teeth on edge, though, for reasons already given. 😉
claes:
I doubt that generators would be any lighter today than they were when the 787 came into being.
That gen technology was stretched to the MAX (pun intended) and there are no real breakthroughs that apply to airborne applications.
I worked in Power Generation (backup mostly) for 35 years or so. In that time I saw engines up their output by close to double what they were when I started.
The generator size remained the same. Motors were the same. There were some efficiency gains in motors but not a lot. Mostly it was being forced to adapt the most efficne capability by regulation than any tech.
Flip is that Airbus proved there was more than one way to skin the composite cat (I was surprised but then Carbon Fiber composites are not anything I had much to do with ).
Its something of a wash, less tech build approach by Airbus and more labor but still the high tech use of CF. I tend to think Airbus got it right but clearly the 787 spun fuselage does work (well assuming you maintain your quality control)
The Soviets are now doing out of auto clave curing. But that tech is fairly new and the major use on air frames is relatively new vs aluminum and 80 years of use and development.
Ironic the Soviets might have had a market for the MC-21 and now its gone (they sure were never going to sell any in China as that competes with the other State Owned ops in the C-919!
@ TW
There are (at least) 37 countries that are still strongly aligned to Russia — including all the BRICS countries, and most of the Middle East oil giants. The combined population of the BRICS countries alone is 3 billion — which is 38% of the entire world population. The BRICS have a combined GDP of 23.5 trillion dollars — which is slightly more than that of the USA.
Stop deluding yourself as regards Russia’s addressable markets.
“There have been 4,922 orders for all MAX types. Airbus reports a total of 8,086 orders for the A320neo family. That’s a 62% market share.”
…and once again, the poor Canadians get forgotten, like yesterdays sports scores.
It only moves the dial a couple of points to 64%, but it moves the dial.
You can also look at it this way. 741 is 15% of the entire 737Max market share.
(on a side note: Much has been mentioned about how Boeing has dropped the ball with the Embraer tie up, not because of the loss of the E2 series, but because of the engineering talent they lost. Funny thing – just an hour away from where it’s new HQ offices will be located, was a large pool of engineering talent AND a modern, market ready, clean sheet aircraft waiting to go – coupled with a weaker dollar which would have brought even more bang for the greenback. Both names even start with the same letter of the alphabet. What more could they ask for???)
I *did* read ‘Air Wars’, and for the life of me, cannot understand Boeing’s actions WRT Bombardier.. the latter approached the former and were turned away, because the
C-series would interfere with the stone-age, soon to be grounded MAX?
No further comment.
Adding: Boeing’s actions WRT Bombardier are one of the facts that fit into my hypothesis below. Boeing’s continuing blithe complacency (examples in the
essay above) do, too.
One can understand Boeing as the C-series were design outside most Boeing spec’s and standards. To make it a “Boeing” aircraft “everything” needed to be changed at huge cost, Airbus is working thru it now and it might take another 10 years before the accumulated cost curve heads down and another 10 years for a program profit. Still “a nice little aircraft”
I understand your points, but Boeing
needed- needs desperately!- to change..
We are in agreement that the A220 is a very nice aircraft. Boy howdy, it is.
I’m not sure I can agree, … 717 was that not outside Boeing spec’s and standards?
I think everything around the C-series has been a disaster for Boeing.
Boeing was comparing the MAX to the NEO only in this context, and more specifically the 321 to the MAX 10.
Ahhhh, I see.
It’s funny that when they mention market share, they act as though the A220 does not exist. I guess given how difficult the situation is for them, it’s probably best to parse the statistics and spin it in their favour, as best they can.
Sticking by those numbers though, Scott – you would agree that the replacement market for the NB market is somewhere in the 20k range, right? The A320CEO family vs 737NG/737 Classic market bears this out.
If so, the score is Airbus ~8,800, Boeing ~4,900, with the race to ~20,000 total units.
Unless Neo’s & A220’s fall out of the sky and get grounded, the game is pretty much over, for this product life cycle.
I believe the single aisle number (100-240 seats) is more than 30,000
So double the aircraft currently on order.
If that’s the case, wouldn’t the game plan be to go into the locker room and tell the team that you lost the first half, but we’re getting new players in for the second half (i.e. make a new, inexpensive NB with plastic wings and metal body, you know – kinda like the A220, but competing directly in the meat of the NB market) and we’re going to fight like hell for those remaining 15,000 orders?
Instead of limping along with a tired, beaten up group – that doesn’t seem able to turn the game around?
Scott,
looking through your kindly rose colored glasses and therefore assuming everything Boeing comes up trump for the foreseeable future, they are looking at a “stabilized” single aisle market share of 33% – before the barbarians ( from China/Russia) step in.
Talk about snatching victory out of the jaws of defeat…
Boeing won’t recover its single aisle market share until it does a new airplane.
Boeing won’t recover its single aisle market share until it does a new airplane.
Scott: Interesting double post!
I think this should be listed as “possible” future market share.
We are in a period of huge upheaval. Current single aisle market share slightly favors Airbus but its possible that that move to 75 a month gets cancelled as the EU falls into recession.
Boeing could be well positioned with their 30 a month (by accident)
Reality is we can only watch and see how things fall out.
One interesting aspect is what happens if Boeing does come out with a new aircraft.
Will we see an A320NEO like shift?
Granted its wild speculation on my part, but the 787 failure to kill off the A330 was failure of program management, the airframe was a winner.
A decently executed program would have Airbus responding with ?
As we saw with the A350 Mk 1 to 4, the market did not like the A330++++ (then some did but a lot of the A330NEO went away with Air Asia collapse
-> “…. as the EU falls into recession.”
Recession is geofenced??
You believe UA is going to take delivery of a couple hundred NB jets as planned??
A large chuck of MAX latest orders came from airlines in U.S.
> It’s funny that when they mention market share, they act as though the A220 does not exist. <
Indeed- and it could have been *their* plane.
Facepalm moment..
“Indeed- and it could have been *their* plane.”
The real existing Boeing would have killed off the C-Series as fast as possible ( without causing war with Canada.)
Today in Aviation: Boeing Finalizes Purchase of de Havilland Canada …
A few comments in reaction:
1. Getting into the Details (Hiring):
I read elsewhere that the hiring is for the programs struggling toward certification, not new airplane design. Also, a friend was recently recruited to return to Boeing for an engineering role. His offer was a nice increase but his acquaintances without Boeing experience received offers below their current salaries.
2. Intangible Things: They likely hope to use Farnborough to announce resumption of 787 deliveries.
3. New Airplane Program: Surprised to see Scott project program launch in 2023 or 2024 when Calhoun just stated his moonshot digital magic system won’t be ready for AT LEAST two years.
4. Advanced Design and Production: This is the magical digital system that will allow Boeing to accomplish a $15 billion 7 year program in 4 years for $7 billion, just like the magical “global supply chain” of the 787 development fiasco. My explanation for the Boeing obsession with magical new methods is that the GE financialists are not content with an oligopoly in which new development can be easily countered by Airbus. They are desperate for some kind of breakthrough advantage that Airbus cannot easily duplicate, but this makes them likely to bet the farm on half-baked schemes (ala 787 development fiasco).
No break through’s around the corner, but evolutionary development seems a realistic, viable approach. Based on the previous 20 years.
Lets also assume challenges will mostly not be solved in a few months and deliveries only slowly resuming.
And that new challenges popping up, become more likely if you already have your share of challenges.
Lets furthermore assume reasonable customer disloyalty & Airbus not sitting on its hands but moving forward. Also based on the previous 20 years.
Away with best case scenarios smoothly transforming into firm expectations.
Application of this new digital system to an entire clean sheet commercial program for the first time sounds more revolutionary than evolutionary. Old Boeing (premerger) introduced changes incrementally rather than wholesale. But the people making the decisions back then appreciated the difficulty and risks of integration of a product as large and complex as a commercial plane. Millions of parts, thousands of suppliers. One supplier deep down in the food chain cannot procure or produce a part per schedule and the delays cascade upward like dominoes. Developing a new plane even with the exact same technology as the last one is a daunting task, doubly so when anyone who was there the last time has been golden-handshaked out the door.
Now you introduce new technology throughout the program, risk of schedule/cost overruns skyrocket.
Furthermore, I believe it’s premature to talk about a new jet program without clarity of how engines would evolve (evolution vs. revolution), it might come back to bite BA when their new jet is about ready.
John, thanks for these comments. I’m pretty sure Mr. Calhoun has said that engines “required” for a Boeing NMA/NBA/NSA/whatever-it’s-called-this-week will not be available
any time soon; make of that what you will. I’m guessing you’ve considered that already,
judging from previous stuff..
Bill7:
What Calhoun says and reality are vastly different.
P&W could easily come out with a GTF for that new aircraft in time for the program as they have invested a lot into detailed design and improvements to the existing GTF.
Calhoun does not want to do anything so he uses fig leaves.
Until David Calhoun, the whole executive corps and the BOD gets s/canned nothing will change at Boeing, Scott said this very thing two years ago.
Calhoun has pretty much surrendered to Airbus.
Another big problem at Boeing is their abject arrogance, ‘we’re Boeing and no body can do it better’ I lost count how many times I heard this when working there. They said it about the pathetic 787 program and even more with the mad max. I should add ignorance to their continued problems.
Hiring new engineers is a good thing but when the experienced senior engineers have been forced out the newbies can’t learn the tribal knowledge that just is never written anywhere.
Airdoc:
No question the arrogance continues but is that by the people that work or the out of touch management?
And was the 787 pathetic or was the management pathetic?
As I see it, when its done right its a heck of an aircraft.
In addition to this arrogance is Boeing’s chief engineer Greg Hyslop and senior VP Mike Fleming continue to make statements that the mad max 10 is safe and doesn’t need to comply with the new EICAS rules taking effect Jan 1,2023. They are trying to circumvent the law and seek exemptions, have they learned anything?
What they need to learn is how to understand and comply with the regulations. If the FAA approves an exemption they are just as complicit and says everything that safety is not the priority.
All Boeing cares about is schedule.
Don’t forget to add Mike Delaney to the troika of arrogant McDonnell-Douglas retreads now given a VP title
But I disagree regarding the Max 10 and EICAS. Boeing deserves every bit of scorn heaped on them for the past 25 years of collosal management failures. But the EICAS horse is out of the barn. The FAA should have demanded that Boeing step up and modernize the Max flight deck 11 years ago, but they did not. Caught with their pants duct taped around their ankles following the MCAS debacle, the FAA is now going to use the Max 10 to show with all due vindictiveness that they are once again firmly in charge. But nothing good will come from from having that airplane differ from its predecessors.
Airdoc:
You are taking things out of context. The MAX is safe unless EASA, CAC and the rest of the world has it wrong!
The MAX MCAS debacle was a horrid tragedy.
But prior to that the 737 had as good a track record as the A320 series.
So what you contend is not that the MAX needs the added stuff but its dangerous and should be grounded.
Just say that. You are wrong but quit beating around the bush contending something else.
MCAS still isn’t up to the modern standards required by EASA / Transport Canada: it won’t be until it has a third sensor input. Until that juncture, it’s availing of a temporary exception.
We won’t mention the primitive manual trim wheel issues, or the primitive cockpit alerting system that has been implicated in 5 crashes.
Airdoc is entirely correct.
> Airdoc is entirely correct.
Yes, and I thank him for that trenches-based comment.
Transworld said: “..So what you contend is not that the MAX needs the added stuff but its dangerous and should be grounded.
Just say that. You are wrong but quit beating around the bush contending something else.”
I’ve got a better and more honest idea, Transworld: stop putting words into other commenters’ mouths. It’s cheap and dishonest. Airdoc writes clearly, and I appreciate his *well-informed* comments.
@TW
Again that is alternate reality being posted.
EASA (and the rest of the world) agree to re-certify the MAX 8 conditional on synthetic AoA and other enhancements added later.
AW:
-> “EASA expects to clear the Boeing 737 MAX to return to service by year-end after securing commitments from Boeing to address specific safety issues the agency found in its review of the model, including adding a third source for measuring a key flight parameter.”
https://aviationweek.com/air-transport/safety-ops-regulation/easa-sees-737-max-approval-november-says-boeing-add-third-aoa
I won’t mention EICAS here, which the Boeing “Safety” dude also said is unnecessary..
One good commenter here has provided details on the number of Boeing 737 crashes that have been partially attributed to confusion in the cockpit from that plane’s very old and confusing alerting systems.. I think there were several.
-> “EASA is among several regulators working alongside the FAA during extensive reviews of the MAX’s certification and operational characteristics. The European agency’s insistence on ensuring multiple failure scenarios were either manageable by pilots or improbable enough to present risks helped expand Boeing’s work beyond the MCAS software into other areas. Runaway trim scenarios figured prominently, prompting extensive analysis of how much time pilots have to respond, and the difficulties presented by the last-ditch step of using a manual trim wheel to move the stabilizer.
“We worked very hard on our side to insist on independently re-certifying all the elements we considered critical,” Ky said. “We have recertified all the flight controls, including information about altitude and speed. That made for a number of difficulties with our Boeing and FAA colleagues as we were going beyond simply correcting the contributing factors. If we had listened to the FAA and Boeing we would have settled for making modifications to the MCAS which was the contributing factor for both accidents.”
@TransWorld
“But prior to that the 737 had as good a track record as the A320 series.”
I’m calling BS on this. Simple research will show the dire 737 safety record back from 1967.
Case in point: the classic single rudder PCU, Boeing stood fast claiming it was safe no changes required until the USAir that had a rudder hardover.
An AD was issued on the classic after that accident. Then…. Boeing decides to a redundant dual PCU after the FAA forced them to.
Their arrogance never ceases.
I’ve pointed out the Boeing 737’s rudder pcu/yaw damper issues *going way back* to that commenter and others, multiple times.
crickets..
It speaks volumes that national hero Capt. Chesley Sullenberger testified publicly to Congress that the MAX was “not up to modern standards”.
https://www.seattletimes.com/business/boeing-aerospace/celebrated-pilot-sully-urges-further-updates-to-boeings-737-max-and-to-older-737s/
A couple of commenters here clearly disagree with silly ol’ Captain Sullenberger, so that issue, too, is settled.
If Boeing were serious about a comeback
they’d put Capt. Sullenberger on their Board.
Airdoc:
In fact I have been the one that brought up the 737 rudder issue repeatedly.
Equally Boeing ignored and discounted the 767 issue until Lauda proved it.
But then Airbus was not even making aircraft in 1967 and Commet had a horrid accident rate (until they fixed it)
But then the prop jobs had a far worse one including Lockheed and Douglas.
Boeing in 1967 was no more cavalier than anyone else.
So where do you draw the line?
I put it at the point where Airbus came out with the A300 and then the A320. Who pushed what is worth some discussion.
Boeing still has a garbage auto throttle setup.
Airbus claims wonders for its system but its had its own share of failures.
So, let me ask you this.
Do you consider the MAX so dangerous that it should not be flying? And what are those flaws specifically and what would you do to correct them?
Gut the control system, put in an A220 FBW and its logic or what?
Just calling something dangerous is a loaded emotional statement without any substance. Flesh it out, put out your answer like I have.
Good, positive assessment of today’s Boeing Corporation. I would like to add Boeing has the expertise of their Defensive Division, and the fact that aerospace is a DUOPOLY. Where else are airlines going to buy commercial airplanes that can make eight rotations a day for twenty years safely? Yes, I know about the Russian and Chinese attempts to grab a piece of this pie, but they have their own challenges. Also, the MAX crisis was an aberration in the long history of Boeing manufacturing (granted, a CEO man-made crisis,) but it appears to be in the rear-view mirror. Another thing, too, that could be a sticking point would be a major turndown in economic conditions.
SamW:
I don’t think its in the rear view mirror because you have the Calhoun and his like continuing.
It only will be with a management philosophy change from the Pillage model that Boeing has a future.
Right now, they are just grinding through one program at a time and all are (or were) horribly hossed up.
They have the pieces in place, they do not have the upper management and they have a thin bench or they would have corrected all 3 programs by now instead of grinding through one at a time. Or with a good bench they would not have got there (M/M and Calhoun sadly were equally culpable of wrecking Boeing) – That has to stop if Boeingis going to succed mid and long term. Short term fix/grinding is not the answer, it helps to stop the bleeding now but long term like Ford, Boeing needs a fix not a patch.
MCAS, the training associated with it, the “Cover-up,” the SW CEO, man, I think the fact that MAX 9s and 8s have been flying for some time now with no major incidents tend to make me think the program is pushing ahead. I would say the last two major milestones (and they’re big) are getting to 31 airframes a month and getting the planes up with Chinese airlines.
As far as the regime in charge, the microscope is on them, and the mantra they are hearing is: No more goof-ups. As was pointed out in the article the 787 is very close, and the 737 could be right behind it as far as deliveries. The market wants these planes.
SawW:
While I think in the larger picture you are correct, I have yet to see the microscope haivng any affect.
Being in charge of failed programs and not stock buy back and no dividends is what is driving the bus.
What would Calhoun do if we could magically wave a wand and they had profits again?
I think it would revert to the pillage model.
As Bill7 pointed out on the MW-139A, its a mess. Granted you have to wonder why the USAF needs a different helicopter when an Black-hawk would work just fine.
I agree the market is good for both MAX and 787. 777X is an open question but its years away sadly and clearly its getting fixed last because they can’t fix it at the same time as the 787.
Until the like of Calhoun are removed, its going to repeat or keep cycling down.
You are probably correct on leadership. At the end of the day when the coffers start filling again from Max and Dreamliner deliveries, there might be hope for the development of the New Plane. What a tenuous position that succession of weak CEOs put an amazing company in.
“Emirates Seeks Faster Airbus A350 Deliveries Amid Boeing Delays”
“(Bloomberg) — Gulf carrier Emirates said it’s in talks to take delivery of A350 wide-body jets ordered from Airbus SE over a shorter period amid continuing uncertainty around the handover of Boeing Co.’s delayed 777X model.”
“We’re talking to Airbus about compressing the delivery scale so we probably get up to two a month,” Clark said in a briefing at the International Air Transport Association’s annual meeting in the Qatari capital. “We’re trying to get this whole lot done in two years to pick up this big capacity”
“The executive said he’s not convinced that Boeing’s new delivery target will be met and that the situation regarding the plane’s General Electric Co. engines is particularly confused, with the turbine yet to be subjected to scrutiny from Emirates, “let alone the flight test program.””
http://www.bnnbloomberg.ca/emirates-seeks-faster-airbus-a350-deliveries-amid-boeing-delays-1.1781334
The many faces of Tim Clark…
Just recently stated they won’t take any a350’s until a permanent solution is implemented on the paint issue..
Even sided with Qatar on this fiasco..
1st delivery was pushed back almost a year and half from Early ’23 to August ’24…
Just what we’ve expected from Sir Tim over the years…
“Just recently stated they won’t take any a350’s until a permanent solution is implemented on the paint issue..”
A perfectly acceptable solution has been in place for months. Qatar might not accept it as such — because of suspected ulterior motives — but other airlines do. Perhaps Tim went over to Abu Dhabi to see what Etihad thinks.
You really believe everything TC says.
Ok, latest is… a350-1000 too small to meet future large aircraft needs!!!
Looks like they’ll continue flying their large fleet of flying fossils many years to come..
Prior to the pandemic, Emirates was generating 85% of its profits from its A380 fleet.
Not bad for some “flying fossils” 😉
https://simpleflying.com/emirates-a380-profits/#:~:text=Dubai-based%20UAE%20flag%20carrier%20Emirates%20is%20well%20known,that%20it%20generated%2085%25%20of%20Emirates%27%20pre-pandemic%20profits.
@TC
What are your other workable alternatives??
Shrug.
Yeah, he’s going to get those [undeliverable] Boeing 777-Xs instead.
🙂
And he says that the A350 is not big enough, shrugT
He’s looking for a A380 “next generation”.
Paint issue is manageable and will be taken care of by AB (first repaint) in case a solution from AB is not ready.
Looks like TC is not going to take those 777X produced. Would have serious implications to BA’s finances and debts. Another shoe to drop??
QR will have to decide whether they want a quick resolution with AB and get its A350 reactivated ASAP.
-> The many faces of Tim Clark…
What TC now said is to compress the delivery schedule (i.e. the time frame between the first delivery and the last).
Furthermore, neither you nor me know the discussion between EK and AB, what assurance can AB provide etc.
Think Airbus has a permanent solution on the metal mesh (new metal alloy), surface treatment and paint sticking to it and Emirates and everybody else will get that standard after a switchover date. I assume it can be retrofitted on sensitive areas at heavy checks, most likely as a new top layer leaving the old below it. We will see.
claes:
No they will not add a whole layer on top of an existing one.
I agree on a switchover date.
I suspect that they will just continue to patch the existing mesh/paint issues until they come up with a fix for those that they selectively apply as needed.
The fact they are doing a whole new mesh speaks volumes about the failure (or perils of making aircraft)
Not perils. No plane was in danger from a small discontinuity in the mesh coverage.
The whole lightning problem thing is far overrated, and any issues that are out of spec can be fixed during a major check- which is what happens for many many other issues.
For commercial aircraft the day new issues stop arising is the day there are none left in service.
Duke:
MCAS was overated until it wasn’t as well.
Sure you can launch Shuttles at 32 deg, then they tried it at 25 (?) and we lost one.
Its known as toggle action. Change of state suddenly.
And clearly, if you don’t deal with it it spreads.
The good news is it seems to show on the surface and not work under it.
But aircraft have been severely damaged by lightening and you do not want to be the one that finds out what the limits are.
Safety system keep you well back from that, not right on the edge of discovery.
The MCAS issue caused a crash ..or two.
So clearly doenst count as a minor thing that puts a plane in danger. It of course wasnt even mentioned previously
Locations around fuel tanks are a different matter as its a known cause of crashes- well one or two
My Take:
I am not portending that the Digital Design is magic. I do think its possible it changes things by a lot.
And there are two programs currently underway that use it. T-7 and the MQ-25. So its being tested.
I agree that there is not usually a direct cross from military to civilian programs. But the Digital design tools would be agnostic.
Even the bid process is more like a commercial program in that there are early losses to be made up by latter production volume.
I would say am hopeful Vs Scott Cautiously Optimistic.
Mostly its based on 737 MAX is now working as well as supply allows (Airbus has issues there as well).
The 787 will be resuming deliveries soon (6 in Everett per Seattle Times being worked on). There is an experienced workforce to draw on for that.
What many are missing with the 787 is there is two totally difference aspects to 787 delivery and production. Delivery of built is a whole different process than production.
For the already built you have to check them all and fix them. For production you have to sort out where the mfg issues are and fix them and then confirm them on the line. Once confirmed you can go to random sampling and testing as is normal in quality control.
Boeing has a good product line, its not as good in the Single Aisle area and more so when as was noted you throw in the A220.
They don’t have to be number 1 (yes its much better but they are where they are). They do have a large defense presence that Airbus does not.
787 has a great future and the 777X has some future (stay tuned, I don’t buy the whole fragmentation thing, it looks to me its in addition to Larger Airport to Large Airport.
Calhoun and his like has to go. The steal and pillage mentality is what got them in this situation. That is really what is missing is Calhoun continuing despite the track record going back to Stonecipher what that type Lack of Management (LOM) does to a company (not just Boeing its US industry wide)
Just a reminder: T7 advanced design is coming from SAAB in SWEDEN
Saab is the rear fuselage structure only.
‘Advanced digital design’ covers more than just 3D CAD/CAM of a structural section.
Haha.
Alternate reality??
-> Saab responsibility includes the rear section of the aircraft, *from where the canopy ends to the tail cone, together with the associated subsystems*. Wings, fins and rudders excluded.
So its an rear airframe section like I said
‘The production and shipment of this aft airframe section is the latest milestone in Saab’s contribution to the design and development of the T-7A”
Nit picking from someone who cant even count fuselage tanks
Another obfuscation attempt … but failed.
Your earlier post:
-> Saab is the *rear fuselage structure only*. ‘Advanced digital design’ covers more than just 3D CAD/CAM of a structural section.
Saab might have had design influence on more parts than what it makes, there is a possibility that Dassault tought them how to use all new Catia system features on the Neuron and the Saab team used what they learned on the T-7 (the Mirage T-7…)
Saab has had its own fighter project in production and substantial upgrade the Gripen . ( which had BAE help for the wing design and production for the prototypes)
Dont think they needed Dassault help for T-7 on Catia, as they would have used the DS Catia for decades and the Gripen , a single engine type uses the same F404/414 afterburning engine.
DS is software only subsidiary with its own 20,000 employees in 140 countries and of course Boeing St Louis would use it too
Its hard to compare directly as little information on T-7A dimensions , but I would guess Saab was chosen as the partner for reasons of some design commonality for the structure they make and to de risk it for Boeing
Duke:
We are in rare agreement. I think it was a very good collaborative effort with SAAB and Boeing.
SAAB has a lot of experience with playing well with others.
You might recall back in the day when the first Grippen crashed and a US mfg helped them fix the software.
I think SAAB and Boeing get a huge amount of future build setup out of this project.
And if you look at the picture, the rear does not include wings, tail etc.
https://defence-blog.com/saab-delivers-t-7a-fuselages-to-boeings-plant-in-st-louis/
A very expensive lesson to learn digital design.
BA could loss *$10 billion* on this one single contract. Jaw dropped.
So how do you derive that insane number?
Boeing SAAB will easily make 1000 of the T-7 and its variants before its all said and done.
Like the 787, they built capaility into it (and that costs) that they will mine for years on not just the T-7A, but the F/A-7 and adversarial trainers.
From WIKIPEDIA
“Saab has developed new software for the T-7 to help provide for cheaper and faster development. The T-7A employed digital engineering that went from development to the first test flight within 36 months.[26] The T-7A has an advanced and digitized production line that takes only 30 minutes to splice aft section with wings.[27]”
You are right SAAB is manufacturing the rear fuselage structure only.
But as far as design is concerned, my understanding is that they did most of it.
SAAB may be a small company, but they are very respected in the trade
another point: CATIA is the product of DASSAULT SYSTEMS
which is totally separated from DASSAULT AVIATION the manufacturer of RAFALE and FALCON
RE Catia- early versions of CATIA were used on significant parts of Boeing designed and built sections of B2 Bomber in the 1980’s – along with NCAD-NCAL systems derived from Lockheed computer aided design systems. Significant use of Catia systems also on 777 in late 80’s early 90’s.
There is nothing that says Boeing did not do the overall design and SAAB made the rear section in conjunction of that design.
Boeing is responsible and does the work on the front, wings, tail, gear and electronics.
You also miss this is an entire training system, Boeing does the simulators, books etc for the whole training syllabus.
The T-7A is just the visual hardware part of it.
I also think it’s good to see this column, and will be staying tuned for vital actions at Boeing, rather than words.
Bill7:
Agreed talk is cheap, doing is where its at.
As an aside, interesting that Caterpillar is abandoning Illinois as well. Maybe they like going to the new Sahara dessert?
https://will.illinois.edu/21stshow/story/why-are-boeing-and-caterpillar-leaving-illinois
Pretty weird as Heavy Equipment is all Cat does, non of the defense thing.
The weather in Chicago would be my bet
Weather? After more than 110 years??
Duke:
Cat is not centered in Chicago, its in Peoria Illinois and has been for 80 years.
Same case can be made for out of touch executives.
HQ of Caterpillar is moving to Texas like you say
HQ of Caterpillar is currently Deerfield Il, A suburb of Chicago
I dont know about the manufacturing plant moving , but in a number of places
Large track-type tractors (East Peoria, Illinois)
Large mining trucks (Decatur, Illinois)
Large motor graders (North Little Rock, Arkansas)
Gas turbines (San Diego, California)
Surely you knew the details which you now dispute?
Adding: I’m very curious about EASA’s steps and concerns regarding certification of the Boeing 737MAX-10.
It will also be interesting to see what modifications the Chinese will (ultimately) mandate — assuming, of course, that they ever recertify the MAX.
I don’t buy the argument that China absolutely needs new MAX orders in order to serve its (projected) traffic needs.
Yes, I’m wondering about China and its various steps, too.
China Southern has conducted a flight to confirm the MAX ops.
Due to the lockdown of most of China in various types, the demand is not there.
If that eases, then that changes the ballgame.
A teasing game, to keep up the illusion of hope.
The Chinese have been master strategists for more than 3000 years — they know how to use a slow knife.
@TW
As I pointed out before, China Southern also had test flight in early 2022. What happened after that?? Sigh.
Pedro:
That was answered, I assume you did not read before commenting.
Where??
Can you re-post?
Pedro:
No, I do too much of the leg work for you guys already.
At some point you have to learn to fly on your own (like I did)
-> At some point you have to learn to fly on your own (like I did)
Writing fantasies??
@Bryce
I’m curious about this:
-> China’s refusal so far to authorize its airlines to return the MAX to service
Is there any report that supports it??
Not that I know of.
Just regard it as a far-fetched attempt to find a curve that sort-of fits the data points. Some people feel better when they can blame something on a foreign government 😏
This is the evidence , the certification authority has approved it , so another factor is preventing the state owned airlines from flying their planes of this model ?
https://www.bloomberg.com/news/articles/2021-12-02/china-closer-to-ungrounding-737-max-with-airworthiness-directive
Many month back , the airlines with Max jets in China said they just needed to ‘update the systems and arrange pilot training’. 7 months have passed.
China Southern executives have said they have excluded 737 max deliveries through to 2024
I guess those Leap-1C engines arent being delivered either.
The CAAC provisionally approved it, pending comment from Airlines.
@DoU
News report you cited support the fact that the Chinese government has appoved the recertification. You have no proof that the government refused to authorize its airlines to return the MAX to service.
> [Boeing] Officials believe they have a great, unchallenged product strategy vis-à-vis Airbus. <
Based upon what evidence, I wonder? When I read
that it was like reading something from Pravda in the latter days of the Soviet Union. It don't add up..
Bill7:
I agree. Boeing has a decent (Single aisle) to good Wide Body but they sure are not equal to Airbus in the Single Aisle and that include the A220 that keeps getting left out (Scott!)
The -10 sales are doing pretty good oddly, but the issue of the flight deck is looming. In this case I think a waiver is justified.
The Synthetic AOA/Airspeed resolves the erroneous aspects of that so called issue (they have a third backup instrument cluster that shows them what is really going on – pilots should use it, while I also think it should have a repeated in the Main Display you can enlarge as needed)
> The Synthetic AOA/Airspeed resolves the erroneous aspects of that so called issue <
"resolves" in the above comment is sloppy language at best, since there is no *implemented* synthetic system
on any production Boeing 737. "so called issue" in the same sentence is just.. dishonest.
When in a deep hole, step one is to.. stop digging.
Bill7:
Phew, did you work for Clinton at one point?
In response to the EASA insistence on a third independent AOA, Boeing has implemented a Synthetic AOA (and airspeed) on the MAX-10
Said implementation will be back-fitted to the -7-8-9
You are aware that there is already a third backup Airspeed system on the NG and MAX?
There is also a backup Artificial Horizon.
How many times do I have to state the same facts ?
-> Boeing *has implemented* a Synthetic AOA (and airspeed) on the MAX-10
In alt-reality??
Pedro:
Nope, per EASA requirement (good thing in my view to have the cross check the FAA)
While I don’t think its needed, there is a 3rd backup system without the AOA and the AOA is not needed, go with that.
But it keeps the EASA engaged and lets them think they are doing something useful that is worth it.
@Bill7
This is the Boeing arrogance I eluded to earlier. As so many of us internally have pointed out, just keep thinking this way and see where it takes you.
“Bloomberg reports that the company has reviewed the carbon-composite frames for structural imperfections with regulators and key suppliers. At the same time, an FAA official disclosed that the agency had accepted Boeing’s recertification plans.”
Regarding Boeing’s claim regarding Airbus and “niches”: I think that AB are doing a nice job on those multiple “niches”, and filling them is serving them quite well;
that’s leaving aside obvious market preponderances.
I do hope Boeing gets it together.
Bill7:
I am 100% on board with the hope, too bad the Board is not there making a difference!
As always with life, its a work in progress and we have to see.
I note that Clark is also contending that the A350 is not big enough for their needs. Maybe the 777-9 is!
Clark will just have to make do with what’s available if/when the 777X gets cancelled.
And if it gets cancelled..
Would you like to elaborate what Emirates future widebody fleet will be..
According to you…
The 777x won’t exist…
The a350 1 is too small for Tim’s future 380 replacement..
I eagerly await your reply.!!
It’s up to EK to figure out! Hah.
@TC
Tim will just have to cut his cloth to suit his measure.
He also wanted a re-engined A380, but he didn’t get it — and life went on.
This article is quite interesting – https://www.flightglobal.com/iata-agm-2022/a350-1000-too-small-to-top-airbus-range-emirates-chief/149067.article
Here are a few of my possible interpretations:
“I don’t know what will happen” if the 777-9 “doesn’t come”. — He may be getting concerned that 777-9 may not come, or may be too far delayed.
“And how are you going to fit two-and-a-half 787s with all this growth into a restricted field like Heathrow?” — There are very real slot constraints at a few major hubs in the world, LHR obviously, SFO, SYD (LHR expansion is a long way off, if ever). This problem doesn’t go away with growth as predicted.
“extrapolate to 2030 at 4%?” … “You need a bigger unit.” … “three-engined – A380 on the drawing board” — Airbus, you need to stretch the A350 beyond the 1000 or even better do the A380NEO plus.
Realistically only British Airways and Emirates made the A380 work, but for them, it really does work, a NEO Plus would work far better.
Upshot, even the 777-9 isn’t big enough for very specific airports/routes and TC has doubts that it will be delivered in time / at all. He’d like an option from Airbus as a backup. Farnborough could be interesting.
Boeing really need to get their act together, at the moment, it’s looking almost possible for Airbus to stretch the A350, certify it and get it into service before Boeing get the 777-9 into service. Stop messing around Boeing, get on with it.
“Stop messing around Boeing, get on with it.”
BA doesn’t have enough money to “get on with it”.
*********
On the A380, Clark is still (informally) pushing Airbus for a neo.
Under the circumstances, it surprises me that he hasn’t been purchasing secondhand A380s, seeing as they’re a goldmine for him.
A380 seems to have been just a handful of years ahead of it’s time. Those slot constrained airports matter and they’re not going to be resolved anytime soon.
Imagine an A380 built now, A380-900 sized (+100 pax over current 800) to properly use the current wing design, with the Plus winglets & mods (extra 4% efficiency) & current tech engines.
Only thing is that even if they were built now, you’re looking at a max number of frames around 150 to 200 tops.
Willie Walsh did say he’d take more A380s for British Airways, if he could have gotten them for a decent price (cost too much to change interiors on second hand aircraft as Airbus offered so many different configurations).
Perhaps IAI would be up for modifying a few existing second hand frames to a -900 Plus NEO standard (wishful thinking, certification would be a nightmare).
TC has missed his chance, the A380 line is gone, it won’t be back IMHO, I do think he wants a bigger A350 from Airbus.
As it turns out, if Airbus had offered a stretch A350 a few years ago, I’d say they could quite possibly beat the 777-9 into service.
“get on with it Boeing” is more of a mind set than money, focus on the 787 and the MAX, really push to get things fixed … get back to solid engineering rather than being a financial product, the money will follow.
@ JakDak
I’d love to know Emirates’ pre-pandemic load factors on their 777ERs.
An A350-1000 at 100% load factor can carry the same number of passengers as a 777-9 at 90% load factor…and the A350-1000 can fly further.
We’ve already seen that the A350F can carry 109t of cargo.
I think that Airbus is pretty happy with the A350 as-is. Tim Clark will just have to maximize the use of his A380 fleet on bulk routes, and put up with smaller aircraft on other routes.
On this entire subject: I certainly agree with you that Farnborough may be VERY interesting.
JakDak:
The A380 was never going to work, only a few airlines that the load factor worked and no matter how good the engines, bigger size mans more load factor.
I do disagree for who it worked for. Qantas did fine with it as well as Singapore (who bought some of the last ones and retired the Dr. Peters 5).
Its the lack of flexibility that even a 777 has that was its death knell.
@ TransWorld
The problem of slot constrained airports still exists. LHR is not going to get bigger (3rd runway) for some time, if ever. As TC says an A380 needs two and a half 787 to replace it, there just aren’t the slots at LHR.
LHR is a useful case, as there are a number of “London” airports, LGW is the other big one, also slot constrained & looking to add another runway in the face of a lot of opposition, I wouldn’t bet on it happening.
LTN is planning another terminal for it’s single runway, STN has already tried to expand, but very strong local opposition has made that impossible so far. SEN is too small, it can only handle up to 767 size aircraft & it’s a bit too far out of London.
It’s great that 787s have opened up DSA to MCO, but tourists want to fly to London, not to Manchester or Birmingham (SOU & BOH too small although closer) and then onwards to London.
It would be like if New York was completely full and you have to fly to PHL for New York.
SFO is nearing runway capacity (possibly as early as next year) it would then likely become a Level 3 Coordinated facility.
So you get your 787 flight from DSA, but if you’re wanting to go to SFO & it’s full where would you be flying to … FAT or SMF?
There clearly is a role for much larger aircraft, it’s not a big market (around 150-200), but it does exist.
British Airways could have done with a few more 380s as they could make them work, Emirates we know about & yes Qantas also made their’s work, as did Singapore & to a point Lufthansa.
A380 just slightly ahead of it’s time. An A380 being released into service today with current engine technology & A380-900 sized would have been about the right timing, but still only a very limited market.
It’s worth considering slots at many major airports on both sides of the Atlantic are gobbled up by oligopolies. Newcomers struggled to gain any worthy ones.
For now I’m sticking with my armchair hypothesis that our trans-national ruling
class decided some time back that there will be only one Western maker in the segment we’re discussing. I have no inside info to support that idea, but based on actions observable to all, it seems to fit.
I hope I’m wrong, FWTW.
I’m laughing. Many of you referring to Calhoun’s ‘moonshot for digital manufacturing’ will solve so many of their problems. All I have to say is look up Boeing and FAUB. It was the moonshot for the 777 and 777X. It was a failure and cost millions, yet it’s successful at Airbus, why do you suppose that is?
There was also mention that Boeing is hiring new engineers to help with certification work. Folks it takes years to understand and work in engineering certification, just hiring a person off the street and then tell them to go conquer doesn’t cut it. My comment earlier about the loss of senior people that help in the tribal knowledge to younger people can’t be stressed enough.
The same for working in aviation safety.
To your comment- the big divergence between what one reads in the press v. what one hears from those
working in the trenches is striking, to me.
This comment applies to fields other than the aviation business, I think.
To your comment- the divergence between what one reads in the press v. what one hears from those working in the trenches is striking, to me.
This comment applies these days to fields other than the aviation business, I think.
Sorry for my double-post; there is still no edit button for me, so I can’t delete it. I did try deleting my browser cache after reading Uwe’s
comment in another thread, but no luck here, so far.
This story explains the problems associated with taking the production/digital moonshot.
https://leehamnews.com/2022/06/13/migrating-advanced-processes-from-defense-to-commercial-isnt-a-cakewalk-for-boeing/
And as we saw with the 777, done right digital can work well.
Its a matter of resources and management execution .
Its being done as we write on the T-7A and MQ-25.
And another issue worth consideration:
You all remember the key teflon contamination of 787 wings.
“The internal FAA memo relates how, early this year, Boeing reported to the FAA that Mitsubishi Heavy Industries in Japan — which builds the jet’s carbon composite wings — had discovered contamination of the composite material during fabrication that could potentially weaken the bonding when two composite parts are bonded together with adhesives.
For example, when a stiffening rod is bonded to the inside of the wing skin.”
Nobody mentions this any more!
Did they find a solution?
Very nasty issue, that might explain the much delayed 787 deliveries: Apart from changing contaminated wings, there is no safe way out!
I mentioned this issue in the previous Pontifcations article below — see the posted link.
And it’s not just the wings — it affects the tail and certain fuselage parts, also.
And let’s not the issue with the titanium parts from Leonardo.
https://www.adn.com/nation-world/2021/11/20/faa-memo-reveals-more-boeing-787-manufacturing-defects-including-contamination-of-carbon-fiber-composites/
flying frog:
The issue is not new build, that is easily solved.
As overwhelming evidence mounts that Boeing will deliver built 787, then they have worked it out.
We may find over time what the answer was. Maybe enough inherent strength in the build they can ok it.
787’s are allowed to fly and as we saw with the shim issue. It was not that all of them had a problem, it was stacking tolerances with both shims and the fuselage that was at issue. Correct as they come due to heavy maint checks.
Anyone that follow aviation knows there are lots of ADs that compliance can be as much as 5 years out. I don’t always agree with it nor do I always disagree.
As EASA and the other AHJs have a say, that they are not putting holds on this indicates they are on board as well.
Yes I would like to know what the resolution was just as much as I do on the 777X and the door blowout, but that is tech interest on the fix not a concern for safety.
-> The issue is not new build, that is easily solved.
Any proof??
Well, historically – it’s always easier when building things, to build it right the first time, then it is to build it wrong, take it apart, clean out the old improperly used materials, prepare the parts for re-assembly and build it again – properly.
Especially when taking things apart. You have to make sure you don’t damage the pieces you want to re-use.
I would extrapolate this to explain the delays in 737 Max inventory delivery. Those coming off the line can be made properly and delivered. Those 450 that were sitting in inventory – aging by the day? Not so much.
I have a feeling that those 787’s that have to be carefully taken apart and re-worked are:
1) Going to take some time
2) Going to cost Boeing money
I also suspect that those 20 – 777X’s that are built and sitting in Washington are going to have to go through the same process.
What a mess.
On a side note:
My brother in law worked at GM for over 30 years. He tells me a story of the first Saturn’s that were produced, back in the day. I can’t vouch for the veracity of his claim, but apparently they made some 7,000 units and put the wrong fluids in the vehicles. When they figured it out, apparently, they just decided to send all of them to the scrapper, rather than fix them.
Frank:
I don’t know that they ever have build something right the first time!
But yes, taking things apart and fixing them is hugely costly. An aircraft cost so much its deemed worth it though Boeing had a bad time getting rid of the terrible teeens (and Airbus made massive changes after line number 17 to the A350)
You hope to get it right enough that the re-work is not massive (swing and a miss on the 787 and 777X!)
Cars? If you ruin something really expensive (engine and or trany) then yes you might scrap them. They are a lot lower cost than a LCA of course
Keep in mind that a large group of built MAX belong to Chinese airlines.
None of the changes to the MAX were of the magnitude that the 787 was.
It was in fact mostly software. Time consuming to write yes (two teams have to write their own versions) but not structural.
@TW:
“and Airbus made _massive_ changes after line number 17 to the A350”
You invariably have to overstate one side to make your claims a bit less absurd.
Could you please enumerate as to show us the massiveness of those changes?
Afair they reduced OEW by a couple of tons in a production step change. no rework.
Did the 788 ( starting with 10+t of baby fat ) ever meet its design weight? IMU the MkII 789 got anywhere near …
I want to acknowledge the criticism that was correct, I did not phrase this the way that was accurate.
I need to amend the “easily solved” statement. Sometimes its sort of right but not the reals specific phrase needed.
The fix for the built 787’s is straight forward (pun intended). Its a mater of checking each shim point and then adjust with the right shims if needed.
Its time consuming and tedious, but it what they check at least randomly (or maybe should) when they build them.
Its not like they have to put new fuselage sections on them, they shim them out to spec.
Thousands of hours spent doing that, Joe, I need a .003 here!
That is why Everett will be so valuable. Keep them busy for a long time and provide employment.
Or as a wag from my company said, we do it right because we do it twice! (he was talking about the non trained (and did not care) my company employed other than a few of us who not only cared but were good at our jobs, he in fact was a mechanic from remote Alaska waiting for his job to open up so he could go back to it)
@TW
How about the off-spec titanium rods? It’s like an open-heart surgery, so it looks like it has to tear it apart!
Pedro:
You tell me!
With what money would Boeing launch a new aircraft as early as next year?
Thank you for asking that.
I keep asking the question, but I get no (credible) answers.
BA has burned through $15B of cash in just 18 months, and it has $10B left — the end of the line is fast approaching.
The 787 production rate for the near future is a meager 2 p/m, and re-work on the 787 inventory will be time consuming and costly. Translation: the 787 won’t be buttering much bread for BA any time soon.
The 737 MAX is already being delivered (at low rates), and it also hasn’t buttered much bread in the past year.
Extra borrowing is off the cards.
Solution?
> Solution?
The American Way, of course: a taxpayer-funded, elite-benefitting bailout!
That’s if the other scenario I mentioned above is incorrect. Munny flows only upwards, these days: check out how the world’s fifty richest persons have fared since
March 2020.. more than doubled their
nominal wealth in that time frame. Odd.. “pandemics” seem to be real good for Business [scratches head..].
I also don’t see a concrete short-term solution.
Well we are not talking concrete here (probably see the Vegas World of Concrete show?)
Per Scott, I don’t see Boeing not being able to borrow money or fund the development as money comes in. The very high price of fuel means a lot of efficient aircraft will be needed.
When I was working, I could always borrow money. Have to see since I quit work (maybe).
Big companies alwyas have lenders eager willing and able. Its the way it works and there is a monumental amount of substance to that, its not going to change suddenly now.
> ..The >>very high price of fuel<< means a lot of efficient aircraft will be needed. <
Weren't you the guy who was just saying
a *couple of days ago* that inflation was low and contained, or do I have you mixed up with someone else?
https://www.newsweek.com/pawn-shop-owner-says-drivers-selling-personal-items-buy-gas-1717156
Or
The >>very high price of fuel<< means
recession; airlines in financial difficulties/bankruptcy etc.
@ Pedro
Exactly.
“When asked specifically about their future travel plans, nearly 70 percent of surveyed Americans flagged travel prices this summer are higher than last summer and many worry that the price hike will last for a long time. Among those who noticed the higher prices, two-thirds of them said the rising prices have impacted their travel plans. Flight seems to be the most affected part, with 31 percent stating they will be using alternative transportation instead of flying.”
https://skift.com/2022/06/15/anxious-americans-now-say-higher-prices-impacting-summer-travel-plans-new-skift-research-travel-tracker/
Remember: all 777Xs can be canceled without penalty, as can most MAXs, and some 787s. An interesting way out for distressed airlines…and a potential nightmare for BA.
When you borrowed that money, lenders looked at your credit score, yes? They usually do. When you go for a mortgage, those with better scores, get better rates – as you show an ability to repay the loan. The worse your credit score, the more in interest it will cost you, as the risk to lenders is greater, that a default will occur.
Same with the corporate world. That’s why you have bond rating agencies. That’s what happened with the 2008 ARM scandal. They were packaged and sold as AAA, sure to be repaid, low risk investments. Everyone like’s those. Everybody bought them.
But they were high risk. Good chance of defaulting. Should have been rated lower and charged a higher interest premium and thus becomes a lower percentage of an investment portfolio.
There are those out there willing to take on high risk investments, but they charge a premium and the terms are onerous. These aren’t stupid people. Boeing tried to sucker some investors recently for $30 billion in equity at between $250-300 a share.
The money laughed and walked.
So the people who hold all those bonds NOW (the $55 billion) put terms in place to make sure that they get paid. Kind of like a poison pill (you’ve heard of that? To avert a hostile takeover?) that makes it unpalatable to the borrower to take on more debt.
“OK, we’ll loan you this money, but IF you go out and borrow more, which risks our funds AND your rating get’s downgraded, you’re going to have to pay us more”
So yah, Boeing can probably go out and run up the old TransWorld Financial Service credit card ™, but chances are that they’re going to pay for it. More…for it.
Frank:
All the financials are true, sort of.
Its how an entity(ies) loaning to Boeing assesses the risk.
I had no assets (well other than my job and wife and I was not going to sell her!)
I had a condo lost in the 80s, but my credit score was good as I had been a good boy for 7 years (well 18)
Corporations are assessed differently and play by different rules.
Boeing is going to get a heck of a lot better interest rate than I could.
Ford put all its assets up to get a 20 billion dollar loan and they were going down like a rock. Even the Logo. They did get the loan and you have to wonder what a car factory is worth if you are not making cars? Or a Logo.
Boeing got 13 billion dollar loan at the flip of a switch. I don’t see that changing.
So I recently quote the BA financials for 787 deferred production balance information (I just love parsing financials…) and on reflection, something struck me as odd.
For context, prior to 2018, IIRC – the accounting block (The total number of aircraft BA expected to sell for that type) was 1,700. Then it got dropped to 1,600. Then it was further downgraded to the current 1,500.
From the BA website, here is the order book:
https://www.boeing.com/commercial/#/orders-deliveries
There are ~1,000 in service, with ~500 ordered. There’s your accounting block.
Now, from the last 10-Q:
“At March 31, 2022, $8,901 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 $4,670 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.”
So Boeing is going to make a margin of about $18 million an aircraft (not sure if this includes fixed costs, but I digress) on those last ~500 aircraft they have on order, to lop $8.9 billion off the DPB.
(not sure if it’s a great idea to let airlines know your margin, but then I am really digressing)
They are also saying that they expect to sell another 260 Dreamliners in the future, to zero out the remaining $4.670 billion (assuming the same margin).
A new freighter variant would incur further DPB costs.
Are they talking about people jumping out of the 777X program and into a 787? Can the market really bear an addition 260 wide body aircraft? Who needs these, who hasn’t already ordered them?
“Who needs these, who hasn’t already ordered them?”
Perhaps they still think that China is eagerly looking forward to placing more orders at BA.
Or India.
*************
$18M per remaining 787? That’s a total of $9B — spread over many years — and that’s supposed to keep the wolf from the door…?
Don’t confuse cash with accounting.
$18 million is the margin they make on an aircraft. For instance;
Those 115 Dreamliners they built have already been paid for from cash bond sales. A portion of that is also deposits and PDP’s. IIRC, after reading around a bit, that makes up some 30% of all cash taken in before sale of the aircraft. So 70% of the sale price is still to be gotten from customers. That’s the money they are going after.
Margins come into play when profits are calculated for accounting purposes, to tell investors, regulators, banks – how profitable your company is. Boeing may be actually making less on those 115 because they’ve been sitting there, accruing interest over the past year. That interest expense eventually has to be paid for and it’s cash given out and accounted for each quarter.
Where and how BA moves the cash, allocates it to each program, along with the fixed costs (remember – there are huge buildings involved with require maintenance, insurance, utilities and taxes) which haven’t earned BA a penny in South Carolina for the past year, because there have been no deliveries.
But until a sale is completed, only then are amounts totaled, dollar values from Deposits (Liability), Cash & Inventory (Asset) are moved around and off the balance sheet and into the Income Statement accounts like Revenue & Cost of Goods Sold.
Until then, they keep everything in the Balance Sheet.
Frank:
You are missing the payments made on an aircraft when its ordered and the payments that ensue as its reaches its various stages of production.
As for the accounting block, that is weird stuff with program accounting. It does not mean that Boeing simply turns off the 787 production when they reach it.
Yes the 787F would take investment but if its built into the aircraft, its not that huge.
I have not seen wholesale cancellation of 787.
As for production? 767s and A330s are being retired and often turned into Freighters.
What the demand is goes back to where the world is at but in theory, that continues to grow and you need both new and replacement aircraft.
So, we are in major uncertainty (I am making no predictions on where it goes). I was shocked in the last oil crisis that aircraft were going out the door like hotcakes.
Clearly there are aspects of the calcs on more fuel efficient than I though, but then I am (was) just an engineer not a financial whiz.
So I put a ???? as to what happens this time as its not the same as last time. I can say its possible as last time away they went.
And while Boeing shot itself in the foot, at rate 1 in Charleston for 787 they can adjust that up if it proves to have a better market or hold until they have the sales
JAL has a bunch of 767s to replace and others have needs so……
@Transworld
“As for the accounting block, that is weird stuff with program accounting. It does not mean that Boeing simply turns off the 787 production when they reach it.”
No. It also doesn’t mean that they will reach that number, either. The accounting block is an estimate of how many aircraft the company thinks it will sell.
If they thought they would sell more, why not keep it at 1600?
Deposits and PDP’s are classed as ‘Unearned Revenue’ and are a liability item on the balance sheet. It’s a cash in/out account, until revenue recognition (an aircraft is delivered and the sale is complete). They have nothing to do with Margins.
Gross Margin is Revenue – Cost of Goods Sold.
Deposits are held by producers to;
1) Show customer earnestness
2) Partially pay for bills along the way
When a sale is completed (aircraft handed over) and the airline makes the final payment, only then can the margin be calculated. You have to look no farther than the 737Max and the 787 programs to see why. Both require extensive re-work, which is running up the bill on every airframe.
At that time, a series of journal entries are made;
– The Unearned Revenue account is zeroed (for that one aircraft, call it a sub-account)
– Inventory is decreased by the amount of value that has been put into the aircraft
– Cash is increased by the amount of the final payment
– Revenue is recorded in Sales on the I/S, the entire purchase price of the plane (sometimes some companies have discounts that are shown, other times not)
– Cost of Goods sold is recorded as an Expense
A margin is born for all to see
Side note:
It’s entirely possible that the value of Inventory that is brought into COGS is greater, than the Sales amount. Then you have a loss. But that amount can be held back in Inventory, which is exactly what BA did with the 787. When the whole battery issue messed up early production, IIRC – the DPB ran up to $26 billion.
A lot of that was re-work, done on aircraft to get them up to snuff, for delivery. But instead of taking the loss then and there, they rolled those amounts into the DPB and said we’ll kick the can down the road.
Whoever was in the C-Suite at the time, didn’t want to lose their bonuses…
Frank:
No I don’t know why they put the accounting block at 1600.
And yes they might not reach it (just like Airbus never reached the A380 accounting block for the Free Lunch Aid) and the secret blocks for the A330 and A350.
I think they will but then that is an educated guess as nothing I see says we will see another 787 class aircraft to 20 years.
-> “No I don’t know why they put the accounting block at 1600.”
Haha. But you know BA can sell 2500 copies …. because it’s a nice number plucked from the air??
For a less sanguine view of Boeing’s state see latest newsletter from Richard Aboulafia:
https://richardaboulafia.com/june-2022-letter
Cheers for that – interesting to see how Aboulafia has really gone from one of the most ardent Boeing promoters and Airbus bashers out there to being incredibly critical of Being’s every move.
In fairness, I really do think he has a point when he says: “[I recommend people who haven’t been paying attention] read my December 2019 letter. In it, I wrote, “In 2020, [Dave Calhoun] will choose either to be a fantastic nine-month CEO, or he will stay on, becoming a potentially disastrous multi-year CEO.” Now, a brief update: he stayed. That’s really all they need to know.”
With every single programme slowly getting back on track, Scott’s view seems to be that things are starting to look up. Which in a way, they are. But really – they’re just getting back where they should have been from the beginning. Keep in mind – they have three active commercial airplane programmes (with the 747 and 767 effectively wrapping up or wrapped up already), and all three of them have been in deep trouble for a long time now.
I.e. BCA is still in damage control mode. Very necessary, of course, and it’s good that it’s starting to bear some fruit.
But in the meantime, Calhoun and his team are still taking long-term decisions in ways that don’t seem much different in style and motivation from the last few decades, and I think that’s where the problem really lies.
See e.g. the 787 FAL decision in favour of SC, the next HQ move for 100% political reasons, etc.
I think the HQ thing is overrated. Chicago was a ghost facility with no where near the number of HG types that were obligated to be there. The CEO and board etc just flew in for the meetings. At least its honest now.
Cat just jumped ship to HG in Dallas so its not just Boeing. And Cat has one product line and its built in the MidWest. Weird.
The rest is all too true though I don’t remember RA being a big Boeing roooter, could be wrong.
I never had any hope for Calhoun, clearly he was the problem along with all the other bad CEO of the last 30 years.
“The rest is all too true though I don’t remember RA being a big Boeing roooter, could be wrong.”
To be honest, I haven’t been following him *that* closely over the last five years or so, so I’m not sure how new this change in attitude is, but back when the 787 was launched and then (eventually) the A350XWB, he had a bit of a habit of touting how great the 787 was while moving the goalposts of what Airbus had to do to make the A350 a success.
That did leave quite an impression, so it’s curious to read his statements now.
anfromme:
I always found RA interesting and sometimes a big miss.
But he truly did nail it on Boeing.
Its just I never had any hope that Calhoun would be transformational.
Its like a Galapagos turtle running at Pembleco. Its not in the DNA.
I can be cautiously optimistic that they may resume deliveries of the 787 soon, also that they will find way to conquer the certification issues of the Max10 and 777X.
But I am NOT optimistic that Calhoun and friends will ever successfully launch and execute a new clean sheet commercial airplane program. Everything I know of recent history and have read of their business philosophy points against this. The GE management philosophy is to cut costs to the bone and divert all the savings to the shareholders. Calhoun wouldn’t launch a paper airplane without some fantasy story that it will cost half as much as last year’s paper airplane. Twenty years ago the pixie dust was supposed to come from the “global supply chain”. This time around the source is “digital design & manufacturing”.
> Twenty years ago the pixie dust was supposed to come from the “global supply chain”. This time around the source is “digital design & manufacturing”. <
And with no possible downsides (from that company's POV) in either case.. glad you aptly called it
"pixie dust". #should be fine, this time
There's something much bigger going on, I think.
John:
That is why Calhoun needs to go. You are right, if he magically had money to spend again it would all go to share buy back (that worked out well) and dividends and nothing to product.
> also that they will find way to conquer the certification issues of the Max10 and 777X.
I think they will on the former, at least, by legislative means in all likelihood. But if your aging
products are *there via waivers* and the like, while the other guys keep making better stuff- even
if marginally, like the assorted Neos- who’s really in a better spot? Boeing is reminding me
more and more of the motorcycle industry in England in the early 70s.. Triumph and BSA.
Bill7:
While I agree fully Boeing is way behind, who makes something better than a 767F?
Air Frames have reached a limit and it was only engines that changed things (excuse or not, Calhoun is right there, there is no proven magic in air frames right now, just incremental clean up and CF wings that allow a smooth airflow)
You are also right, Boeing keeps it up and they will indeed be the British Cycle Industry of the 60s acualy (Honda was nipping at their heals then)
And lets not forget Lucas, Prince of Darkness!
I had a 71 Honda 750, it made the British stuff look like the junk it was (I got to rid one one time, 60 mph was a challenge and I applaud the guts and skill it took to do 100+ at the Isle of Man races!
” And lets not forget Lucas, Prince of Darkness!
Sounds like someone who had dealings with 1950s-60’s British Autos, sportscars, etc.
I had for two years a 1957 MGA- and thats about the most polite thing I can say about brit electronics, and Brit SU carbs or that era. Of course that was a few years after Ford had started to recover from the Fix Or Repair Daily era, and the
Olds 88 and Chrysler Hemi and the Chevy 283 was ascendant.
Bubba2:
I was around the edges of it and did some work on SU carbs, what a mess of a system.
But the Brit bikes and cars were still around and the owners had nothing good to say about the electronics!
So is it the 737MAx-8 that is *currently* being delivered, and the 777-300?
I feel like the pro-Boeing argument is, at present: “if every single event falls Boeing’s way, they’re gonna do OK- maybe.” My take is closer to Aboulafia’s, though his is too histrionic for my taste.
Strange times..
Corrections and contradictions (fact-based only, please) are welcome.
Bill7:
There are some 777-300ER white tails. Its the 777F that is in production right now.
MAX-8 and -9 are being delivered. -7 and -10 are in certificate process and I believe the -7 is close.
Also 767F along with the 767 2C is being built.
Do you all remember when Clark canceled the entire order of 70 A350’s in 2014 and claimed that Airbus changed the specifications (increased power and range) without consulting him? the real reason was that Boeing was about to launch the 777X with his input. I bet you he regrets that now.
“I bet you he regrets that now.”
That’s putting it mildly…
Not to worry: with the accelerated delivery of his A350s, he’ll have a year to play with that plane (2 per month) before 2025 comes. He can then decide to pull the plug on his 777X order — penalty free — if he so wishes…assuming that BA doesn’t ax the program before that.
Jose:
Who knows what TC really thinks. He changes his mind daily.
Remember how awesome the new and improved Trent 900 was? 7% fuel economy improvement over the GP7000 at the wave of his magic wand.
And then we heard the horror stores how much a mess it was and…… you never heard a peep out of TC
From smallest to biggest Airbus NB
FG: The Airbus A321XLR is of interest to Air Baltic in the longer term, according to the carrier’s chief executive Martin Gauss …
https://aviationweek.com/paris-2019-airbaltic-sees-a321xlr-ideal-transatlantic-flights
On the subject of BA potentially raising capital via a new equity issuance:
It should be noted that BA’s market cap last Friday was $80.94B. Raising $20B (for example) to fund a new program would therefore cause a 25% dilution of existing capital. A dilution of this magnitude is unheard of for an established large company.
To entice demand, BA has to price its shares at a discount (15-20% min.) to market price.
I would say that the probability of Calhoun diluting the stock is next to zero for any reason, and the likelihood of him doing this to launch a new program is less than zero.
He would issue new equity only under dire circumstances, some existential crisis, ie, facing immediate collapse.
John:
Calhoun would dilute the stock in a heartbeat if he could get away with it, the stupidity is trying to sell it at a huge premium when that is not supported.
He could raise money by selling stock at $100 a share.
Of course that raise question why he bought it at $300 a share (or whatever it was)
Of course that would not stop his soon to be (hoping) successor from doing so.
Whether or not Boeing has access to $15 billion to launch the NMA program is a moot point. If Boeing were sitting on pile of cash at this moment Calhoun would give it to the shareholders in dividends and stock buybacks, he wouldn’t invest it in the product line.
Go back to Jan 2020 when Calhoun became CEO. What was his first act? He borrowed $11 bil and used $6 of it to pay the dividends. This was with the Max grounded and in crisis mode, and with Covid knocking at the door.
John:
That is the sad truth. Calhoun needs to go before Boeing has a chance.
As I recall they were going to spend 13 billion on Dividends but that got cancelled when they started sniffing after government money.
I think that all went by the wayside but will not swear to it. He did try for sure.
https://www-cnbc-com.cdn.ampproject.org/v/s/www.cnbc.com/amp/2020/01/22/boeing-ceo-says-it-will-keep-paying-its-dividend-despite-max-crisis.html?amp_gsa=1&_js_v=a9&usqp=mq331AQKKAFQArABIIACAw%3D%3D#amp_tf=From%20%251%24s&aoh=16558612363053&referrer=https%3A%2F%2Fwww.google.com&share=https%3A%2F%2Fwww.cnbc.com%2F2020%2F01%2F22%2Fboeing-ceo-says-it-will-keep-paying-its-dividend-despite-max-crisis.html
https://leehamnews.com/2020/02/05/consultant-to-boeing-cut-dividends-invest-in-new-airplane/
Feb 2020 he borrowed $10.7 bil and paid out $6 bil in dividends.
I agree that Calhoun needs to go.
Actually, it was 8.2 bil in dividends, the fourth dividend payment was made after the article was written.
https://www.streetinsider.com/dividend_history.php?q=BA
Memory was they were going to and then changed their mind.
I do not see a March 2020 statement that the dividend was paid.
Hmmm, actually even the Boeing website indicates a dividend payment of $2.055 bil in March.
https://investors.boeing.com/investors/stock-information/?section=dividend
I stand corrected then.
Easyjet
https://seekingalpha.com/news/3850090-easyjet-to-buy-56-airbus-a320neo-aircraft
“Budget airline easyJet (OTCPK:EJTTF) said on Tuesday it plans to buy 56 Airbus (OTCPK:EADSF) (OTCPK:EADSY) A320neo aircraft and convert an order of 18 A320neo jets to A321neos, Reuters reports.”
…and this is just before Farnborough. They didn’t want to save it for the big show? Maybe Airbus doesn’t need the press?
Yes, I saw that order announcement this morning — interesting timing, indeed.
Perhaps Airbus has Tim Clark lined up for some spectacular headlines in Farnborough…who knows? He may have wanted the recently-announced accelerated A350 delivery schedule as a prerequisite to jumping ship.
And, of course, we also know that Air India, Malaysia Airlines and Turkish Airlines are shopping for planes at the moment…perhaps Airbus has something lined op on that front?
I assume you read the full article ,regarding Jumping up a350 deliveries.
If you read to the end, you would see them taking delivery of their first in August of’24…
A far cry from Early ’23 as previously stated..!!
Only TC could turn a year and half delay into something positive!!
Yes, I read the article.
You saw that the delay was due to delivery glitches for seats, galleys and TV screens?
Looks like Tim is a realist.
-> You saw that the delay was due to delivery glitches for seats, galleys and TV screens?
Exactly! Not surprised media (biased?) mostly left off that piece of information in reporting.
So many times I heard AB doesn’t have production slots for more orders => the orders has no way to go but BA blah, blah, blah.
Ahem.
Well – not having production slots isn’t a bad thing. It shows scarcity. When something is scarce, it’s costs more. Remember when toilet paper was thought to be scarce? What happened to the price? Antiseptic wipes? Masks? People made a killing…
I would say that Airbus is using the demand of the A320Neo family to be able to charge a premium price for the aircraft (even though, in the article, Easyjet states they got a good price, due to a 2013 agreement), but working towards the 75 per month ramp up rate.
In the article it also does state that deliveries are from 2026 to 2029.
I guess customers are willing to line up and wait, when you have something good to sell.
Frank:
Airplanes are not flexible like car produion.
Airbus has contracts for each aircraft and they are obligated to deliver at the price they sold for as long as the buyer comes up with the money.
Airbus like Boeing over sells and then juggles the cancellations and even negotiations with previous obligations. In fact they started the over selling.
One of the keys is locking into an aircraft type. If Airbus wants to snag a Boeing customer then they have to adjust their pricing and provide support to convert.
True market share only takes place over time in the industry. The right term should be sales share.
Its a harbinger of the future not the current reality.
And if the World goes into recession takign the rest of the world with it, then Boeing looks pretty good and Airbus has huge numbers of white tails.
Yes I would rather be Airbus but I also would not ramp up to 75 a month. 50 looks like a long term sustainable and longer term you will see the A220 take the A320 market over (more so with the 500 but the 300 bites on its heels)
“Airbus has contracts for each aircraft and they are obligated to deliver at the price they sold for as long as the buyer comes up with the money.”
On the flip side – airlines and lessors (who are 50% of the purchasers) are also obligated under the contract to purchase those aircraft they signed on the bottom line for.
“True market share only takes place over time in the industry.”
https://www.investopedia.com/terms/m/marketshare.asp
“Market share is the percent of total sales in an industry generated by a particular company. Market share is calculated by taking the company’s sales over the period and dividing it by the total sales of the industry over the same period. This metric is used to give a general idea of the size of a company in relation to its market and its competitors. The market leader in an industry is the company with the largest market share.”
“And if the World goes into recession takign the rest of the world with it, then Boeing looks pretty good and Airbus has huge numbers of white tails.”
Really?
You base this claim on what?
Let me offer a rebuttal with this:
We just came through a mini-slump, with the pandemic, where air travel was shut down. Some airlines went bankrupt, some sought protection, many got bailouts.
Who came out of the mess first, Airbus or Boeing?
Who is in a better financial position, Airbus or Boeing?
Who’s aircraft are sought more, Airbus or Boeing?
Who has a better management team, Airbus or Boeing?
Who is building a 10 billion Euro war chest for future down turns and who spends money on buybacks and dividends, Airbus or Boeing?
Who had more white tails during the last dip, Airbus or Boeing?
Who still has 250+ narrowbodies and some 150 widebodies sitting around collecting dust, costing money – Airbus or Boeing?
Who is in a better position to borrow money from lenders, if/when a downturn hits, Airbus or Boeing?
Going forward from today, any downturn in the market, will hurt Boeing far greater than Airbus. Boeing has debts and obligations from before the pandemic, that the company is struggling to deal with. Ramping up deliveries, getting aircraft to airlines and getting paid full price for them and putting money away for a rainy day – is the way to go.
I can assure you, Airbus has people smarter than me, looking at the economy, looking at the health of their customers, looking at the amount of money they are currently pulling in and how much money they are getting in the future, looking at how much more in demand their aircraft are, over the competition…
…and they have come up with a plan.
Boost production. Save money. Sell our winners.
On a side note:
As you pointed out, in previous posts – there is a chunk of money given to the OEM’s up front, to secure aircraft production slots. If airlines start walking away from deals signed, say for delivery of aircraft in 2026-2029 (like our friends over at EasyJet), not because Airbus can’t deliver, but because airlines don’t take the aircraft – what do you think happens to that money?
You might say, it’s the same for Boeing. Except that Boeing has $53 billion in deposits given and less than $10 billion cash on hand – ergo, they spent all that money. Along with another $55 billion they borrowed from lenders and still owe.
Do the math:
$53 billion + $55 billion = $108 billion in cash given to Boeing by customers and lenders
$10 billion (Q2 estimate) cash/convertible’s + $80 billion in inventory (which includes a DPB + tooling for all 3 programs, which are not converted to cash) = $90 billion
Who again is going to weather a downturn better?
I worry Air India can’t wait!!
Uwe said: “..The real existing Boeing would have killed off the C-Series as fast as possible ( without causing war with Canada.)”
Agreed. Hey, is this a Great Country, or what?
“Buy it to destroy it!”
😉
Well I am going to get a million dollars any day now.
Anyone can invent aliens and tin foil-ism but the reality is that Boeing did not buy the C series and no one knows what would have happened if they had.
I understand back in the 60s people swore they could but then the LSD wore off and that was that.
Both Boeing and Airbus knocked back Bombardiers intial ‘deal they were offering’ so they looked to open negotiations with China
Thats when Trudeau stepped in and blocked any deal with China over IP and industrial transfer concerns and it seems pushed a new $1 deal with Airbus to make it happen and retain the industrial footprint in Canada.
I dont think Boeing was even offered the same deal and I think thats when Boeing decided payback was required to protect their Max 7.
Warning: **Not_alt-reality**
Boeing abandoned the talk with Bombardier!
https://www.theglobeandmail.com › … Boeing abandoned C Series talks weeks before US duties imposed
https://www.theglobeandmail.com/report-on-business/boeing-bombardier-c-series/article36699916/
Dead links or behind paywall.
The main item of what I said is true .
The last part was what ‘I think’
The Airbus deal ‘was announced’ after the Boeing anti dumping petition filed
Deals are often in negotiations long before the final announcement and the Bombardier – Boeing ( fruitless)negotiations would have been much earlier too
This source mentions various rescue discussions in 2016
Wikipedia -‘n April 2016, Bombardier reportedly requested a CA$1 billion aid package from the Canadian Government.[64] The Government then offered an aid package without divulging the amount or conditions imposed, though some media reported that the company initially rejected the offer.[65] In February 2017, the Government finally announced a package of CA$372.5 million in interest-free loans for the company, with the programme to receive one-third.[66] By July 2016, Bombardier Aerospace set up the C Series Aircraft Limited Partnership (CSALP) together with Investissement Québec.[67]’
There are those who refuse to admit fantasies they dreamed up.
It’s summer 2017.
-> Bombardier Inc. and Boeing Co. were closing in on a deal this summer brokered by Canadian government officials before the American plane maker abruptly pulled the plug and walked away, people familiar with the matter say. The negotiations were designed to prevent an aerospace trade battle between Canada and the United States and could have seen Boeing take an ownership stake in Bombardier’s C Series aircraft. Instead, after the talks broke off, the United States imposed huge import duties on the planes and Bombardier struck a trans-Atlantic agreement with Europe’s Airbus SE in a deal that will change the face of the global aerospace industry …
After weeks of high-level talks that the Canadians felt were going well, Boeing International president Marc Allen phoned Canada’s Ambassador to the United States, David MacNaughton, one Saturday morning in *August* to say Boeing was breaking off discussions, said the people, who spoke on condition they not be identified.
Farnborough (did I spell that right?) could be interesting, indeed.
Hey Trans: while we’re talking about “tinfoil” and such- tell me more about the “low inflation” we’re
experiencing (see my provided link).
Thanks!, from a reality-based commenter, who is always open to that pesky stuff once called “evidence”.
Bill7:
I did not say we are experiencing low inflation. What I said was there is context and what is the inflation for the last 30 years?
The jump is from a ridiculously low point not added on top of a high point.
When we bought our house (1998) we got a screaming deal at 6.25%.
House interest rates early in the week were 6%.
Gas was $2.50 for how long?
What I am saying is put it in context, we have ups and downs. The pain of bad times stands out more than the good times.
So the reality is that fuel going up if its a real issue is going to result in less driving, shift to economic cars vs Pickup and SUV.
And the State of Alaska blew all its oil money and now its getting restocked.
Otherwise you would have to subsidize us because the only real economy up here is Oil and Government (3 Major military bases) as well as management of the 70% of Alaska the government owns.
The people I feel sorry for are the poor who have good issues, most of us are not affected.
> The people I feel sorry for are the poor who have good issues, most of us are not affected. <
I do not fit into the category you call "us", above.
Nor do most citizens of This Exceptional Nation..
To be clearer: Immiseration of the Many is not
an aberration; but rather, the [tiny, corrupt, defective] Ruling Class's goal.
You'll figure it out.. eventually.
Adding: in my region (Central California Coast) gasoline prices have more than doubled since the Biden regime came into
power. To speak of what those prices “should be” is inconsequential, because
three bucks a gallon is what already very financially stressed (and dependent on gasoline, as most Amurricans are) citizens are used to
paying. Now that price is around seven bucks per gallon..
Well see how it goes.
#shouldbeFine
#pootinsFault?
Bill7:
We are getting off topic but this also has a major if not massive affect on the Aviation mfg industry.
In 2005 we bought a diesel as fuel prices were getting high, as I recall that topped out at $4.50 a gallon. Last time we hit $120 a barrel airlines bought aircraft to gain efficiency which I found to be a surprise (I did not think that they gained that much efficient for the cost of new aircrat)
Remember fuel hedging?
So yes, a major factor here is the Soviet Union attack on Ukraine. A subset of that is the EU jumping into the big waves at Kaneohe Bay (been there as there as a spectator and its scary) Hawaii and becoming dependent on Soviet Natural gas and to some degree oil.
So, what is your answer? Not griping, but how much do we subsidize oil? We have not heard from our EU friends but they pay as much per Liter as we do a gallon (they have to get the money for the social programs someplace)
Less flying and driving means less environmental impact does it not?
I do not pretend to have the answers. Like you I am more than old enough to have seen this play out over and over again and memories of gas shortage of 73 (or allocation mess up) gas at 50 cents a gallon mid 60s.
That puts gas at $5 a gallon. 3.75% inflation since 1960.
What you refuse to acknowledge is that were had an artificial low starting point and our dollars went a long way the last 5 years.
And you blame one administration when factually most of the economy is setup by the previous administration for at least its first 3 years.
Trump was insanely luck and hosed up the one crisis he faced (Covid). Good news was others snuck in vaccine programs and at least we had some mitigation.
Did you know 90% of China was vaccinated (granted its by an inferior vaccine).
I am seeing auto starting to drop off Pickup and SUV now and shift to more efficient vehicles. My diesel publications show farm equipment sales have dropped off dramatically (a leading economic indicator)
Like reality, a spot look at a situation gives you a false picture of the average. A low point is not valid and neither is a high point.
I can remember 20% interest rates under Carter and when they came down under 10% it was like the dawning of the Age of Aquarius.
Did you predict 3% house interest rates?
We paid ours off early so I am not sure what our real interest rate was. We gave up a heck of a lot to do so.
Others do jumped into the Prime Mortgage debacle and bought high and thinking it would never end and there was the 2008 crash.
I made a career out of being level headed and not basing my reconditions on black swan events. I was rarely wrong.
An engineer cannot afford to let emotions rule. That is why I look at this situation and see a blip not its this forever. It too will change.
Dukeofurl said, on
June 20, 2022: “Not when you have $15 bill of unused credit line that hasnt been tapped.
You keep forgetting that”
Actually, good friend Duke, I didn’t mention the financial angle at all because it was *not necessary
for the soundness of my argument* WRT Boeing’s future viability. Even with adequate funny-munny Boeing’s looking ultra-sketchy, is my take. See my contention below, if you like.
next..
That comment from @DoU was directed at me — though he didn’t bother to specify that. The indentation (which some commenters don’t seem to understand) is commensurate with the message being directed at you — hence the confusion.
Incidentally: some commenters don’t have much grasp of economics/finance…though they don’t realize that themselves 😏
Bryce:
We fully agree, some people do not have any grasp of economics or finance.
Some support what they say with details about how and why and other just post.
As I live (lived) in a technical world I like facts and data not mindless posting and speculation (that is why many of my responses are supported with what I am seeing, its called analysis, and I grant I can be wrong.)
As I recall, I once thought I was wrong and it turned out I was mistaken! That was a real letdown.
Thanks for that, Bryce. I think we both like clarity.
Bryce said, on June 21, 2022: ” @ DoU
Perhaps BA should just go ahead and tap that extra credit: the resulting rating downgrade would finish the company off, and put an end to the uncertainty.”
That would be true as can be, if we lived under the system our Ruling Class say we live under: “free-market capitalism”, according to them.
Notice how that same tiny class squeal like pigs
and run to Uncle Sugar when their own actions
precipitate a crisis (like the one coming to you)..
Nah.. we live now under capital-F Fascism, for which the selfsame Rulers will put one in jail (or much worse!) for saying..
How’s it goin’ with all those “vaccines”, anyway ?
Are ya quadruple-vaxxed yet, for your Security™
and Protection™?
I’ll continue to say F-No! to the BioSecurity State, Thank you very much.
Moderators , do we have to read this stuff which appears to be outside quite a few guidelines:
Obscenities
Going on tangents regarding policy and strategy;
Going off-topic generally
Nationalistic attacks
Obscenities? Go look at what the Creel Commission did in laying the groundwork for World War I, and the HUAC did, post World War II.. I get your larger point though, Friend Duke: my comments are “out of step” with Our Fascist Times.
and that’s cool, it’s super-cool. I can be arrested for WrongThink.. now.
These are rules of civility that apply here.
Duke:
There is only one moderator.
So, another analysis on the 787 restart
https://seekingalpha.com/article/4519520-boeing-787-flies-out-of-dreamliner-crisis#comment-92670866
Some of the claims made:
In total, Boeing expects to incur $2 billion in abnormal production costs of which $780 million has already been incurred and the remainder will mostly be recognized by the end of 2023. In total, the current estimate of the Boeing 787 costs is $5.46 billion.
Keeping the current market value and base market value in mind, the Boeing 787 inventory still represents $16.4 billion to $17.6 billion in revenues.
So, even compared to a good year the inventory would be worth around 25 to 30 percent in terms of revenues. That’s a huge amount, and it also represents 120 aircraft for which Boeing did not receive final delivery payments. Following typical pre-delivery payment patterns, this would result in an estimated $5.6 billion to $6.9 billion due on delivery
What should be kept in mind is that the final delivery payments are not necessarily a pass-through to the free cash flow, or in other words, you will not see Boeing 787 free cash flow jump by $5 billion to $7 billion once all aircraft are delivered.
While this story is positive, I do think that investors should take note of some things. The first thing is that while there might be up to $7 billion due in final delivery payments, one should not expect a sudden jump in free cash flow. The inventory unwind will take time. There will be an initial ramp up in unwinding and it is expected that the unwind will be completed in 2024, that is also the timeframe on which you should see things improve but on a quarterly basis you will not see major jumps even though the inventory unwind is happening. Furthermore, part of the delivery payments will be offset by abnormal production costs and customer compensations.
For profit margins, one should keep in mind that delivery resumption of the Boeing 787 will not result in improvement in the margins as Boeing will be recognizing a breakeven margin on the Boeing 787 program.
Isnt when a new plane is complete , rolled out and painted it passes out of Boeings inventory.
Even if the customer doesnt take delivery that month, under normal times theres various reasons for that, doesnt the accounting category change to to ‘cash on hand and other easily marketable items’, meaning the planes can be sold/have a customer.
Im thinking ‘inventory’ covers stuff in production still or the supplier has made it and Boeing has paid for it ( to keep them in business) but delivery to Boeing hasnt happened . I can think of 737 fuselages made by Spirit as a category there but there must be others.
I seem to remember GM in its old days used the ‘cash on hand and others’ category for its huge pipeline of cars completed but not yet on the dealers lot. Back them keeping the production lines going at a standard rate was valued over all, and if demand slowed then ‘money on the hood’ was the go to way to keep them being delivered to dealers.
Ahhh the bad old days !
I’m still hoping my good friend Duke will finally start commenting in a dialect of English or American-ish that we can all parse with relative ease.
So far, though, he goes in the same round bucket as Trans. it’s too fatiguing for me..
Next..
Rule 3.No attacks or criticisms about grammar, spelling or sentence structure…. Absolutely verboten
https://leehamnews.com/comments-by-readers/
Who says it’s an “attack”?
I see nothing more than an expressed desire.
Sigh. Sales is recognized when the title is changed hand, from car to property to …
The post was about the planes built by Boeing but not yet delivered …from the start of assemblies or parts to FAL and the end stage when they are between rolled out the factory but not yet delivered to customer to fly away.
Frank was going into detail over what value is given is to inventory
Table 3 in the 1st qtr results
‘Cash and marketable securities’ down from $16 bill to $12 bill
While ‘inventories’ is almost unchanged at $79 bill, up from $78 bill
Advances and progress billings is $52 bill- which points to the payments for planes under order or started build.
To answer your question Duke, everything stays in Inventory, until the sale is completed. This also includes development costs. On the Liabilities side, all progress payments and deposit amount remain in that account, also until a sale is completed.
To your point; advances are $52 billion. Money they got from airlines, right? BA doesn’t have $52 billion in cash, because they spent it on stuff to make the planes.
It’s all about matching revenues and expenses (which are Income Statement items), so that a ‘truer’ picture is reflected in the financials.
An example;
Airbus recently secured an order with Easyjet. (We’ll just throw out some random numbers). Let’s say the order is worth a total of $3 billion. At signing, Easyjet had to put down 10% or $300 million.
Delivery for those aircraft are in 2026-2029, 4 to 7 years out. I’m guessing that Airbus hasn’t even turned around and plunked down any cash with it’s suppliers for any parts for those aircraft. Perhaps some things haven’t even been ordered yet. Airbus may not even have the employees that are going to make those aircraft, under employment.
That $300 million they got. If it got recognized now, on the income statement, it would be a lie, wouldn’t it? No work has been performed, no services have been rendered, nothing has been EARNED. It would make the financials look good, but it would be false. So by rule, that money get’s ‘parked’ somewhere, waiting…
Likewise, in a couple of years, Airbus may have to pay for stuff they ordered and give up some of that cash to suppliers. But maybe they don’t get anything in return, yet. Maybe they get some parts and they sit waiting for a couple of years in inventory, essentially collecting dust, until installed on the aircraft. Those amounts also have to be ‘parked’ somewhere.
Which brings us to the ‘Deferred Production Balance’.
When a ton of money is spent on developing a new plane, what is a company actually making? It’s making an ‘Asset’. All the engineering, all the labour, all the testing, all the flight test vehicles, all the fixtures – it all culminates with a certified commercial aircraft ready for sale.
Let’s say it cost you $10 billion. Then you start producing aircraft for sale Jan of next year. All of 2023 you make and sell 360 aircraft at $100 million a pop. There are no snags, so your Cost of Goods Sold is 80% of the sales price, or $80 million.
So you have:
Revenues: $36 billion
COGS: $28.8 billion
Margin: $7.2 billion
Then you have your other expenses, which are not directly related to the production of those aircraft, like sale & marketing, general & admin costs. Say it’s another $3.2 billion.
Earnings: $4 billion.
Now, you’ve spent $10 billion to develop the thing, right? But if you were to expense the whole amount in Year 1, you would have a loss of $6 billion. That’s not really representative of the situation, is it – because in Year 2, you’re going to use that same know how, that same technology, that same ‘asset’ to make more aircraft in Year 2 – and subsequent years.
So what do you do?
Well – you take a portion of those dev costs, and expense it to sales of aircraft in Year 1. You ‘match’ a fair portion of those costs, to those sales? You do the same in Year 2 and so on, until that number is zeroed.
It’s all about matching. It’s like a farmer buying a tractor for use on the farm, that he will get 20 years of work out of. He depreciates a bit each year (as defined by asset classes) against his revenues.
But revenue is recognized, along with the appropriate expenses – when the sale is completed and the customer takes delivery, in the BA/AB world.
@ Frank deserves a weekend for two in Hawaii, a cash prize, and a soft toy for that explanation 🥳
It won’t have helped some entrenched readers, but still…
It’s interesting that some commenters can write so clearly- even if necessarily at length, for their topic-
and yet others can’t string a couple of sentences together in the same clear way..
Thanks very much again for your comments, Frank.
Mom was a school teacher. It was drilled into me at a young age. I owe her much…
Frank:
My mom was too for a couple of years. Sadly she was not able to drill spelling into my head though she got a pretty good engineer out of it!
Frank:
Something I keep in mind on the balance is that yes, Boeing will loose money on the 787.
But say a 787 cost 100 million to build (lets not try to mix up the investment costs that would have made money on the 30 billion they spent!!)
Through all the up front factors in and each 787 due to the delays costs Boeing 120 million.
They do not make money but they also do not loose that money, aka break even.
Breaking even is better than loosing 120 million each.
Granted that is lack of management to get there but that is the big picture for Boeing in the board endorsing that incompetence .
So delivery all those 110 x 787s is not going to put Boeing in the black but will put it less in the red. Same with MAX and 777X (stay tuned on that one!)
@Trans
Sure – IF….those are the numbers. Do you know for a fact what BA sells the 787 for and what they get for them? If so – you are way ahead of financial analysts from all over, because BA does it’s best to hide that info.
Airlines themselves, try to figure out how much the competition is paying, so they don’t pay any more.
IMO – years ago, the meter started running on the amount that was spent on the program. The program is a loss, if at the end of the day, they don’t recover every single dollar spent.
Its a 30 yr program, maybe longer . that could well sell 2500 units or more
Your seeking alpha source on the financials was very informative and unlike the disastrous start to the 787 program this a relatively inexpensive hiccup affecting say 120 planes. The costs are a lot but not compared to the massive costs for the redesign in initial stages.
Airbus fines for its bribery done over decades well exceed the 787 ‘shims’ costings
787 program this a relatively inexpensive hiccup affecting say 120 planes.
ROFL!
IMU: the tolerance issue touches all produced 787.
All but the last 120 were delivered before the issue was noticed ( or could no longer be ignored.) i.e. a persistent manufacturing and quality control/assurance issue.
@Duke
“Its a 30 yr program, maybe longer . that could well sell 2500 units or more”
The best selling WB of all time is the 777, with some 1,700 units sold into service. Then comes the 747 with about 1,600, then the A330 with about 1,550.
The 787 has been in service over a decade, with 1,000 delivered.
In 2012, the 777 topped the 1,000 delivered mark for the model – with 423 in the backlog (sounds familiar?). It didn’t make another 1,500 aircraft for customers, did it?
There’s also another matter of 223 Freighters included in that number of ~1,700. The 787 does not have a freighter version, does it?
I’m sorry, but I think your projection of 2,500 units is wildly optimistic. Boeing themselves see another ~250 units being sold, as mentioned in their financials.
“Airbus fines for its bribery done over decades well exceed the 787 ‘shims’ costings”
I’m just curious, but in your expert opinion – at this moment, who is in better financial shape; Boeing or Airbus?
Also @Duke
“…this a relatively inexpensive hiccup affecting say 120 planes.”
Having looked at the financials and the recent disclosures by BA, let’s say that there is strong disagreement with this comment.
The 787 stoppage caused BA to trigger a $3.5 billion write off in Q4/21 – that is, they moved $3.5 billion out of Inventory (the DPB) and onto the income statement. Money that will not be recovered.
AS WELL, they stated that they expect another abnormal series of charges totaling $2 billion to be expensed, until 2023 – when they hope this mess will be cleared up.
And indeed, in Q1/22, they took another $330 million hit in abnormal production costs in the financials. I can post the link and the exact wording, if you like.
BA is in no shape to be throwing $2 billion out the window, after writing off another $3.5 billion. But if you think that this is ‘inexpensive’….more power to you.
On the subject of 787 rework:
I read just this week that ALL 787s have to inspected — and possibly reworked — for possible joint faults around the doors. There’s no particular hurry with this (for now), but it still has to be paid for by BA.
@Bryce and Duke
“ALL 787s have to inspected — and possibly reworked”
…and there is your $2 billion in abnormal costs.
@ Frank
Not just doors — the 787 also has other nasty gremlins:
“The problem with inadequate titanium parts from Leonardo’s sub-supplier MPS could affect over 1.000 Dreamliners, The Wall Street Journal reports.”
https://airinsight.com/boeing-787-quality-issues-get-a-new-twist/
This next link gives more info on the door issue, and other problems with the 787:
https://www.aviationpros.com/aircraft/news/21247591/faa-memo-reveals-more-boeing-787-manufacturing-defects-including-contamination-of-carbon-fiber-composites
Desperate times call for desperate measures: make up numbers … how many 787 can be sold?? Yahoooo
I agree with Duke, long term the 787 could sell 2500 units.
The 747 and the 777 were much larger, the A330 closer in size and sold 1500 mostly based on the 787 program management failures.
There is nothing in the works to replace it. The A330NEO does not do it. A350 is a 777 competitor.
There are a large number of 767 as well as A330 to replace.
Growth we will have to see.
I do disagree that the not delivered 787 are a blip, its another debacle though its not as bad as the original debacle, much more so than the battery debacle.
Frank , your wisdom on financials is respected .
However you have assumed there is only another 250 787s to be sold – based on the ‘program accounting’ number
As you would know its a moving number, its always larger than the number sold of course but it grows over the years as more orders are confirmed and in pipeline
The initial 787 program accounting number was much lower
https://leehamnews.com/2011/10/26/boeing-sets-787-accounting-block-at-1100/
Expected to sell over the lifetime of a plane project and the number expected for accounting purposes in the immediate future are different things.
You would be wise to put ‘accounting block’ in the Leeham search function to improve your understanding of this feature of Boeings financials
For a plane program that “could” get 2500 orders, it’s strange that there haven’t been that many orders lately…n’est pas?
Surely the recent delivery hiatus didn’t affect the plane’s stellar reputation — so where have the orders been?
Net orders in 2021 were *minus* 11.
Net orders so far for 2022 stand at *minus* 6.
Looks like a lot of cancelled orders: every month of the delivery hiatus that goes by, another 10-12 units can be cancelled free of charge…
@Duke and Trans
I haven’t assumed anything, in reference to the 787 future sales. I pulled that number from the Boeing financials, themselves, who came up with that number.
Please direct any comments about your dissatisfaction with the estimated total amount of aircraft produced by the 787 program to the CFO of BA.
I can find you an address, if you like. If you send it by post, it may take awhile if the mail is forwarded from Chicago to the Washington DC area.
@Bryce/Frank
IIRC BA was basically “forced” to dial back its 787 magic accounting black box block from 1,600 or so to 1,500 in the last year or two??
Why? Because its backlog is falling like a stone thanks to orders canceled (covid/delivery pause).
Recent years BA B787 net orders:
2020 / 2021 / 2022
20 / −11 / −6
BA might not want to reduce its accounting block, but it had no choice!!
There’s no meaningful net orders in recent years.
As is typical, I have *no idea* what my good Friend Trans is on about.
Next..
Bill7:
I will pass on a comment as it would be well out of bounds.
Granted I am confused by various run offs into WWI etc.
> An engineer cannot afford to let emotions rule. That is why I look at this situation and see a blip not its this forever. It too will change. <
Somebody help me parse this (is it worth the trouble?).
Trans: do you get to put a P.E. after your signature?
My slightly-informed guess is that you don't,
and if you don't, you're not an Engineer.
Anyone want to make odds on the answer?
Depends on state law- if you are licensed and have been working in field- no problem – some states may prefer you label yourself as active or retired.
But one can be a degred engineer and recognized as such such as BSME,BSEE etc and recognized as an Engineer in most states or companies.
One can get a PE at the same time as graduation, or several years after.
Most states have uniform rules somewhat depending on area of education, experience, and related qualifications AND passing the
mostly standardized test and periodic advanced studies depending
I was an active one for over 30 years and simply did not renew my license after retirement. I never did sign as such, but my company page had a PE on it depending on program . .
In Europe (and elsewhere), you’re only an “engineer” if you have a university degree in engineering or a related science.
The next level below that is “technician”, which applies to those with a higher-level certificate in engineering from a technical college (non-university).
Below that is “mechanic”, which applies to those with an intermediate or lower-level certificate in engineering from a technical school (non-university).
In California, trash collectors are referred to as “sanitation engineers”, so as to be politically correct. In that context, the use of the term “engineer” by some commenters here may follow a similarly informal trend.
Bryce:
In the US there are provisions for rank advancement based on experience. I had 35 years (roughly) in my field and I was an expert in 5 fields (Power generation, Switch-gear, Sprinkler systems, HVAC (which is many fields in one) as well as VFD/Electronic GPU and UPS (not the Cargo outfit) – Fire Pumps, fuel systems.
Realistically despite the title, I never was an engineer as I would define it in US terms. I had Union Journey level skills in all those fields.
I referred to myself as a field engineer without any letters. In some ways more a super tech as I was the best in the State as well as some areas stretching back to the East coast on equipment we had.
I worked directly with lettered engineers on the projects, I wrote the equipment specs for the projects as well.
I got many accolades from he lettered engineers because what I knew and what I could bring to the table to make our requirements were met vs generic experience that did not apply. It was a collaborative experience for the most part.
A few I had to go toe to toe with because they were simply stupid despite the letters. Large projects I had no control over I had to clean up the mess and see if I could make the mess work (mostly I could Kludge it but some never worked).
We had one pneumatic vacuum system (think a big shop vac) the engineer totally messed up his calcs on (very few engineers really understand pneumatics and I did and do because I worked with them for all those years)
Finally it came down to me telling the Manager, I am taking that air device and the hose over to the Vehicle Maint building where we have the duplex 20 hp compressors and I am going to prove one way or the other just how much compressor horsepower it takes to support one of those things and the hell with the theorized calculations)
The two 7.5 hp compressors had failed (that was his calc) and I found that the device took 18 hp to support by direct test (the Eddison method)
They then had to put in a duplex 20 hp compressor system in addition to the already installed 7.5 duplex. And we won’t even get into the air the non air use air dryer used!
The engineer gave it a good faith effort, but he got tangled up on free air flow and compressed air flow and the reality was that the device mfg has put out a number (in CFM) that I could convert to what it really needed and I bet the boss money that one 20 hp would support it.
I always thought Field Engineer described the position, technician was a good one.
And yes, I did sanitary engineering work in my youth and I had the fish guts all over my body to prove it! (55 gallons drum in Valdez AK full of fish guts). Not being stupid the next time I put on my whole rain-gear set of coat and bibs and Sou Wester and stayed clean!
You have to keep in mind the EU came up with the insane ISO9000 garbage that was nothing more than the right paper in the right slot and the quality control was all paper, you still could produce garbage, it just was meticulously proven garbage.
Some US Wag came up with the saying that ISO9000 was a European plot to destroy the United States. How true.
My company started in on it and then we wound up hiding all the equipment they said we had to test.
Kind of like a slide rule, you know what values you should get and if they are not in the ballpark you know you did it wrong.
You do remember slide rule don’t you?
And thank you for the opportunity to expound on my career. Its most fun (and its all true and I was also a grunt laborer, pilot, truck driver, house builder, Gunner on a Survey crew.
Okay, so you’re not an engineer — thanks for the confirmation 👍
Bryce:
I am glad it made your day. Seeing as how much a mess the EU has made of its world, using EU definitions for my position is not only non applicable but a joke. So empty phrases are to be expected.
So lets talk PID statements and super cool and sub cool and digital scrolls and compressor air flow.
For the rest of the group, I have repeatedly stated I was an engineer without letters attached to the title.
I was told I was the engineer, it was not a volunteer position. It was accept it or get fired. FedEx always called me engineer. You don’t argue with your client.
FedEx and my company both had the position listed as Engineer (acualy it read Technician/Engineer). Two pages of what the job entailed.
I did not even get a raise out of it (instead when I told them I was going to decline the position I was told my old position as a technician (US) had been terminated. So yes I took it, I had a mortgage to pay and a wife to support.
I always made sure to let the lettered engineers I worked with that I had no letters, it was just a title. I was and am most humble.
I make no claims to grandeur though clearly I was as good as many engineers in some very specific fields (that is why I wrote specifications for equipment, they did not know the application and FedEx wanted specif answers and results, that was my job, to ensure they got it and they did)
And for people form countries like Belgium, kind of like pointing fingers at the US for slavery and ignoring the atrocities committed in the Congo (yes I follow that stuff).
@ TW
Thanks for that convoluted rant on a whole variety of irrelevant subjects — it was highly entertaining.
However, none of it changes the fact that you’re not an engineer.
Bryce:
This is truly funny. Me thinks you need to go argue with FedEx!
All I got was a tittle with no salary increase.
Its a hoot to see you arguing what we can do in the US (well what FedEx did).
For all our downsides we do not need an instruction manual like the EU does to open a bottle of beer.
Me? I always made fun of my tittle though I ticked FedEx off on occasion. Cannon fodder was really a better description.
And having got accolades from Engineers with letters (unlike you) I will take the compliment.
Clearly you are jealous of an American who has had 6 different careers and successful at all of them. Classic case of an insecure individual (no I was never insecure though running a Catwagon down the Ice Cut surely had me puckered up)
Rather than list your capabilities you try to cut others down. Sad, very sad.
@ TW
More (truly weird) hot air…but it still hasn’t turned you into an engineer 😏
Bryce:
And you should go talk to FedEx
Those are just the facts mam.
And now I have to tell another story, sigh (if it flies like a duck, quacks like a duck, has duck legs and duck beak as well as duck DNA is it not a Duck? ala an engineer? )
Ok, we had a million dollar cooling upgrade to the Sim. I was the FedEx engineer rep (again FedEx not me, I was just a tech promoted into a position that had degree requirements that could be substituted for experience, FedEx specifications not mine and the FedEx manager felt I had that, shrug, go argue with FedEx)
So, the project engineer puts in a buffer tank in the cooling system (so the AC compressors don’t cycle)
I look at it and tell FedEx that the piping system bypassed the Buffer tank and it was doing no good.
But, I could only tell FedEx that, I was directed not to discuss install busts with anyone other than them (being a good engineer I complied). FedEx in turn passed that up the chain of command.
Then the Mechanical engineer responded to FedEx (he was a former Journey Level Plumber who did go onto get his letters and was a certified engineer) note this was FedEx not me.
Sign off was something I could never do, if an engineer sign off was needed (sometimes yes sign off and sometimes no depending on the type and magnitude of a project). That is what you get the letters for an then an Attorney if you are wrong!
FedEx then tells me Bill the Mechanical Engineer wanted to meet me over at the Sim, hmmm, yes sir, when?
So Bill shows up and he asks, what do you think about this surge tank.
Bill I am not allowed to talk about it, all my input has to go through FedEx. So he calls the Dept manager, can XXXX talk about this with me, I see the concern and he knows this system like the back of his hand, I would like his take. He hands the phone to me, FedEx says, yes, only this subject and only to Bill, yes sir.
Bill, if you look at the flow line, the flow bypasses the tank and does not flow through it. Clearly its not what was intended but the way the Project engineer drew it, that is the result. Its doing nothing.
Bill says, I agree, I just wanted it from a second source, I thought I was nuts when I looked at the drawings when we got the word down from Memphis and I wanted to be sure it was that way on site.
Bill: What do you think needs to be done.
Me: Simple would be to put a valve in that bypass line and force it through the tank.
If we want to be able to isolate the tank for any reason, the 3 valves, one to force it through the tank by being closed and two open, one going into the tank and one out of the tank.
3 is better than one as it gives us options to keep running if the tank has an issue, in any case, we have to shut the whole system down, drain it to do the work.
Bill says, lets go talk to FedEx, see what they want to do, good spot!
Me: Thank you, its a treat to work with someone who has real hands on, you know I am under some serious restrictions about what I can talk about, hate it has to be this way but we both know the project engineer is incompetent and we are stuck with the structure as that is how FedEx handles things.
We went on to fix many screw ups that way.
So, happy to be called a grease monkey, its honorable work and I could go from the exotic to working on sewer systems as needed.
Someone has to keep society working and its people like me that do it.
Otherwise your toilet backs up and then the hollering begins.
Yep, I have an honorable degree in Sanitary Engineering, the real thing with poo and all.
Not pleasant but anyone can diss people, it takes a real human being to get in and do the work that is needed.
So, from Laborer to Sanitary Engineer and back, I should have a medal or two and all I got was, dang you are good.
If nothing else its nice to get a pat on the back. Bill was great because he had hogged out his share of sewer lines when he was a plumber.
There is someone like me in Belgium that keeps your sewer pumps going and I hope you are grateful.
@ TW
Your rants get longer and longer, and ever more convoluted…but none of that is ever going to make you an engineer.
Why not just accept that you’re a mechanic? Much easier than trying to create an alt reality avatar…
Wondering if anyone can name a program Aero,Navy, Army, Space, Commercial since the McDac virus infection that Boeing has met schedule ( flight, delivery, in service, etc ) within 2 years of contract such as sales, delivery, first flight, etc and/or within less than 100 percent over budget or contract.
How many fingers , hands, and toes will I need to keep track?
It’s easier to name a program or manufacturer that’s had a program or or product on time or on budget.
That’s zero.
Surely you remember the delayed A330 neo program, the delayed A350-1000 program, even the A320 XLR which had it’s first flight this week is expected to be delayed certification.
Two of the Airbus helicopters military customers want to return their choppers in service , and that’s not even covering their major civil machine the Super Puma a very popular model, was decertified for a few years because of a serious gearbox issue.
These things are a feature these days not a bug.
Size matters.
Airbus keeps its delays short and sweet.
Boeing lets them grow and fester to the point where they cause severe financial / logistical burden.
Duke:
Accurate, you do miss the A330 1.5 (have to differentiate it from the CEO) then 2.0, 3.0, then 4.0 before Wallah, we get the A350!
And Norway comment that no matter how many techs we get, no matter how many spare parts we can never keep this turkey flying (NH-90)
And lets not forget the wondrous A400 when we compare Boeing work on the KC-46A.
Or German and France buy C-130 and Brits and Germany and how many others buy US Helicopters because they work!
Infighting on European Aircraft (two, they can’t even agree on one) and tanks (5?) Or Subs in dry dock (5). So it goes.
Germanys only choice on a heavy lift helicopter was between 2 US types as they are the only ones in the market.
Dont you remember the long delays the RAF had on its new C130J ( to replace the earlier C-130 models)
have you seen the long delays on the ‘improved’ CH-53K
It all makes the same point , everyone has the same problems or different versions of the same
@ Frank
Regarding the 127 787s in inventory, the only payment yet to be received by BA is the relatively small final payment by the customer. However, depending on which reports you read, only 9 787s have undergone rework, which leaves 118 yet to go — and, on all of these, BA is going to have to bear the costs of rework. For these frames, the rework costs have to be subtracted from the final payment made by the customer. And, until the frame is actually delivered, storage/interest/insurance costs also have to be subtracted. One wonders what meager amount will be left over.
Next up: some of the planes in the inventory had penalty-free cancellation rights, due to delayed delivery. We know that at least one customer availed of such rights. For any such cancellations, BA has to refund all money paid by the customer in question — which is a substantial amount. Such cancellations are still possible, and may be occurring or about to occur in view of the impending travel downturn.
Next up: new build 787s. Spirit AeroSpace has informed us that, for the near future, the build rate will be just 2 p/m. If we assume a — generous — margin per frame of $50M, that’s just $100M per month, or $1.2B per year.
Debt is currently $63B, cash on hand is about $10B, and annual interest payments are about $2.5B. So, it’s pretty clear that the 787 program won’t be doing anything meaningful to shore up BA’s finances any time soon.
Agree?
First of all congratulations to Frank and Bryce, they made this financial issue crystal clear!
And what we can see is not beautiful…
one additional point: Bryce says “annual interest payment is $2,5B”, this will go up pretty quickly as interst rates go North
Worse could come quick: BOEING debt is quoted BBB which is the last investment grade. The day it is downgraded to BB, the interest rate will go even further fast…
And BOEING stock might even go out of the DOW JONES (GE showed the way some time ago)
Thanks for the compliment.
You are correct regarding interest rates: BA has a number of short-duration bonds expiring in the 2023-2025 timeframe, and any debt rollover will entail much higher interest rates.
Similarly, drawing on revolving credit will entail paying the interest rates “du jour”…which are much higher than the rates BA is currently paying.
This company is staring into a financial abyss.
Flying Frog:
You got one thing wrong, interest rates are locked in (normally).
As for Bryce clarifiy9ing anything , phew, laugh of the day.
Frank does a good job of laying out the details involved.
I miss AP when he is gone, he has an amazing in depth knowledge. If any of this was simple any poster could do it.
Interest rates are usually locked in on fixed term investments, like loans and bonds, with a repayment schedule.
With lines of credit, the IR is usually variable, usually tied to Prime, the lending rate. For instance a Home Owner Line of Credit (HLOC) might get Prime plus 2. If lending rates go up, so does the cost of borrowing.
Could you imagine if bankers locked in a line of credit, say at 3%. Then you didn’t touch it for years. If interest rates were to shoot up, say to 5% – you could borrow money, cheaper than you pay for it.
Under that scenario, you could borrow at 3%, and turn around and put it in term deposits at say 4% and make 1% with zero risk.
Banks wouldn’t like that…
Line of Credit explined:
Business Line of Credit
Businesses use these to borrow on an as-needed basis instead of taking out a fixed loan. The financial institution extending the LOC evaluates the market value, profitability, and risk taken on by the business and extends an LOC based on that evaluation. The LOC may be unsecured or secured, depending on the size of the LOC requested and the evaluation results. As with almost all LOCs, the interest rate is variable.
I draw you attention to the final sentence:
*As with almost all LOCs, the interest rate is variable.*
https://www.investopedia.com/terms/l/lineofcredit.asp
For Duke:
Depending if the BA LOC is a revolver or non-revolver:
Revolving vs. Non-Revolving Lines of Credit
Non-revolving LOCs have the same features as revolving credit (or a revolving LOC). A credit limit is established, funds can be used for a variety of purposes, interest is charged normally, and payments may be made at any time. There is one major exception: The pool of available credit does not replenish after payments are made. Once you pay off the LOC in full, the account is closed and cannot be used again.
Once again, I draw your attention to the final sentence.
*Once you pay off the LOC in full, the account is closed and cannot be used again.*
@ Frank
As regards fixed-term (bond) loans, don’t forget what I mentioned above:
BA has a number of short-duration bonds expiring in the 2023-2025 timeframe, and any debt rollover will entail much higher interest rates.
Frank:
While I have worked for big corporations, they never let me into the CFO side!
I do know that houses (at least at one time) had variable rates as well as fixed. So someone that got a 30 year mortgage at a fixed would be locked in for the 30 years if they take that long to pay off.
I would guess big business has variations of that but I could be wrong.
As variables were pegged to inflation I would think those would be avoided. I had a Condo at a variable based on salary, the more I made the more I got. Dumb me, when we bought the house it was fixed. Never wanted to get into that variable stuff again.
A Variable pegged to inflation right now would be a killer when the cycle ended for one and was calculated for the next one.
“I do know that houses (at least at one time) had variable rates as well as fixed. So someone that got a 30 year mortgage at a fixed would be locked in for the 30 years if they take that long to pay off.”
A mortgage is not a billion dollar line of credit. It is a line of credit with, as the definition states;
“As with almost all LOCs, the interest rate is variable.”
Variables are not pegged to inflation, they are pegged to the prime lending rate, which is the rate the Fed loans money to the banks. If prime is 5 and your LOC is at prime plus 2, you are paying 7% on any balance drawn on the LOC.
If prime goes up half a percent to 5.5%, you are paying 7.5%, even if you took the money out when it was 7%. It always moves (hence the term variable) when the prime lending rate moves.
Each month, the only thing you pay – however, is the interest payment. You don’t have to pay against principle.
> First of all congratulations to Frank and Bryce, they made this financial issue crystal clear! <
Indeed- thanks to both of them.
The Nasdaq site is indicating a consensus earnings-per-share estimate of +3 cents for BA for 2022 Q2, and an annual EPS of -0.81 cents for 2022 Y.
To put that into perspective, let’s convert BA’s debt of $63B and cash-on-hand of $10B into per-share figures and we get (592M shares outstanding):
Debt: $106.41 per share.
Cash: $16.89 per share.
The current cash burn rate is about $10B per year.
Not much perspective there for funding new aircraft programs, is there?
“-0.81 cents” should read “-81 cents”.
Consensus has been wrong nearly each quarter these last two years.
Their analysis is nearly always BS
These highly paid analysts are just parroting the management hot air and they do not work on fundamentals. Reading Leeham news should be mandatory for these guys!
” Reading Leeham news should be mandatory for these guys!”
Of course- but I doubt if Scott is willing to pay for a rewrite editor to redo his news to one or two syllable words at 3rd or 4th grade
reading level. Or restrict posters to the same limits.
Analysts are currently in the process of revising earnings estimates and forward PEs DOWNWARD…so the picture above is set to become even bleaker.
And — indeed — for the past few quarters, BA’s actual results have been BELOW consensus estimates.
Since it doesn’t look like any 787’s will be delivered in Q2/22 (they have 7 days to get some out the door) and a glut of 737Max’s haven’t been flying out of Wash recently, I would expect that Q2 is pretty much going to mirror Q1.
Another abnormal charge to the 787 program taken, more cash burn.
Mind you, I haven’t looked at the Q2 order book – have there been an influx of orders of sizable proportions that would mitigate cash burn, with deposits saving the day?
BA had 23 gross orders in May, and 46 in April.
No official figures available yet for June, though Norwegian has firmed up an order for 50 MAX-8s (announced yesterday).
“Emirates Weighs New Airbus Order as Boeing Deliveries Drag Out”
“…Service entry for Boeing’s new 777X model has slipped to 2025, while Emirates wouldn’t get 787 Dreamliners until the same year at least should it hold the US manufacturer to a contract, he said.
““That’s kind of too late for us,” Clark told journalists in Germany on Wednesday. “This is why we’re getting a bit wary and we’re looking at the A350. We really only have one place to go.””
https://www.bnnbloomberg.ca/emirates-weighs-new-airbus-order-as-boeing-deliveries-drag-out-1.1782245
The BA’s very strong WB segment need reality check!
Is QR going to step up?? 🙂
Would EK rejig its order book again?? Back in 2019, there was a MOU for 40 A330. Desperate times call for desperate measures!
“Boeing sees supply chain issues lasting until end of 2023”
https://www.sharecast.com/news/news-and-announcements/boeing-sees-supply-chain-issues-lasting-until-end-of-2023–10050882.html
Calhoun is correct. People having been made redundant have found others jobs, the positions are hard to fill / train short term.
“Boeing has added to its board another executive with aerospace experience as part of the airframer’s settlement of 737 Max-related claims brought by two major shareholders.
David Gitlin, a longtime aerospace executive who now heads air conditioning company Carrier, is Boeing’s newest board member, the airframer says on 21 June..”
https://www.flightglobal.com/airframers/boeing-adds-gitlin-to-board-part-of-737-max-lawsuit-settlement/149095.article
Bill7:
The Air Conditioning field is highly complex and passengers, electronics and pilots all need to be cooled (more accurately, heat removed but most people things its cooling and we go along with them)
You have digital DX valves, digital scroll compressors, super heat and sub cool all electronically controlled now with processors and the same PID statements to control the process you have for flight controls.
As good a tech and engineer as I was those systems had me stretched.
Gitlin has extensive aerospace experience. Sigh.
Yea I worked 6 or 8 different job areas in my career.
Just because I started out as a grunt laborer and was a very good one, did not mean I did not have the brains to advance.
Actually it was fishing career (very young at age 10 to later teens) then Gunner on a Survey crew, laborer, truck driver, house builder, electrical and HVAC installer and eventually into mechanical/electrical/electronics repair. For the latter part I also moonlighted in power generation work.
Trying to follow all the bloviating re ‘ CAD-CAM ‘ digital design and assembly stuff posted here would lead many to believe that the t-7 project is a major ‘ breakthru’ of ” modern” tech, yad yada.
Sorry folks – take a look at the origional 777 ‘ computer aided ‘ design of about 30 years ago and then explain what is really new ( other than reduced use of massive IBM mainframes as to capability.
https://mura.org/websites/me39c.me.berkeley.edu/Spring97/Projects/b777/catia.html
” Workstations/Mainframes
Instead of producing drawings on reams of paper, designers store their work inside the memory of eight IBM mainframes. In the Puget Sound area, approximately 1,700 individual computer workstations are linked to the largest mainframe installation of its kind in the world, consisting of four IBM mainframe computers. This mainframe cluster also is linked to mainframes and workstation installations in Japan; Wichita, Kan.; Philadelphia; and other locations.”
> Trying to follow all the bloviating re ‘ CAD-CAM ‘ digital design and assembly stuff posted here would lead many to believe that the t-7 project is a major ‘ breakthru’ of ” modern” tech, yad yada. <
No joke.. Thanks for this informed comment.
if one even tries to search on 777 ” catia flythru” and similar plus one could easily confuse the computer generated video clips with star wars. And the 777 caiia was an outgrowth of similar design capability of the B2. Most do not realize that the 777 did not use a partial ‘ wooden’ mockup’ and also used computer aided ‘ jacks’ to ’round’ up the fuselage join which reduced the use- need of shims.
Plus the initial 777 layouts used computer ‘ plastic printing’ of some parts to check certain fit- interference issues. One such ‘ printed- plsstic ‘ part was the ‘ folding wingtip’ hinge- this in 1993-94.
How do I know this – wuz there on b2 and 777-
Still Does NOT make me and ex spurt on all related issues
and that was before the mcdac buyout !
I’d look to the Airbus design and testing processes as used on the A350.
Going towards more parametric design methods ( change loading or move items and the design software morphs the design to fit. Full simulation with modules switchable between sim and real hardware ….
location transparency, …
Major progress achievement is in the overall integration aspect.
IMU Airbus never had the module interfacing issues that bother Boeing on the 787 ( outlier: A380 wiring ).
Y’all might want to look up digital design.
Just a clue, its not CAD.
Bryce: .. and super-modest, too; he only claims
to be an expert in *five* fields..
#comicRelief
Bill7:
Actually if you count prior careers, its more like 8 or 10.
Humble yes, modest no. Most are lucky if they master one field. I got throwing into the deep end on all but the fishing and labor and was very good at them.
No brag, just fact.
> Boeing *has implemented* a Synthetic AOA (and airspeed) on the MAX-10 <
Can that writer provide evidence to support that claim?
Sometimes I think it's just a bot, meant only to send
honest people on endless Gish Gallops..
From the double secret classified site found with about 30 seconds of search via duck duck go
http://www.b737.org.uk/737max10.htm
” Synthetic AoA
Although the revised MCAS now has split vane monitor and Mid Value Select (MVS) input from the AoA probes, there are still only two probes on the aircraft so the FCCs do not know which one to trust in the event that one misbehaves. It is probably significant that this concern was raised by EASA and the Airbus has three AoA probes. EASA is not insisting upon a third probe but instead agreed to a synthetic sensor which computes AoA data from a variety of other existing sources on the aircraft. Boeing already uses synthetic airspeed on the 787 so this is achievable, albeit expensive and time-consuming. Boeing has agreed to introduce synthetic AoA with the MAX-10 and then retrofit it to the rest of the MAX fleet.”
Meanwhile- back at the ranch . .
Now that I’ve revealed this to the unwashed, will have to now work on terminating those readers – posters with predjudice . ..
Bwhhhhhaaaa Bwahhhhhh
“…has agreed to introduce…”
That’s the future conditional tense, since an expressed intention may not materialize; best case, it’s future perfect.
Our Star of The North, however, keeps referring to the implementation in the present/past tense — indicating an apparent conviction that the implementation is a done deal.
Fantasy presented as reality.
I’ve simply provided a link to how to describe the synthetic aoa and frelate its its previous use on 787. Neither I nor anyone else need to’ prove’ to you the current status, since you now have enough info to do your own search to/fvrom whatever source you believe is credible.
Searching on 787 safety issues and symposiums that more fully describe how synthetic aoa really works ( hint has to to with inertial navigation computers and capability ) should be enlighhtning”
Have a nice day,.!..
You might try boeing direcctly, the FAA, etc as to what status really is.
Or one could ask a commenter making an extraordinary claim to *support his assertion*, thereby establishing a number of useful facts at the same time..
” Or one could ask a commenter making an extraordinary claim to *support his assertion*, thereby establishing a number of useful facts at the same time..”
Once again proving that no good deed goes unpunished
eg ‘ is it an extraordinary claim ? ‘
BYE
Whats the fundamental difference between Airbus and its 3 probes and 737 and two ( other Boeing planes have even more)
Win a plushy toy if you pick FBW which enables the computer system to pick a winner when 1 of the 3 choices differs and continue without pilot input.
Boeing doesnt use that system, except for MCAS when it shouldn’t have due to incompetence in testing.
A bonus prize will go to the winner who also selects that civil airlines have a very narrow AOA operating range and its the artificial horizon thats used to establish the correct attitude of climb and bank
Looks like someone has forgotten — again — that failure probability in a system of parallel sensors scales multiplicatively with the number of sensors…and that multiplying fractions yields smaller fractions.
BRYCE below said” Looks like someone has forgotten — again — that failure probability in a system of parallel sensors scales multiplicatively with the number of sensors…and that multiplying fractions yields smaller fractions.”
Yo dude- suggest you take the time to read and learn just how the Boeing implemention of a ‘ synthetic AOA/sensor works BEFORE mixing 2 apples with a fˆg . In short, the synthetic AOA does not depend on any external sensor it is a modification- software -sompertized version of an interial measuring system eg inertial guidance. it does use initial- timely comparison of aoa and airspeed to interial motion and relative spatial position and gravity and velocity. Sort of like an apple watch that can measue all your motions relative to a known quantity such as center of earth. Would work in space. Thus once matched up with a known position- velocity, it can use that data to measure vector velocity and flight angles, etc. ( the proceeding is an OVERLY simplified explaanion. ) Near exact explantions can be found ith a little effort.
The MY point is the synthetic AOA is entirely independant of external sensors and after continuing inflight- takeoff automatic calibration provides a close enough simulation- match of aircraft vector velocities and angles – with NO outside connnections needed.
Thus your 3 similar sesorr comparison is not pertinent.
@ Bubba2
Yo dude- suggest you take the time to read and notice that my last message above wasn’t directed to the subject matter in your posts, but to a point raised by another commenter in the chain.
B2 its like pushing ‘water’ uphill to educate some clowns here – in the sense of making much noise but little sense
Its because they dont have the basic understanding ( maybe they sell insurance or something) nor do they want to learn from their misunderstandings.
thanks for your efforts as of course most readers appreciate when those with actual knowledge pass it on.
@DoU
“…its like pushing ‘water’ uphill to educate some clowns here – in the sense of making much noise but little sense”
That’s an excellent summary of your continued inability to grasp why EASA is mandating a 3rd sensor input in MCAS: basic control theory just doesn’t cut it with you.
Same for fuel cell propulsion: you gave us a recent epiphany, but it took a LONG time to get there 😏
“Thus your 3 similar sensor comparison is not pertinent.”
Merging data sources for fault detection/alleviation ( be they similar design or (vastly ) different ) also merges reliability aspects. complexity tends to reduce reliability.
(you also expand the work to show proper system behavior. reason why KISS and avoiding to mesh different systems is a relevant design metric! )
Interesting in context: the obscure A330 ADIRU (?Collins? ) bug and its fall through through the Airbus native system data filters.
counter to popular “bullshit bingo” believe by some here it is not a “just slap on” kind of change.
The facts are Boieng agreed to add synthetic AOA to the -10 per the EASA to get it certified.
So yes, that is reality, it will be done (it was done on the 787 so yes they know how to do it)
And its not the failure prone 3 that Airbus uses. You can and they have taken out all 3 AOA as well as Pitots.
So its more robust, Airbus should copy it.
Next think we know certain parties will start arguing the Sun does not rise in the East!
Even when it’s eluciated for him by four different commenters, he *still* doesn’t get the point about tense…
Bryce you are incorrect about the ‘3rd sensor’ for Max 737 required by ESAS.
They have re certified the maxes without it ( but of course the MCAs is back to what it should have been)
The Max 10 is the only Max model that they say their preliminary view requires a 3rd sensor of some type ( air speed ?)
Perhaps you could update us on the exact reasons for that model but not the rest
“The Max 10 is the only Max model that they say their preliminary view requires a 3rd sensor of some type ( air speed ?)”
IMU:
The MAX8/9 got the nod under provision that the still to be certified MAX10 would get a more fault tolerant solution (3vote, synthetic, whatnot .. and certified too ) and that solution would then be backported to the earlier certfied family members.
In that context Boeing not progressing with MAX10 certification makes sense in deformed way. ( upcoming deadline on mandatory “other” modern features makes this feet dragging a Skylla & Charybdis thing: fast talk cop out expected? )
PS: would it make sense to create a list of “TW facts” vs reality? There is so much wrong info in his saturation postings!
@ DoU
You left out an important quallifier — again.
The EASA has *provisionally* re-certed the MAX -8 and -9 under the condition that the entire MAX family must be retrofitted with a third sensor input à la MAX-10.
You really seem to be *very* badly informed.
Bubba2, Dukeofurl, thank you both for not being mindless fanboys! There might be hope for this board yet…
Uhh Bryce ?” @ Bubba2
Yo dude- suggest you take the time to read and notice that my last message above wasn’t directed to the subject matter in your posts, but to a point raised by another commenter in the chain.”
I noticed but in this system there is no way to respond directly to you or whom..
The 3 sensor comparison referenced-decribed is still wrong
Uhh bryce ?? ” That’s an excellent summary of your continued inability to grasp why EASA is mandating a 3rd sensor input in MCAS: basic control theory just doesn’t cut it with you.”
your problem is the use of the term ” sensor ” which infers a 3rd AOA sensor.
The synthetic AOA does NOT use a ” sensor ” unless you mean an intertial navigation system is a ‘ sensor ”
Please check the wording of EASA again
Thanks
DoU and I aren’t talking about different *types* of sensors: we’re talking about different *numbers* of sensors.
And you’ll note that, with regard to EASA’s requirement, I said “sensor input” — not “sensor”.
Please check the wording of the posts again
Thanks
Check the fit: https://en.wikipedia.org/wiki/Gish_gallop
That commenter almost never provides evidence
for his assertions, I’ve noticed.
> “*has implemented*” <, per our Alaskan friend.
Maybe he will provide some evidence to support
his repeated claim.
-> “It was, but there was a huge retirement wave that came with it that had nothing to do with CARES retention. *Airlines wanted their most expensive pilots to retire* to save on the cash burn and here we are coupled with a broken regional pilot system.”
https://mobile.twitter.com/jonostrower/status/1539671964079382528?cxt=HHwWgICjmc3fgd4qAAAA
TransWorld
I’ve seen you post in a couple of places how Airbus could be in a bad spot trying to ramp up to 75 and Boeing could be just fine at 30 per month, if a recession hits.
Have you considered the possibility that BA cannot make money at 30 aircraft per month? There is a huge entity behind the production facility, with enormous fixed costs – costs that don’t change if you make 1 or make 30 aircraft.
If you have a building and staff, that is built to make 50 of something, but yet you only produce 30 of something – you have a facility with excess capacity and is inefficient. You still have to heat 100% of the place, you still have to have lighting in 100% of the space, you still have to insure 100% of the space, you still have to maintain 100% of the space, you still have to clean 100% of the space, you still pay taxes on 100% of the place…
…and that’s just scratching the surface. There are all kinds of fixed costs that can be lowered by just allocating them over a larger number of units produced and sold.
You are hanging your hat on a big ‘what if’ scenario. Meanwhile, Boeing is dealing with huge ‘what it really is’ scenarios.
Frank:
Its an interesting point, but I do not see it as actually true.
Boeing has dropped 767 production to two a month (they may be at 3 now outside of the 2C airframe) and I assume they are making money.
I also assume there is a low production rate that Boeing breaks even on 737 and then below that looses money. They have gone to some very low rates in the past (not MAX related)
Renton is paid for and reality is the MAX is not that much different than the NG.
Its a better question on Charleston and what production they need to make money on the 787.
777F is down to 2 or 3 a month and they are making money on it (I assume again).
A good question in Everett is how you deal with the overhead form a underutilized factory.
Accounting wise it has to be assessed at the real costs but do you chalk it up to Boeing losses and not pin it on the two remaining aircraft made there?
Clearly Airbus does need to make 75 x A320 series a month to make money.
But no, I do not know for sure, I can make some ball park guesses but there is huge financial juggling going on as to who pays for what and how.
I did see that late in my career where what were formally support entities became stand alone (IT) and you had to get a pay voucher to get them to work on the bosses computer (I did my own work as their solution to my problem was to wipe it and start over and none of the 4 I managed were standard FedEx loads, they all ran building control software I managed myself)
When we changed versions then corporate would created an open ended voucher and they charged that but terminated it as soon as they deemed the job done (it never was but…)
If we needed a CAT 5 connection our department had to run it up to Memphis who in turn sent down the approval for a voucher to do just that install. Sure got to be fun.
“Clearly Airbus does need to make 75 x A320 series a month to make money.”
Did you happen to see the last quarters financial results from Airbus? They made 1.3 billion Euro’s on 12 billion in sales? They delivered 109 A320 family aircraft, during that period.
Here are the financials:
https://www.airbus.com/sites/g/files/jlcbta136/files/2022-05/EN-Press-Release-Airbus%20Q1%202022%20Results.pdf
Does it look like Airbus clearly NEEDS to deliver 75 a month, to make money, as you purport? Do you want to amend that claim, sir?
On a side note:
I see the word ‘assume’ in a lot of those sentences you make. It seems that assume very much in favour of BA in a positive light and Airbus in a negative light.
Airbus is making money. Boeing is losing it.
@ Frank
Why do you even bother?
Some commenters here (you know who) just don’t want to hear such things and/or can’t grasp what you’re saying. They just become entrenched in further ignorance the more you try to enlighten them.
You should know from various studies that a very large proportion of the general population has a very poor grasp of financial/economic topics.
@Frank
BA is falling behind its plan to ramp up production to 31/month. The program is still bleeding money. BA currently is still stuck with 240 MAX parked waiting for customers.
But, but, but … by late 2022 or early 2023, BA is able to clear them all, have money to repay debts due ….
Shrug.
-> “We are in a period of huge upheaval. Current single aisle market share slightly favors Airbus but its possible that that move to 75 a month gets cancelled as the EU falls into recession.
Boeing could be well positioned with their 30 a month (by accident)”
Q1 GDP change/ 2022 est. change
U.S. -1.5% / 2.3
Euro area +1.1% / 3.2
Only BA (your assumption) can find a low production rate to breakeven, but AB can never?? Wow.
> Boeing has dropped 767 production to two a month (they may be at 3 now outside of the 2C airframe) and I assume they are making money.
I also assume there is a low production rate that Boeing breaks even on 737 and then below that looses money. They have gone to some very low rates in the past (not MAX related)Renton is paid for and reality is the MAX is not that much different than the NG. Its a better question on Charleston and what production they need to make money on the 787.
777F is down to 2 or 3 a month and they are making money on it (I assume again). <
That's a whole lot of *assuming*, TW-and all of it falls in Boeing's favor. Why so,
given that company's obvious straits?
I think that the problem may be that certain commenters (still) don’t grasp the difference between revenue and earnings. They see money coming in (revenue), but forget to deduct costs. @Frank has explained that costs per frame are higher when the production rate is lower, but that doesn’t register with some.
The wonderful world of BA software — and quality control:
“The Federal Aviation Administration intends to require airlines to update Boeing 777 software because a previous software update introduced a problem with the jet’s auto-throttle system.”
https://www.flightglobal.com/safety/faa-to-require-boeing-777-software-update-due-to-auto-throttle-glitch/149116.article
On the increasing likelihood of a travel slowdown:
Reuters: ‘Perfect storm’ for airlines facing strong U.S. dollar and high oil prices
https://www.reuters.com/business/aerospace-defense/perfect-storm-airlines-facing-strong-us-dollar-high-oil-prices-2022-06-21/
Reuters: ‘High fares, rising economic worries could weigh on airline recovery’
https://www.reuters.com/business/aerospace-defense/global-airlines-narrow-losses-2022-outlook-improves-2022-06-20/
A Short while ago Duke said ” Dukeofurl
June 22, 2022
B2 its like pushing ‘water’ uphill to educate some clowns here – in the sense of making much noise but little sense . ..”
yep-FWIW several moons ago re AOA discussions, i made a copy of a document about 787.
“Introducing the 787
-Effect on Major Investigations
-And Interesting Tidbits
Tom Dodt
Chief Engineer –Air Safety Investigation
ISASI September, 2011
===
it is 57 pages long
And on page 41 we find an interesting page
787 Synthetic Airspeed
•Calculated from angle of attack and inertial data
-AOA –voted dual sensors plus inertial data
-Accurate Coefficient of Lift (CL)
-Airplane Mass from FMC -Validated after Takeoff
•Algorithm developed for enhanced stall protection
•Avoid displaying data known to be bad
-Loss of valid voted VCAS
= Display synthetic airspeed VSYN
-Loss of valid voted PSTATIC= Display GPS altitude
COPYRIGHT ©2010 THE BOEING COMPANY
Smith, 7-April-2011, ESASI-Lisbon | 41
++ I’m sure there are more completeexplanations- but the above is a good start.
Good evening :))
Dave (says he) sees a brighter future ahead:
“Boeing CEO Says the ‘Drip, Drip, Drip’ of Bad News Should Stop. Investors Don’t Believe It.”
https://www.markettradingessentials.com/2022/06/boeing-ceo-says-the-drip-drip-drip-of-bad-news-should-stop-investors-dont-believe-it/
On the subject of air freight:
Reuters: “Air freight demand begins to wane amid global economic shocks”
https://www.reuters.com/business/aerospace-defense/air-freight-demand-begins-wane-amid-global-economic-shocks-2022-06-20/
Dave: “The huge demand for freighters that was seen during the pandemic will continue, Boeing chief executive David Calhoun said and noted efficiency and sustainability are key to the success of the aviation industry as a whole.”
https://www.gulf-times.com/story/719761/Strong-pent-up-demand-seen-in-passenger-segment-ou
What would a “professional” salesman say? Truth, nothing but honest truth??
Doesn’t BA plan to ramp up production of 777F after 2023?? Oops.
-> “Biden’s gas-tax holiday: The impotent calling on the dysfunctional to enact the ineffectual”
https://mobile.twitter.com/liamdenning/status/1539713451571953665?cxt=HHwWgoCyjb_OlN4qAAAA
https://t.co/apHaLXuyJR
I have a BS in engineering but have never used it in my career. I am a proud FAA Airframe and powerplant mechanic (grease monkey) in you guys world. It pays more in my profession as an A&P and we laugh at the newbie engineers that write specifications that is garbage. Very many of my coworkers have engineering degrees.
Daveo:
Pretty much true in my case though maybe experience wise I could have had a BS in engineering.
But yea, not matter the tittle, when the dirty jobs were there to do I did them. A lot more fun than the suit and tie thing.
One of my major laughs was a newbie engineer who missed a 20,000 CFM fan with 25 tons of AC!
Uhhh guys, I thought that was supposed to go away, where are the cross links to that new 40,000 CFM fan with the 60 ton AC? Uhhhhhhhh
And he gave us a Pneumatics control panel to run the 40,000 CFM fan! I mean like they had not put in Pneumatic in about 15 years at that point.
Yes Eventually I converted it to DDC. As much as I loved pneumatic, the ability to monitor and adjust as well as program via a head end of a BAS allowed me to run a 300,000 square foot campus of 7 buildings.
“Independent review urges updates to FAA risk reports after Boeing 737 MAX crashes”
https://www.userwalls.news/n/independent-review-urges-updates-faa-risk-reports-boeing-737-max-crashes-3407234/
Remarkable: Exasperated Tim Clark strikes again!
“Emirates chief predicts ‘relief on both sides’ if 787 order parked”
https://www.flightglobal.com/emirates-chief-predicts-relief-on-both-sides-if-787-order-parked/149135.article
Analysis required of what the main points are and your ‘informed opinion’ …laughs.. on what the links mean
Cut and paste of stuff out of the blue is the lazy way
Translation:
You don’t like the sound of the headline, so you refrain from reading any further.
Yep…that’s a pattern 😏
It’s funny on the one hand some strongly opinionated (but lacking facts to support) insist the glass is half-full, as long as the horizon is extended to infinite (since BA can’t afford another engineering program ATM), the (potential) order book will grow to the sky; OTOH TC threatens to cancel, or to be more business appropriate, postpone its 50 or so 787 orders.
Time for TC to extract a pound or two of flesh.
https://mobile.twitter.com/SpaethFlies/status/1540598494049849345?cxt=HHwWgsC-td-Kp-EqAAAA
TC: [AB] sold out on the single aisles, [they’re] probably going to sell out on the A350s because of the demise of what’s going on at Boeing
It appears to me that Sir Tim is playing a long game, and because of that, what he’s saying
at this or that moment is not of *great* interest. Others here are better informed, though- this is just a casual view.
@ Pedro
Tim sees a 50-unit order of A350s coming from Air India.
He also knows that Malaysia airlines needs to replace 22 A330s, and that Japan Airlines is looking for 767 replacements.
Interesting times ahead.
Marrying 787 tech with 737 MAX’s 80s flight computer …. easy peasy? Lol.
Its nothing more than programming.
That was the beauty of DDC vs Pneumatics, if it did not work right due to the program, you could change it and fix it.
At the worst you could see what and where things were broke and had the right stuff to go fix it. Equaly when all the managers were hollering you could tell the dept head, ok, this is what is wrong and this is roughly how long it will take to fix it.
Its exactly what Airbus does when they fine a flaw in their programming.
And keep in mind, with the so called rule of 3, you have the same program in all SEVEN computers. If its flawed, it just repeats itself.
Boeing has two computers in the 737s that are each programed by different teams.
One of the subsets of the MAX tragedies was no one ever explained how MCAS got programed so lethally wrong in both computers.
” One of the subsets of the MAX tragedies was no one ever explained how MCAS got programed so lethally wrong in both computers.”
It wasn’t =at alternate power up-the AOA and computedr systems were switched from lef to right, etc. There was a very long discussion of that system a few years ago.
here are a few
http://www.boeing.com/commercial/aeromagazine/aero_12/aoa.pdf
https://theaircurrent.com/wp-content/uploads/2018/11/B737-MAX-AD-1107.pdf
https://www.faa.gov/news/updates/media/CAN_2019_03.pdf
http://www.ata-divisions.org/S_TD/pdf/other/IntroducingtheB-787.pdf
https://www.flightradar24.com/blog/wp-content/uploads/2018/10/2018-035-PK-LQP-Preliminary-Report.pdf
Can you load and run Windows 10/11 in a PC from the late 80s?? Haha.
https://www.satcom.guru/2018/11/737-fcc-pitch-axis-augmentation-command.html?m=1
> Its nothing more than programming <
Yeah, that bit made me smile, too. Sure, sure..
"Merely a flesh wound."
Whenever I see ten sudden comments from this blog in my inbox, I know who just woke up.
😉
Yes, I know the feeling.
Brace yourself: it’s *particularly* bad today 😒
Good morning to you too!
We are an hour behind the Great State of California and as I quit work I get up a bit latter and have a leisurely morning before I start into correcting posters who don’t understand aircraft!
Cup of tea, some toast, enjoy the sun a bit, you know the drill.
> So yes, that is reality, it will be done <
Sigh..
And Airbus giving intellectual property to China, investor in the Chinese government, why am I not surprised? Only from the EU
https://www.politico.eu/article/eu-champion-airbus-has-deep-links-to-chinese-military-industrial-complex-report-says/
Talk about bribing your way to success!
And we want to let Airbus have the secret sauce for the KC-Y for what reason?
Phew, good thing we skipped that debacle. Loose Lips Sink Ships
What secret sauce for Airbus on KC-Y ?
The final fitout for refuelling and to USAF specs would be done by the lead contractor – Lockheed at its Marietta plant
Similar process to how Boeing does it. The commercial side does the flyable aircraft based on the commercial derivative and its handed over to Boeing Defence for secret sauce and normal refuelling stuff
Updates . the LMXT boom will be made in Arkansas ( probably mostly final assembly)
Im sure the comms rack in the cockpit for the ‘secret sauce’ will be empty when the LMXT leaves the Mobile FAL
By extension:
The US also probably shouldn’t be trusting those nasty EU types with the “secret sauce” in the F35, so perhaps it’s best not to send any more?
We prefer planes that don’t spend most of their time sitting in maintenance hangars.
Who’s trust-worthy??
NSA had tapped Merkel and her advisors’ phones for years.
Gaaahh, *please* make it stop..
Don’t despair: if you steer around the vomit, there are many interesting (and ramble-free) posts today.
Missing in post below:
>In 2021, GKN delivered to Airbus the first 18m (59ft)-long spar … Between 2023 and 2024, GKN will demonstrate high manufacturing rates, and by 2025 “we will be ready to start a specific production development programme”.<
Bryce ?? please sit back and watch the blinking lights. pettifogging each and every issue and word( ing) is getting tiresome
Thank you !!
https://www.flightglobal.com/aerospace/gkn-eyes-doubling-of-airbus-narrowbody-content-through-wing-of-tomorrow-effort/148936.article
Paywall (more or less).
The most interesting part is this:
Slap a well-engineered composite wing on the 321/322 and you’ve gotcherself a nice little
plane..
I’m guessing there will be a nice, incremental engine update available for them around the time AB’s composite wing shows up.
“Moonshots” seem unlikely to me, from any source.
While BA procrastinates, AB innovates:
“Airbus project to improve composite wings”
“Plans are for the company’s ‘eXtra Performance Wing’ program to develop active control technologies that can adapt the wing shape and area to the particular weight, speed and altitude of the aircraft to suit fight conditions. These include pop-up spoilers, multifunctional trailing edges on flaps that can dynamically change the surface of the wing in flight, and a semi-aeroelastic hinge that controls a moving folding tip.”
https://www.reinforcedplastics.com/content/news/airbus-project-to-improve-composite-wings/
I agree, but not sure I would label what Boeing does as procrastination. I think more often than not what can be taken for procrastination is actually them making a decision, no, we are not going to spend money on X.
They do not issue a press release saying: “Hear yet, hear ye, the wise, illustrious, and all-powerful Boeing hereby declares that it shall never, ever launch project X.” No, they just say something like: “We continue to study the business case for project X….and the moment we find a way to squeeze a 25% margin out of it (and pigs fly) we will launch project X with alacrity.”
I suspect that BA is trying/hoping to keep the ship (barely) floating in the hope that there’ll soon be a favorable change in the US legislature / administration: they know that the company has a better chance with Rs than with Ds.
Bryce ?? please sit back and watch the blinking lights. pettifogging each and every issue and word( ing) is getting tiresome
Thank you !!
If you don’t have the acumen to follow the conversation between others, it might be a good idea to instead post on matters that you *can* grasp.
Regarding the matter at hand: even Scott recently tweated on BA’s chances in R vs D terms. It’s not rocket science.
> they know that the company has a better chance with Rs than Ds <
Not really, I think. The difference between those two entities is almost entirely Theater these days, with
just enough nominal separation to maximize the tiny ruling class's divide et impera consensus.. check out their votes on DoD and recent [perma-]War spending, as an example.
@Bryce,
I for one appreciate your in depth analysis comments, I especially appreciate your research such as one here about Airbus innovation. Thank you!
Airbus is leading, Boeing is following…. And not very good I might add. I noted in my post a few days ago that Boeing is looking at innovating with ‘digital’ manufacturing. As an retired insider, Boeing simply cannot execute on their programs. I mentioned FAUB as one the those failed digital programs, yet Airbus was and still is successful. Less than two years ago Boeing shutdown the composite research lab… boom all gone. Calhoun said they were moving in a different direction. Teflon contamination in the 787 wing program!!
Connection by Boeing was another money drain program, had great potential, but was shutdown with leadership saying the market won’t support it. Now look, everyone wants satellite communication.
I won’t go on and go foaming at the mouth as one commenter we are aware of. But I think I made my point.
Those of us that worked in the trenches at Boeing know what’s happening and not buying Calhouns smoke and mirrors clutter.
Thank you, Airdoc.
The appreciation is entirely reciprocal.
As a retired BA insider, your input is of great value in cutting through the BS.
Uwe said: “What he describes is the Pravda side of things. Media in Germany work as a (mostly US oriented ) Phalanx today. […] Ask around and expressed views are quite a bit more cynical. ( why support the most corrupt state in Europe the US has set up over more than a decade to piss on RU? ).”
Thanks for those comments, Uwe, and I see that Phalanx operating, as well.
..and those rants/snoozy anecdotes virtually without exception shed *no light* on the topics at hand; in fact, they could be easily seen as intentional misdirections (like when one asks for evidence of unlikely assertions).
“Let me tell you a little about Myself..” please- no.
-> Aboulafia, speaking to National Defense, noted that while the T-7A is widely looked at as a solid aircraft, he believes Boeing’s contract and bid were not realistic. The program is structured as a *firm-fixed price contract*, which means *Boeing will have to absorb cost overruns much like its tanker counterpart — the KC-46A — which this year reached $5 billion in excess costs that Boeing has had to eat. “$9.7 billion was just not realistic, but it’s fixed price*,” he said. “That’s a recipe for under-resourcing and trouble ahead.” According to the Congressional Research Service, the Air Force had originally valued the contract at roughly $19.7 billion. While Aboulafia doubts the program will end up being a “tanker story” — a reference to the problems the KC-46 project has faced — there likely will be some issues moving forward. “The big issue is just going to be the expense associated with the flight test program,” he said. Additionally, Aboulafia flagged growing inflation as a potential pitfall for the program. “You’re seeing inflation, particularly for technical personnel” increasing, he said. “There’s a whole bunch of factors at play with inflation. But obviously inflation makes that under-resourcing question that much more difficult and interesting.”
BA might be the ONLY U.S. military contractor that consistently loses money on its contracts!
It is well known that Boeing is being run these days by what is essentially a hologram of Jack Welch (JW himself being unavailable due to death), and the executive business culture is short term financialism imported from McDonnell Douglas and General Electric.
Therefore, makes no sense to call the company Boeing. More honest to call it McDonnell Douglas. Even better, rename the company “McDonnell General”. This captures the names of both its spiritual parents, and has the added bonus of sounding almost like Dollar General, which is apropos for a company that aspires to be the most efficient (cheapest) producer of airplanes.
As for the order in which Bombardier offered itself
to Boeing and Airbus, I’ll stick, for now, with what’s written in Scott H’s excellent book ‘Air Wars’, rather than DoU’s evidence-free assertion.
Adding: those who cite Wikipedia as an authoritative source, shouldn’t. Have a look
around..
It’s not Wikipedia is the issue. The problem arises when our commentator dreamed up fantasies without facts as basis.
Actually, Wikipedia *is* an issue, if not “the” issue in this particular case.
Uwe has written some good comments here on that site’s veracity and interests.
I’ll stick with what I said above, for now.
Bryce said, on June 24, 2022:
@ DoU
“You left out an important quallifier — again.
The EASA has *provisionally* re-certed the MAX -8 and -9 under the condition that the entire MAX family must be retrofitted with a third sensor input à la MAX-10.
You really seem to be *very* badly informed..”
Thank you for that accurate and very clear statement of fact, which Uwe pointed out well, too.
The other one should be waking up soon, so..
Gish Gallops here we come!
RE gish gallops
Mr/mrs Bryce currently holds the lead with over 90 posts in this thread, which is at least 10 percent more posts than any other.
Accuracy seems to be variable
Not being a debating ex- spurt i use the term Petifogging
Every morning here in [Edited] WA state, myemail inbox has 20 to 30 posts in this thread- and guess whose numbers tops the list-
Now do another calculation detaling the cumulative *length* of posts…I won’t be anywhere near the top.
Next up: the amount of irrelevant waffle in posts — we know who’ll get 1st place there…and it won’t be me.
😎
QED
@ Bill7
Referring to your recent posts about lack of communicative accuracy in blog settings, isn’t it amusing that the act of pointing out that a commenter has omitted a *crucial* qualifier from a post, is being labeled as “pettifogging”?
I presume you know that at least 30% of adults have problems with comprehensive reading? If you look above, you’ll see a totally unnecessary thread started by a commenter who was not able to accurately read a short piece of prose. The problem was bad enough in the boomer generation, but it’s gone off the charts in the case of GenZ and later.
Bryce: Yeah, I did notice that. No further comment necessary, I think [smiles].
I’m interested to see if the Usual Experts
will attempt to refute what you wrote re:
Boeing 737MAX10 certification, and the others’.
“apparent lack of comprehensive reading skills here”
IMHO 2/3 are debate club technique and intentional.
Other domain: articles in the (US) media
make a racy statement in the headline
that gets no mention, no coroborating facts in
the body of the message.
A pertinent bit from Uwe:
“..In that context Boeing not progressing with MAX10 certification makes sense in deformed way. ( upcoming deadline on mandatory “other” modern features makes this feet dragging a Skylla & Charybdis thing: fast talk cop out expected? )..”
Foot-dragging/shuffling on the MAX10 cert because, well, they’d then have to put it on the in-production/present-delivery MAXs (love that name, for this Edsel of the skies)..
BA is looking for more money for the AF1 project:
“WASHINGTON: Boeing’s next generation Air Force One plane is more than $1 billion over budget and at least two years late, but that hasn’t stopped it from seeking more money from the Air Force for what the company sees as changes to previously agreed upon technical specifications, the Air Force’s top acquisition official said today.”
https://breakingdefense.com/2022/06/boeing-is-pushing-the-air-force-for-more-money-for-air-force-one/
TransWorld
June 23, 2022
Frank:
No I don’t know why they put the accounting block at 1600.
And yes they might not reach it (just like Airbus never reached the A380 accounting block for the Free Lunch Aid) and the secret blocks for the A330 and A350.
=================================================
Accounting blocks are estimates a company makes when using program accounting.
Airbus does not use program accounting, so there is no accounting block. IIRC – they cannot use program accounting and it is a uniquely ‘Murican thing. Kinda like gun rights, rolling back a woman’s right for choice and attacking the capital. But I digress…
From Reuters:
Boeing uses an accounting method that others have left behind
https://www.reuters.com/article/us-boeing-probe-accounting-idUSKCN0VL2K0
The type of accounting Boeing Co uses to reflect the enormous upfront costs of building its jetliners is unusual among large U.S. corporations and leaves a lot of judgment up to the company, accounting experts said.
Accountants said they were not aware of other U.S. companies that employ it, and defense contracts are not handled that way because they have a different structure than airplane sales.
McDonnell Douglas, which was acquired by Boeing in 1997, had been among the companies that used program accounting in the 1990s, according to media reports at the time.
The method can go wrong if a company either initially overestimates the number of airplanes it plans to sell or its costs are significantly higher than planned, accountants said. Either scenario results in miscalculating the company’s margin.
“The method can go wrong if a company either initially overestimates the number of airplanes it plans to sell or its costs are significantly higher than planned”
Both of these scenarios have occurred at BA, with regard to various programs.
“The method can go wrong ..”
IMU the method is faulty to start with as it munges reporting and prediction. But GAAP seems to be more of a convoluted tightly woven fabric “Filz” to pimp numbers than to do neutral/conservative reporting.
And I see hefty collusion between reporting and oversight.
Regarding the 787 accounting block, the initial number was only 1100, then it was increased to 1300, 1500, and 1700. After covid hit, the accounting number was reduced to 1600.
For the Boeing 787 program, the accounting block currently stands at 1,500 units.
https://seekingalpha.com/article/4381078-boeing-787-financial-engineering-nightmare
Oct. 24, 2020
Boeing 787: A Financial Engineering Nightmare?
Thanks for that link, Frank. There’s significant stuff in there, I think- even
if the author is obscuring it with plenty
of gobbledygook (for whatever reason..).
Might I suggest a much more credible source for the ‘ program accounting’ issues, facts, and data instead of outdated articles/
Just about anyone with a web browser and internet can access the Boeing site.
and can even find Annual reports
https://www.boeing.com/company/annual-report/index.page
in the 2021 report start with page 55 and you will find
“The accounting quantity for each program may include units that have been delivered, undelivered units
under contract and units anticipated to be under contract in the reasonable future (anticipated orders).
In developing total program estimates, all of these items within the accounting quantity must be
considered.”
and on page 146 ”
Program Accounting Estimates for the 777X Program – Refer to Notes 1 and 7 to the financial
statements”
etc.
Report can be downloaded for free. 19.3 mb for 2021 report
older reports can also be found
pdf files can be easily searched for words and combinations.
The proof and facts are left to those who want facts ( or at least the ‘official explanation ‘ ) believe them or not.
@Bubba2
On page 36 of the 2021 F/S
https://s2.q4cdn.com/661678649/files/doc_financials/2021/ar/The-Boeing-Company-2021-Annual-Report.pdf
The accounting block for the 787 is still 1,500. Down from 1,600 in 2019, as reported by the article I quoted.
And they still wrote off $3.5 billion in 2021 with a further $2 billion expected until 2023:
“As a result of these impacts, we expect to incur
approximately $2 billion of abnormal production costs on a cumulative basis with most being incurred by
the end of 2023.
During the fourth quarter of 2021, we recorded a loss of $3.5 billion on the program primarily due to the
additional rework, as well as other actions required to resume 787 deliveries, taking longer than expected.”
@Bubba : Boeing’s explanation.
That is the superficial wire model for cargo culters. 🙂
Under the hood there is much more convolution:
what goes into deferred cost to make the acc block book “round” ?
How are those (premature, early) profits determined? ( IMU in regular bookkeeping it is a computed value from real numbers, in the accounting block way it must be a postulated value as the numbers are mostly assumed ( for things in the future ).
@Frank,
My understanding is that the 2 bil abnormal production costs and the 3.5 bil write-off are two different things. The 3.5 bill write-off is a reach-forward loss which results in a reduction of deferred production cost (as part of inventory) on the balance sheet. The 2 bil abnormal production costs are additional cost added on the income statement but do not affect otherwise, at least directly, the balance sheet.
@Jacques
“My understanding is that the 2 bil abnormal production costs and the 3.5 bil write-off are two different things.”
They are two different events, totalling $5.5 billion in write offs.
“The 3.5 bill write-off is a reach-forward loss which results in a reduction of deferred production cost (as part of inventory) on the balance sheet. ”
That is correct – so how do you remove it from the B/S? Where is the corresponding and balancing amount moved to, in a journal entry?
Dec 31, 2021……………………………………..Debit…………………Credit
____________________………..$3.5 billion
……………Inventory………………………………………………..$3.5 billion
It’s moved to an expense account on the I/S. It becomes an expense with no corresponding revenue matched to it, therefore a reduction in earnings of $3.5 billion.
“The 2 bil abnormal production costs are additional cost added on the income statement but do not affect otherwise, at least directly, the balance sheet.”
Yes, they do. In Retained Earnings.
https://www.investopedia.com/terms/r/retainedearnings.asp
“Retained earnings are an important concept in accounting. The term refers to the historical profits earned by a company, minus any dividends it paid in the past. The word “retained” captures the fact that because those earnings were not paid out to shareholders as dividends, they were instead retained by the company. For this reason, retained earnings decrease when a company either loses money or pays dividends and increase when new profits are created.”
The ‘bottom line’ of the income statement, what is leftover after all expenses have been subtracted from all revenues, is reflected back on the balance sheet, in Retained Earnings;
“Retained earnings appear in the shareholders’ equity section of the balance sheet.”
https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/retained-earnings
“Retained earnings are the amount of profit a company has left over after paying all its direct costs, indirect costs, income taxes and its dividends to shareholders. This represents the portion of the company’s equity that can be used, for instance, to invest in new equipment, R&D, and marketing.
Your business’s retained earnings is something banks look at before lending you an additional amount.
“Year after year, retained earnings are added to the balance sheet and become part of the company’s equity with the money that was initially invested by shareholders,” says François-Xavier Lemay, Manager, Business Centre, BDC. “That’s what creates the value of the business.”
(I was trying to find a website with a simple example, happens to be the BDC….)
Hope this helps
@Uwe
“How are those (premature, early) profits determined?”
I think it was pre-determined, by the MBA whiz kids, with the use of some sexy power point presentations and all the right buzz words, into the right ears.
They got a number they wanted to make on each sale, then worked backwards from that. They then made everything match – then when things didn’t match, like the battery thing, they simply rolled it all into Inventory (aka Deferred Production Balance) and the C-Suite boys were happy because they kept getting paid, Wall Street was happy and they kicked the can down the road.
One day, however – the music stops and the butchers bill comes due.
@Frank,
I understand retained earning. I wasn’t clear, it was my bad. What I mean is that the 2 bil abnormal production does not affect the inventory. It is not “used” to reduce an asset, so I don’t think that it is considered as a “write-off”. The 3.5 bil of “reach forward loss” is definitely a write-off.
Another clarification, cost recognition when using program accounting is basically based on a mean production cost. Producing at a much lower production rate is, of course, going to affect the mean production cost. However, instead of updating the mean production cost, a “abnormal production cost” is instead recognized on the income statement over the period where the aircraft is produced at an abnormal low production rate.
It is just a question of semantic, but I really do not think that those “abnormal production cost” are considered as “write-off”.
For example, let assumes that the mean production cost of the 787 is 100 million for the last 500 units. Let also assumes that because 100 787 have been produced at a very low production rate, there is a 20 million additional production cost per unit for those 100 aircraft. This would normally translate into an increase of the mean production cost to 104 million per unit.
However, because the very low production rate is considered “abnormal”, a 2 bil (20 mil /unit * 100 units ) “abnormal production cost” is instead recognized over the period where the 787 have been (or will be) produced at a very low rate, while the mean production cost remains at 100 million.
Salut mon Jacques.
“It is not “used” to reduce an asset, so I don’t think that it is considered as a “write-off”
Here is the wording from the Q1/22 financial statements:
“We expensed abnormal production costs of $312 during the three months ended March 31, 2022.”
If they debited ‘Expenses’ it means that there is a corresponding credit, yes? Where is the credit from? Cashola.
Cash is an asset, yes? But moreover – what would be the ‘normal’ move for BA to do, if they could cover these ‘abnormal’ expenses?
Well, they would credit ‘Cash’ and move the amount over to ‘Inventory’, as they normally do in program accounting. Then they would wait until an aircraft was delivered, allocated a portion of those amounts to that sale and call it a day.
They just skipped the ‘Inventory’ middleman and said “F- it, we’re never making this back – expense it” (along with another $1.7 billion upcoming until 2023).
What Is a Write-Off?
https://www.investopedia.com/terms/w/write-off.asp
“Businesses regularly use accounting write-offs to account for losses on assets related to various circumstances. As such, on the balance sheet, write-offs usually involve a debit to an expense account and a credit to the associated asset account. Each write-off scenario will differ, but usually, expenses will also be reported on the income statement, deducting from any revenues already reported.”
They do also mention a write-down:
“A write-off is different from a write-down, which partially reduces (but doesn’t totally eliminate) an asset’s book value.”
Like you said – it’s a lot of semantics, but the bottom line is that BA has/will expense(d) $5.5 billion on the 787 program. They’re either taking it out of Inventory or Cash. If it’s from Inventory, it’s cash they spent in previous quarters. If it’s from Cash – it’s current to the quarter.
BTW – BA’s terminology for the $3.5 billion:
“During the fourth quarter of 2021, we determined that estimated costs to complete the 787 program plus costs already included in 787 inventory exceeded estimated revenues from the program. The resulting reach-forward loss of $3,460 was recorded as a reduction to deferred production costs.”
Write-off
Write-down
Reach forward loss
Abnormal production costs
Semantics, you say? Yes – it’s all a loss.
What has Boeing really said about the 787 program and specifically the last 500 units in the accounting block?
‘We’re $5.5 billion in the red and it’s a loss. We’re going to try to recover ~$9 billion with those last 500, but we also need to sell more jets to cover another $4.7 billion we spent.’
We all agree that the production issues with the 787 are costing Boeing 5.5 bil. But I still do not considered the “abnormal production cost” as a write-off. A write-off is used when an asset lost its value, when there is an impairment. Cash does not “loss” its value (inflation is an other thing…), it is expensed, but that is not a “loss”, otherwise any “production cost” can be considered as a write-off. With program accounting, the “deferred production cost” is an asset, as part of inventory, on the balance sheet. A “reach forward loss” of 3.5 bil mean that Boeing is not expecting to “recover” that amount, so an impairment, that is, a write-off, is necessary. It is just semantics, but anyway, we agree on the 5.5 bil total cost.
My bad, I got mixed with the numbers, so the 787 accounting quantity was initially 1100, the it was increased to 1300, 1400, and 1600, before being reduced to 1500.
FWIW and IMHO- the greatest corporate desgtructive force honed ovefr several decades as been mcKinsey training and seminars.
They make Machevelli look like an amature
“Airbus to set up China research center to boost innovation”
“BEIJING, June 25 (Xinhua) — Airbus will establish the Airbus China Research Center in Suzhou, east China’s Jiangsu Province, to strengthen the company’s footprint and innovation partnerships in China, the company announced Friday.
“The Airbus and Suzhou Industrial Park signed a framework agreement on Friday on the establishment of the center. The new move by Airbus is aimed at reaffirming its long-term commitment to cooperating with and investing in China, according to Airbus China.
“”China not only has a promising aviation market, but also has advanced technological advantages in many fields,” said George Xu, executive vice president of Airbus and chief executive officer of Airbus China.
“…It will carry out research work on advanced technologies, such as hydrogen energy infrastructure, advanced manufacturing, and the aviation industry’s upgrading with digitalization and intelligence. It is due to start operations in 2023, said the company.”
http://en.people.cn/n3/2022/0625/c90000-10114972.html
Nice overview of Boeing defense strategy
https://www.flightglobal.com/flight-international/how-cost-overruns-have-dented-boeings-defence-performance/148887.article
The currently fashionable retort to that article is that — with the world re-arming — there are golden times ahead for Boeing Defense. This is also a reason why bottom feeders are interested in the stock at its current level.
However, in the US, the largest slice of the Defense cake will go to Lockheed Martin and Northrop Grumman…and Boeing may have to be content with a few crumbs. Boeing won’t make any money on the KC-46A, which is currently its only large defense project. The F-18 isn’t attracting much interest. And a handful of orders for the P-8, P-3, Chinook, etc., aren’t going to put much cash in the coffers. The same applies to the MQ-25 drone program.
Our good @Frank recently elucidated that, in its best ever year, Boeing Defense only contributed 17% of revenue to the company as a whole. It’s unlikely that it will re-approach that level any time soon.
One point of the article is that Boeing was intentionally under-bidding defense contracts to grow market share. This was financed by record cash flows from commercial before the Max and 787 fiascos.
But in the brave new world where the commercial division just produces red ink, this strategy is no longer an option. So it remains to be seen if Boeing can win any new defense contracts when it is no longer intentionally underbiding them.
No doubt some serious headwind in next couple of years … but hey why not look only at the upside potential: how much new orders are flooding in??
https://www.theguardian.com/business/2022/jun/25/max-disaster-casts-long-shadow-as-boeing-tries-to-rebuild-its-fortunes
Thanks @Bill7.
Perhaps it’s best observed at a distance, to be able to see the big picture
-> Production will stop by the end of the year, after 1,574 deliveries of the plane – “the Queen of the Skies” – that became the symbol of the jet age. There is no plan yet for the factory space in Everett; it could soon become the “world’s largest empty cupboard”, said one expert.
-> […] an aerospace analyst at Agency Partners, said of the gap between the two planemakers: “It gives Airbus an insuperable benefit in terms of unit costs and their ability to buy from suppliers.”
-> Boeing is throwing staff at the problem. It has hired “hundreds” of extra engineers to work on certification in the face of an unprecedented level of scrutiny from the Federal Aviation Administration (FAA), according to Mike Fleming
-> Jefferies has cut its forecasts for deliveries of the 787 this year from 45 to only 12
-> Journalist Peter Robison, in Flying Blind, a recent book about the 737 Max disaster, characterised the Chicago period by its focus on cost-cutting and $30bn in share buybacks in the mould of Jack Welch, the corporate celebrity who led General Electric. Calhoun was a Welch employee and golfing partner.
-> Perhaps the larger question hanging over Boeing’s production plans is how it will cope with a world of net zero carbon emissions.
-> Calhoun’s decision to cut Boeing’s global workforce from 160,000 employees to 140,000. Industry observers are concerned that engineering and cutting-edge technology, including on reducing carbon emissions, has suffered. Boeing’s research and development investment has fallen every year since 2016, according to Richard Aboulafia
-> A next-generation replacement of the Max could cost more than $25bn. On top of paying down the $45bn net debt it has built up during the crises and giving itself a cash buffer, Boeing might be in need of $75bn, Cunningham said. Boeing had done everything possible to avoid raising equity investment, which would hurt existing shareholders, but the analyst argued that new leaders with a long-term vision could pull it off, and set the company on course for the next generation of air travel.
“You either fully commit or you eventually go out of business,” Cunningham said. “Eventually can happen very quickly.”
Too late: even with new management, the ship has taken on too much water.
The money runs out in about a year — what an interesting year that will be.
Boeing stock spit history – last split was 1997- before the Welch era
I’m sure it is just a coincidnce
“Jefferies has cut its forecasts for deliveries of the 787 this year from 45 to only 12”
This.
This is troubling.
So I guess we’ll estimate that Q3 is when deliveries will restart. Q2 is done. Let’s also give a very generous ‘last cash payment upon delivery’ of $75 million an airframe (Yes Bryce, I know it’s probably high, but we’ll try to put this is the best possible light)
6 jets in Q3 and 6 in Q4 gives us our 12 jets, per Jeffries estimate.
$450 million in cash, each quarter.
BA dipped into the piggy bank from $16.2 billion Q4/21 to $12.3 billion at the end of Q1/22. Almost $4 billion.
If Q2 mirrors Q1, or is even half as bad – it’s still a $2 billion burn.
If in Q3, they add $450 million, it’s still a $1.5 billion burn. Same for Q4.
2022 is not going to be kind to Boeing, unless something dramatic happens. They’re going to need a bunch of orders at Farnborough and a ton of cash deposits on firm orders. It kicks the can down the road a bit, but until they get all 3 programs delivering solid numbers of aircraft, this is how I think it’s going to be…
…Delta airlines could be in pole position to score a great deal on Max’s, but I wouldn’t put it past Airbus to dip way down just to squeeze Boeing on the margin. Who knows? Since both Neo’s & A220’s are made in ‘Bama (no dumping), they could even go at or under cost to steal the deal and really screw BA.
@ Frank
The MAX is back in the news this morning with reports of multiple mid-air emergencies since being re-certified: see below, and also the LNA Twitter feed.
Delta may want to think twice before associating itself with this monstrosity of a plane.
If Jefferies’ view comes true, BA is stuck with about the same number of 787 waiting for customer deliveries by y.e.
This mulit-billion inventory will drag on for another year.
Will BCA even get twelve 787s out the door and paid for, this year?
Maybe commenter TW will again weigh in on this topic.
Indeed: we should just listen to BCA’s own self-interested take on their situation and prospects.. they’ve never, ever been wrong before, have they (MAX™, 787, KC-46, 777X..) ?
I think I know to which post you’re referring 😏
One would think that referring to “the Boeing site” as a “more credible source” is an implicit oxymoron…
> “more credible source” <
We often notice the same "little" things, it seems.
"I love love love our Corporate Masters, and our collective, abject servitude to them.. All Hail Boeing: Hoo-rah! Hoo-rah! Hoo-rah!"
and stuff like that.
pass..
“Credible Evidence Law and Legal Definition
Credible evidence is not evidence which is necessarily true,
But is evidence worthy of belief, that is, worthy to be considered by the jury.
It is often natural, reasonable and probable as to make it easy to believe. ”
Also sprach the SEC ,IRS
Not sure what the relevance of that post is: we were discussing a credible *source*…not credible *evidence*.
I hear that for inspiration Calhoun wears a bracelet inscribed with “WWJD”, short for “What Would Jack Do”.
I do hope my close friend Bubba2’s life gets a little better in whatever time he has left- he seems a touch bitter, to me.
Wow, almost 450 posts! Nothing like a column with even the faintest whiff of praise for Boeing to enflame the echo chamber! 😀
You are most welcome to post praise for that company; hopefully it would be reality-based.
Many of us are waiting for positive actions from that company, rather than words. I think
recent history- say the last twenty years, or so- supports that approach.
@Bill7
How dare you question fantasies?? Man has to have hope to survive.
Interesting article in the Seattle Times today.
Here’s an equivalent article, without the paywall.
“Boeing wants more workers in-office to ramp up production”
“Boeing has ordered some of its remote workforce back to the office to help the company ramp up production and fix supply-chain problems. But like many employers navigating the post-pandemic landscape, the aerospace giant is getting pushback from workers who resent giving up their “home” offices when other colleagues don’t have to.”
““As we’ve ramped up, we learned that the need to get back into the office to support the airplane is becoming increasingly important,” Stan Deal, Boeing executive vice president and head of commercial airplanes operations, told employees in an internal company video posted Tuesday and shared with The Seattle Times. “Minutes and seconds count in response time to help satisfy our customer on issues that are getting in the way of delivery,” Deal said.”
“But around half of Boeing’s 14,500 engineers and tech workers are still working remotely most of the time, said Bill Dugovich, spokesperson for their union, the Society of Professional Engineering Employees in Aerospace.”
“Some workers in the procurement operations said Monday’s back-to-office directive was an unwelcome surprise. One indicated that they and many of their colleagues were still working at home two or three days a week and opposed being back in the office full time.”
“Another predicted the back-to-office policy would lead them and colleagues to consider leaving for other, more flexible companies or even retiring early. ”
https://www.columbian.com/news/2022/jun/25/boeing-wants-more-workers-in-office-to-ramp-up-production/
On the HR front;
It has taken awhile, but it seems that less and less people are getting married to their jobs. By that, I mean there has been a paradigm shift in the way people view the companies they work for.
Back in the day, it was with a sense of pride that people used to say:
“I work for airline X” or “I work for OEM aircraft manufacturer Y”. Yes, corporations were about making profits and the C-Suite boys were still well compensated, but there was a tangible feeling of being part of something bigger, that workers had.
You see it in sports, more and more. Players had a tie to the city they were drafted in and felt part of the community. As time has gone on, you hear the common refrain when a player is traded or he signs a free agent contract elsewhere “It’s just business…” or “It was a business decision”
It doesn’t matter that the people of the city lived and dies with how well the team was doing.
Now that people have clicked in to seeing how C-Suite boys run a company so that they get paid, first and foremost, workers are no longer tied to a particular job and will look to move, when greener pastures beckon. Indeed, when times are lean, some have figured out that they can take a package and wait for the inevitable call when demand returns, to double dip – often as a self-employed sub-contractor, with better terms that they had before.
It’s getting tougher and tougher to sell the whole, “We’re a team! Let’s work together! We’re doing great things as a family!”, if it’s just pure lip service.
All very true.
Plus: people escaped for a little while from the Rat Race…they had a little more time with their kids because of saved commute time…they were able to have a coffee in their own garden…and they liked it!
Actually, I’m rather shocked that the US didn’t go back to the office long ago: in Europe, the old normal has been back in swing for months. But then again, in Europe, people get more holidays, paid overtime, time-for-time, etc., so it’s not the grind that it is in the US.
Based on the article above, this could develop into quite a problem for BA.
Calhoun is the product of a failed conglomerate called GE, which has been repeatedly fined for “cooking the books”.
Here is it’s most recent adventure with creative accounting:
https://www.justice.gov/opa/pr/general-electric-agrees-pay-15-billion-penalty-alleged-misrepresentations-concerning-subprime
Interesting that inspite of GE being repeatedly sanctions for accounting irregularities, a year ago Calhoun replaced the CFO at Boeing with a guy from….GE.
Perhaps increasing “sshareholder value” is more important than the means by which this is done. After all, Calhoun needed some hard core creative accounting to help that $30 billion plus lost with the Max disaster magically disappear down the rabbit hole of program accounting.
A carpetbagger tribe.
OT:
shareholder value is a derivative property.
Lead a corporate entity into success and you create
real shareholder value.
do all the superficial moves that indicate success
and you create a hollow Potemkin shell mirage
with all value siphoned off.
Yes.
After the merger the McDonnell-General Electric business ethos sliced through the company like a chain-saw through warm butter. Now it would only be honest to change the name from Boeing to “McDonnell-General”.
Of course, the new company has gone on record as not “selling safety”.
Why would honesty be part of its value proposition either?
John said –” Interesting that inspite of GE being repeatedly sanctions for accounting irregularities, a year ago Calhoun replaced the CFO at Boeing with a guy from….GE.”
“When I say I changed the culture of Boeing, that was the intent, so it’s run like a business rather than a great engineering firm. It is a great engineering firm, but people invest in a company because they want to make money.”
Harry Stonecipher, 2004, former CEO of The Boeing Company, reflecting on the late 1990s
+++
And in the annual meeting held in Huntsville – (2001-2002 as I recall – and wuz there ) Phil condit remarked that he embraced the Jack Welch GE management style . .
Of course AFTER jack welch retired, he later admitteed that focusing on shareholdeer value was sort of stupid.
Now count the numbers of ex GE-welch-mcdouglas types now in the Boeing ranks. AS clvid did to the country, Welch management did to mcdouglas and Boeing.
Those wbho dont learn from history- dont learn from history
Only goes downhill (more or less) since then ….
I digress.
Trans said: “..Clearly Airbus does need to make 75 x A320 series a month to make money.”
When that commenter shows up again, I hope he’ll provide some evidence to support this claim.
I don’t think he’s aware of AB’s present finances, yet alone what they’d be raking in at 75 p/m.
For example: while BA groans under a net long-term debt of $53B, for AB it’s currently zero. That saves AB about $2B per year in interest alone.
https://www.macrotrends.net/stocks/charts/EADSY/airbus-group/net-long-term-debt
And under terms of GATT92—>> WTO—>> CVD ( U.S. Counter Vailing Duty ) issues-along with preferred rates of Government loans, etc IF Airbus /EADS does not meet certain targets for sales/deliveries by a certain date – remainder of ‘loans’ for ‘ development ‘ etc are forgiven .
Been that way for several decades.
We’re talking now about long term debt, obtained via bond issuances — not subsidies or tax breaks.
Grooooan- RLI issues ( MBA buzzwords) are in reality a bit different than the morphing of GATT ->WTO–> Airbus launch aid agreements for LCA ( large commercial aircraft ) since GATT-WTO launch aid can be forgiven under some conditions. Not true with ‘ bonds’
A bit of history follows for the younguns Links provided are for examples and not intended to be the total- complete history or facts involved- not enough room here to explain several decades of high level ‘ negotiations’ by various agencies.
Sort of an overview below
https://www.ediweekly.com/55399-2/
LCA = large commercial aircraft
https://www.lawinsider.com/dictionary/large-commercial-aircraft
Large commercial aircraft means an aircraft of more than one hundred ten thousand pounds, maximum certified take-off weight manufactured for non-military use.
But other definitions by various agencies use 10,000 to 12,000 MTOW.
GATT DEFINITION. The General Agreement on Tariffs and Trade (GATT) was the first multilateral free trade agreement. It first took effect in 1948 as an agreement among 23 countries.
About 1995 GATT –>>> WTO
However in about 1992
https://www.nytimes.com/1992/01/16/business/airbus-loses-gatt-ruling.html
” The diplomat said a panel of the General Agreement on Tariffs and Trade ruled against the 12-nation community 11 months after Washington complained that German Government guarantees for Deutsche Airbus violated GATT’s subsidy rules.
GATT is an international body that oversees world trade. Deutsche Airbus, the German arm of the four-nation consortium, was receiving the guarantees as a form of protection against exchange-rate fluctuations. The United States said these payments amounted to a subsidy of $2.5 million on each Airbus aircraft delivered in 1990. The United States has charged that the subsidies paid to Airbus enabled the European consortium to win customers from major American aircraft makers.
In 1999-2000-2001-as Airbus expanded- and Boeing was busy boosting stock price and playing games with 767 tanker development. Having been infected with the welch stoneciper virus.
” In 2001, Japan selected the KC-767 over the Airbus A310 MRTT and signed a contract in 2003. The Japan Air Self-Defense Force (JASDF) ordered four aircraft and has designated the tanker KC-767J.
Officially- BA at that time was pretty much ” hands off ” GATT-WTO” Airbus issues
But in Summer of 2001- BA hired Rudy deLeon (Former Assist Sec Def ) to look into
the issues of Airbus subsidies outside of WTO rules, while meanwhile SPEEA was putting
together a CVD ( CounterVailing Duties ) petition against Airbus.
In late August 2001, the petition and supporting data was complete and approved by
SPEEA Council and to be hand carried to DC the 2nd week in Sept. Then came 911.
” In order to fill out the petition, the Committee gathered data from various sources, including: Boeing Annual Reports; the first European Aeronautic Defence and Space Company (EADS) (formerly France’s Aerospetiale Mantra, Germany’s DASA, Spain’s CASA, and Britain’s BAE Systems) Annual Report for 1999/2000; statistical surveys conducted by the European Aerospace Industry (EAI) for 1997 – 1999; information from both Boeing’s and Airbus’ websites; numerous press accounts; and informal discussions with industry representatives. ”
The partial summary is stated below
” We then compared the published selling prices of Boeing and Airbus commercial airplanes from 1998 – 2000, omitting figures for the Boeing 747. For 1999, the average cost of all airplanes sold by Boeing was $59 million per plane, whereas the average cost for Airbus was $46.4 million per plane. We then compared two comparable models of aircraft, the A320 and the 737-800. Figures reflected an average 737-800 costing (conservatively) about 10% more than the A320.
Therefore, how can Airbus, with equal material and subassembly costs, higher labor costs and arguably lower productivity, and admittedly zero profits, still undercut Boeing prices by at least 10 percent? Our determination is that Airbus is selling most, if not all aircraft models into the U.S. at 10 25% below cost. Note: this does not include special lease, financial, or maintenance agreements, which even further harm our workers. ”
It was several years later before Boeing filed essentially the same complaint.
And the battle still goes on.
So how do I know this-spent a few hours with a person who was at GATT 92,familiar with related issues, dug up a lot of the data, etc. This mostly AFTER I retired.
Sat in a meeting in which my friend after listening to Rudy de Leon presentation about 767 tankers and CVD and …. after 911, simply stood up, waved Rudys handout in the air and in terse- but reasonably polite terms told Rudy why, what , how and where he was wrong wrong wrong.
Some are still chuckling
Nothing in that long drawl changes the fact that the preceding discussion was about long term debt obtained via bond issuances. You can find a full list of AB’s outstanding bonds on the Airbus website.
If you want to start a discussion of subsidies and/or tax breaks, a separate sub-thread might be a better forum.
Trying to blame EU subsidies for BA’s woes is a jaded tactic: BA flushed *itself* down the toilet. Conversely, AB managed to thrive despite extensive tax breaks for BA.
Boeing bonds are unlikely to be forgiven if dates-targets not met
Airbus launch aid will be forgiven if dates- targets not met
There is a relationship AND a difference between them
U.S Countervaiing duties is but one way to discern-address the differences and much much older than GATT-WTO arrangements.
Airbus bonds are unlikely to be forgiven if dates-targets not met.
Boeing tax breaks will be forgiven if dates- targets not met.
There is a relationship AND a difference between them.
EU Countervaiing duties is but one way to discern-address the differences and much much older than GATT-WTO arrangements.
RLI :: Reimbursable Launch _Investment_.
If the object of your investment does not work out
your money is toast.
This instrument should get the clapping consent of
any full blooded capitalist US denizen.
Interesting thing is that over all RLI objects return was vastly positive. State investors still earn money with the A330 and _A320_
compare to US government tax gifts. As any gift: no return. ( trickle through is a myth! )
See why Boeing had to go for killing RLI?
( Going back in time the effectiveness was definitely underestimated by the US side. But no surprise there: US history is rive with “tilting tables” activity to slide the golden egg laying goose into their lap but then killing it with uncontained greed )
” Interesting thing is that over all RLI objects return was vastly positive. State investors still earn money with the A330 and _A320_”
And about the 340 and 380 ??
Thanks for this comment, esp this part:
> Interesting thing is that over all RLI objects return was vastly positive. State investors still earn money with the A330 and _A320_
compare to US government tax gifts. As any gift: no return. ( trickle through is a myth! ) <
I'm also guessing there is some oversight from the RLI source,
which could be a good thing..
Re @bubba’s questionmarks:
reading comprehension:
If the object of your investment does not work out your money is toast.
then I earlier wrote:
“apparent lack of comprehensive reading skills here”
IMHO 2/3 are debate club technique and intentional.
“I’m also guessing there is some oversight from the RLI source,
which could be a good thing..”
Most of the things that are said to hamper Airbus as seen from US observers are afaics more of a boon than a drag down.
Mitbestimmung, No hire and fire, workplace ethics, hours spent on job, holidays, …
another greener leaf: move parts and not people, i.e. try to reduce time and money spent in commute. there is “Betriebswirtschaft” but also “Volkswirtschaft” 🙂
Bryce ?? you said ” EU Countervaiing duties is but one way to discern-address the differences and much much older than GATT-WTO arrangements.”
Wrong wrong wrong
example
” COMMISSION IMPLEMENTING REGULATION (EU) 2015/309 of 26 February 2015 imposing a definitive countervailing duty and collecting definitively the provisional duty imposed on imports of certain rainbow trout originating in Turkey”
Yes EU was in existance in 2015 a few years before
” The union and EU citizenship were established when the Maastricht Treaty came into force in 1993. [14] The EU traces its origins to the European Coal and Steel Community (ECSC) and the European Economic Community (EEC), established, respectively, by the 1951 Treaty of Paris and 1957 Treaty of Rome.”
GATT goes back to 1947-48
long before EU
https://traderiskguaranty.com/trgpeak/history-anti-dumping-countervailing-duties/
The History of Anti-dumping and Countervailing Begins in the United States
Sherman Antitrust Act of 1890
The history of U.S. anti-dumping and countervailing truly begins with concerns about fair competition fostering monopolies with the Sherman Antitrust Act of 1890 declaring “any effort to combine or conspire to monopolize a particular market” illegal. This law tries to prevent the artificial raising of prices by restriction of trade or supply while allowing monopolies achieved solely by merit (innocent monopolies) to still thrive.
Clayton Act of 1914
The Sherman Antitrust Act was later reinforced by the Clayton Act of 1914 which made “price discrimination an illegal practice if it reduced competition or tended to create a monopoly”.
Antidumping Act of 1916 …
Goes on- Sorry if FACTS- DATA- Credible Sourcesget in the way.
@ Bubba
If you want to pull that card:
Airbus didn’t exist in 1947-48, so the US couldn’t have been applying countervailing duties to — or because of — it before then, could it?
> while BA groans under a net long-term debt of $53B, for AB it’s currently zero. <
Remarkable numbers given recent events, and the latter company's continuing strong R&D spending, and now forward-thinking rainy day provisions.
AB didn’t have to write down tens of billions of dollars on a whole list of distressed programs….unlike BA.
Maybe everyone already knows this, but Calhoun was called out as a liar by a Delaware Court in a case brought by investors last year:
https://uk.news.yahoo.com/boeing-board-face-investor-lawsuit-091500211.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAMXAST3vBFPYIoZ7VK2m1fqnB21As61NANVweVb1Me-kwxPq5tSJJmSS_cD5ebSyDh67KGqN0NKoyldLKF5-SzRh2NOG7UtYsf1iYMANOv9zKIqWj-lg4RToWLoexnwOGViQyp4TIe9hz_nZ6hTDiVcno5kfCL3NfyTbOGK-Qmpy
John said ..” Maybe everyone already knows this, but Calhoun was called out as a liar by a Delaware Court in a case brought by investors last year:”
Thats a major upgrade for him.
Still waiting for the pejoritive descriptions
My impression for now is that BCA is headed for a Sears, Roebuck and Co. outcome.
Evidence to the contrary is welcome, and I’d be happy to be proved wrong.
more like montgomry ward
The details of Montgomery Ward’s earlier dismantling are not as clear to me- I’ll try to have a look.
JC Penney
“In May 2020, JCPenney filed for Chapter 11 bankruptcy protection and in September 2020, Brookfield Asset Management and Simon Property Group agreed to purchase the company for around $800 million in cash and debt. The deal was approved by the U.S. bankruptcy court for the Southern District of Texas two months later”
https://en.wikipedia.org/wiki/JCPenney
Ah yes, JC Penney, too.
Almost like there’s a playbook they’re working from: “Neglect” business basics; Hire lots of PR flacks; Dismantle remains; get a PE ‘buddy’ to buy up said remains, dirt-cheap; give ’em a reach-around for a slice..
We’ll see how it all goes.
But there is ( one) major difference. U.S Government simply cannot ever let “Boeing” by whatever name go under. They must retain a viable ( 2 or 3 related aerospace- commercial – military – space ) companies in viable business and ‘ in house ‘ manufacturing- related capability and facilities.
So the name and odor may change, but the minimum basics will survive.
A somewhat related example would be the chip industry – Think texas instruments ‘ or ‘colins radio’ or ” hewett packard ” or even cough-spit- IBM.
@Bubba
I agree. It doesn’t mean that Ch 11 and a wipeout of the shareholders is off the table, though.
@ Frank
On a somewhat related note is this interesting article from 2 years ago (before things got even worse):
“Will the US government nationalize Boeing?”
“Scott Hamilton of Leeham News, which specializes in aviation, said a US takeover of Boeing could pose competitive concerns in the defense industry.
“”Boeing is the nation’s number two defense contractor. How would this affect defense contract bids? I imagine Lockheed Martin and Northrop Grumman might have some concerns,” Hamilton said.
“”I don’t think there’s much of a rationale for a US stake in Boeing,” said Richard Aboulafia of the Teal Group, a research consultancy focused on aviation and defense.”
https://news.yahoo.com/us-government-nationalize-boeing-013447260.html
@Bryce
I agree with Scott on this. Imagine the gov’t doling out contracts (which are supposed to be bid on) to a company it owns. You think the 767/A330 bid/re-bid got tied up in a legal mess? Even if BA were to win contracts fair and square, there would still be challenges to the awarding.
Secondly, we’re back to the ‘privatise profits and socialize losses’ conundrum. You gave away $43 billion in buybacks, plus a bunch in dividends – but now you need socialistic policies to step in and save you from capitalistic excesses.
No – I am not suggesting that socialism is the way to go, but sometimes people have to take their medicine and learn their lessons. Let BA go through Ch 11, let all those who speculated and invested get wiped out, get new mgmt in there and let it be a cautionary tale.
Boeing won’t go away, the US needs it. But people should realize that as they were cheering all the buybacks and all the profits that were being drained, they were cheering Boeing’s demise.
@ Frank
I agree completely — Ch. 11 is starting to look inevitable.
Perhaps Uncle Sam can then somehow twist the arm of LM to step in as a buyer…using tax breaks and promised contracts, for example.
Boeing jet involved in six mid-air emergencies after being cleared to fly following fatal crashes
https://mobile.twitter.com/EINBoeingNews/status/1541149389326008329?cxt=HHwWkoCyiYnNoeMqAAAA
Here’s more on that story:
“The incidents, pulled from US government air safety databases, are among more than 60 mid-flight problems reported by pilots in the 12 months after the US Federal Aviation Administration (FAA) recertified the plane’s airworthiness in late 2020.
“Former employees of both Boeing and the FAA characterised the reports — which included engine shutdowns and pilots losing partial control of the plane — as serious and with the potential to end in tragedy.
“In one incident in December 2021, a United Airlines pilot declared a mayday after the system controlling the pitch and altitude of the plane started malfunctioning.”
“But in April last year, five months after they were cleared to fly again, 100 MAX jets were again withdrawn from service after the discovery of an electrical fault in the cockpit that could result in the loss of critical flight functions.”
“The MAX’s flight control system also failed on 22 separate flights, a problem which became the primary focus of the FAA’s 20-month recertification effort after the two fatal crashes.”
“In one incident on an American Airlines flight in April last year, multiple systems including both autopilot functions stopped working soon after take-off.
“On landing, the crew found the backup power unit, considered vital for safe flight, had failed and was emitting a strong electrical smell.”
“Another report from the NASA system detailed how in December a plane had “multiple system failures” and suddenly lost altitude as the nose of the aircraft pitched downwards and its speed changed rapidly. The crew was unable to provide an explanation.
“Some planes also had a multitude of problems. One Alaskan Airlines MAX-9 was grounded seven times over five months due to malfunctions with its navigation or communication equipment.”
“A Boeing spokeswoman told the ABC, “none of the reports indicate a trend”.”
https://www.abc.net.au/news/2022-06-27/boeing-737-max-in-mid-air-emergencies-as-us-set-to-launch-probe/101175214
Interesting that these incidents only got a faint echo in the media. Even that “100 taken out of service ..” thing didn’t ring ..
How many MAX are currently in service? Less than 500?
Exactly: I, also, hadn’t heard of the 100 taken out of service due to that wiring screw-up.
This news item is now in the LNA Twitter feed also.
Thanks for the non-Twitter link- much appreciated.
Boeing stonewalling, as usual..
#nothinghaschanged
It’s actually offensive, isn’t it?
The MAX — it seems — is still a hashed-up mess of a plane. Who’ll be first to ground it again?
From the linked article:
“Joe Jacobsen, who has 37 years of experience as an aerospace engineer with the Federal Aviation Administration and Boeing and who has also worked on air crash investigations, found the incidents unnerving.
“He was most concerned about the reported incidents involving stabiliser trims, which help with the directional rotation of a plane, including during take-off and landing.
“”It’s a D-grade airplane”, Mr Jacobsen said.
“”A poor design combined with manufacturing defects is a recipe for disaster.”
> “”It’s a D-grade airplane”, Mr Jacobsen said. “”A poor design combined with manufacturing defects is a recipe for disaster.”
That final sentence is going to come back to bite that company, I think. And this is all happening *after* the fine-tooth comb
recert.. ?
Lost potential orders for BA and AB:
“Russia to spend $14.5 billion to boost local aircraft production amid sanctions”
“”The share of domestically produced aircraft in the fleet of Russian airlines should grow to 81% by 2030,” Deputy Prime Minister Yury Borisov said in a televised meeting of government officials.”
“The Vedomosti newspaper earlier reported that Aeroflot, the largest Russian air carrier, could soon sign a contract with the state-owned United Aircraft Corporation (UAC) for the purchase of 300 new aircraft.”
https://finance.yahoo.com/news/russia-spend-14-5-billion-112637552.html
With the apt mention above of “privatized profits and socialized losses” in mind:
https://nypost.com/2022/06/26/airlines-got-50-billion-in-pandemic-relief-but-are-still-screwing-americans/
Still tryin’ to figger out how airlines are
in a plane-buying frenzy, given the above..
A few months ago I read that Europeans now pay less to fly in Europe than we do to fly over here. There is some history of taking pride in our unfettered free market system which rewards efficiency and penalizes sloth. But as far as airlines go this is no longer the case. Apparently the European market is more competitive than ours, with greater penetration by discount airlines such as Ryan.
Seems that over the past 20 years Europeans took steps to promote competition in this industry while at the same we were walking back from competition with a huge round of airline mergers.
Not commenting on economy in general, only the airline industry.
Another major win for AB coming
https://mobile.twitter.com/jonostrower/status/1541466445715976194?cxt=HHwWhMCtoZfkseQqAAAA
If memory serves, Jet Airways had something like 275 Max’s on order. Indeed, there is still an order for 125 Max’s that is sitting in their order book:
https://en.wikipedia.org/wiki/List_of_Boeing_737_MAX_orders_and_deliveries
Must be part of the ASC 606 gang.
So I guess that you can count this as a flip.
Now BA can remove Jet’s orders if the AB order is confirmed.
Who said AB sold out its production slots and orders have no where to go but BA??
-> The new owners of once-bankrupt Jet Airways India Ltd. are in talks with Boeing Co. and Airbus SE to purchase at least 100 narrowbody jets for the carrier’s fleet in a bid to revive what used to be the biggest private airline in the South Asian nation before it collapsed under a pile of debt. The winning bidders for Jet Airways in a state-run bankruptcy resolution process — Dubai-based, Indian-origin businessman Murari Lal Jalan and Florian Fritsch, the chairman of London-based financial advisory and alternative asset manager Kalrock Capital Management Ltd. — plan to start flights in the first three months of next year, Ankit Jalan, a representative for the consortium, said in an interview with Bloomberg News
https://www.bloomberg.com/news/articles/2021-12-02/jet-airways-in-talks-with-boeing-airbus-for-12-billion-order
https://www.nytimes.com/2022/06/27/business/boeing-max-families-whistle-blowers.html
https://seekingalpha.com/news/3852155-boeing-slides-on-reports-of-max-problem-barrons-calls-an-overreaction
“Overreaction”, you say?
Barrons has a “buy” rating on BA…so it’s natural that they’d label this as an over-reaction.
https://www.barrons.com/market-data/stocks/ba
That exposé by ABC has really stirred up some sh#t.
Barrons has a “buy” rating on BA…so it’s natural that they’d label this as an over-reaction.
https://www.barrons.com/market-data/stocks/ba
That exposé by ABC has really stirred up some sh#t.
The ABC article is far and away the best coverage of the MAX’s post-recert issues I’ve seen.
The NYT piece seems like very carefully shaded muddying the waters, from my POV.
Yes, I have noticed the recent ‘buy’ recommendations for Boeing from the outfit you mention and others, and will make no comment on that.
The US approach to subsidies and corporate breaks have a persisting tendency to shovel
wealth ever-upwards; the EU’s- like RLI- tend more toward the common good, from my POV.
This is not to say that I think the EU is some heavenly and wonderful ruling body..
nossir.
Small point:
The EU isn’t a ruling body — it’s a loose union of sovereign states.
The EU Council and EU Commission are bureaucratic rather than executive constructs — in all respects, they are answerable to the EU member states — everything that is enacted in the EU is based on the consent of those states.
The EU is far from perfect, but it embraces dialog and compromise, and it genuinely cares about the quality of life of its citizens.
> The EU isn’t a ruling body — it’s a loose union of sovereign states. <
I understand that to be true- in principle. 😉
My comment was too cryptic. I have a friend “familiar with the process” (to use the current, vague lingo) who has suggested otherwise: like in most places, decisions are
made from the top-down, then sold/force-fed to the plebes, as necessary, it seems.
It’s *great* that you (still) have healthcare, holidays, paid leave, and the like, there. We sure don’t- not by right, anyway- here in The Exceptional™ Nation. Events are moving quickly, though..
energy flows
Yes, decisions come from the top down — but, in this case, “top” means each (elected) national government.
> The EU is far from perfect, but it embraces dialog and compromise <
As with Hungary, and Poland ? I am not an expert, or trying to be nasty; just pointing out things I notice.
Poland and Hungary previously agreed to everything on their plate — but are now trying to move the goalposts in the middle of the match. It doesn’t work that way with agreements.
> Poland and Hungary previously agreed to everything on their plate <
I think we can agree to disagree on that. 😉
” The US approach to subsidies and corporate breaks have a persisting tendency to shovel
wealth ever-upwards”
Check the history of Boeing in the 1930’s, the ATT_MA Bell story, the standard oil games and as a sideline- the results of WW1 and the ottoman Empire and the creation of Saudi, ( the division of north africa ( lawrence IN arabia ) etc- mainly cuz the change from wooden steam powered navy to oil ..
point is it is NOT always a one way street- depending on view and time
Points well taken.. mine above were meant in post-1973 context.
With 777-9 delayed, LH has no choice but to bring back A380
-> Lufthansa reactivates @Airbus A380 due to the steep rise in customer demand
https://mobile.twitter.com/lufthansaNews/status/1541436065059377152
And BA has to compensate LH for the costs of that re-instatement and operation.
-> Macron tells Biden that Saudi, UAE have very little spare oil capacity to raise
https://mobile.twitter.com/ronbousso1/status/1541465469424631808?cxt=HHwWgICwqa2rseQqAAAA
Strange that Mr. Biden didn’t know that already — oil analysts have been screaming it publicly for months now.
Funny – pre-pandemic OPEC was producing 33.67 million barrels per day, which got chopped down to 25.9 million during the pandemic. Now it’s at 30.7 million barrels per day.
https://ycharts.com/indicators/opec_crude_oil_production
Perhaps they’re just enjoying the record profits they’re raking in, huh? I mean that couldn’t be it, could it? Has to be Biden’s fault, right?
Funny how we bash Boeing and their mgmt team for milking every dollar out of the company they can, while sacrificing quality and having a terrible aircraft line-up, but oil producers? Nah – they’re high quality people who would never do that, right?
Oil wells that were stalled prior to or during the pandemic can’t just be switched on again like a light: the process takes a considerable amount of time and investment.
It’s not just Biden — EU leaders are also to blame. Grandstanding sanctions are a bad idea when you haven’t got pre-arranged alternatives.
“It’s not just Biden — EU leaders are also to blame.
But you do know that Russia is part of OPEC+
So how much of their output was part of the oft quoted numbers prior Covid ?
@ bubba2
The figures quoted by Frank were for OPEC…not OPEC+.
” Funny – pre-pandemic OPEC was producing 33.67 million barrels per day, which got chopped down to 25.9 million during the pandemic. Now it’s at 30.7 million barrels per day.”
Do those numbers come from Opec or Opec+which includes Russia?
And of course we WERE ‘ energy’ ( petroleum and nat gas ) independant ( from Opec opec +) in 2020 AFIK
The USA was never energy independent: it still imports oil at the rate of about 6.5 million barrels per day.
That’s because the oil that it produces is “sweet”crude; on the other hand, the refineries in the US are tooled to refine imported “sour” crude. So the US doesn’t have the refineries to process its own oil, and instead relies on imported crude.
Modifying the refineries will take until 2025 at the earliest.
https://fsmetals.com/about-us/blog/americas-light-sweet-problem
And about refinery shutdowns since 1992 for example
pdf file can be downloaded
search on
“Table 13. Refineries Permanently Shutdown By PAD District Between January 1, 1992 and January 1, 2022
PAD District VI 204,300 327,200 a. Facility in operation as other than a refinery since it no longer processes crude oil or unfinished oils.
Who have spare capacity???
https://www.washingtonpost.com/business/energy/opec-mulls-when-to-fireits-last-oil-production-bullets/2022/06/22/feec8868-f1e8-11ec-ac16-8fbf7194cd78_story.html
https://www.bloomberg.com/news/articles/2022-05-03/opec-fails-to-increase-oil-output-as-capacity-troubles-persist
Oil wells can’t be turn on and off like light switch.
@Frank
We don’t have to look that far. U.S. domestic oil/gas production is still below pre-covid level AFAIK. Why???
-> “U.S. and EU policymakers must therefore choose – tougher sanctions on Russia; easier sanctions on Venezuela and Iran; faster production growth from Saudi Arabia and the UAE; faster growth from U.S. shale; or a deeper recession.”
https://mobile.twitter.com/JavierBlas/status/1542246153596686336?cxt=HHwWgMC-1ZOtlOcqAAAA
** I believe neither Saudi nor UAE has much dry powder left
-> Uniper will be bailed out (or nationalized) by the German government. There’s no doubt about it. It won’t be the last utility to be bailed out. By April 2023, there will be a very, very long list. Not just in Germany, but elsewhere in the European Union and the UK.
https://mobile.twitter.com/JavierBlas/status/1542419808838377473?cxt=HHwWgoCzhZyp4-cqAAAA
The World is Round!
-> As ever, sanctions are a great arbitrage opportunity. Saudi Arabia is importing unusual amounts of fuel oil from Egypt, which in turn is buying lots from Russia. You can connect the dots
https://mobile.twitter.com/glcarlstrom/status/1542386983372296194?cxt=HHwWhMC8ocOy1OcqAAAA
-> “One number to consider. Uniper probably is paying currently ~€30 million extra for the gas it’s buying in the spot market. Multiply that for 365 days: ~€11 billion. And that’s one single European utility. Now think about other big buyers of Russian gas. And start multiplying.
https://mobile.twitter.com/JavierBlas/status/1542479882713792513?cxt=HHwWgoC8pf3R_ucqAAAA
-> Libyan national oil company says that crude **exports** have plunged to as little as 365,000 b/d. Four key oil terminals are now under force majeure. “Production has decreased and declined sharply”
https://mobile.twitter.com/JavierBlas/status/1542778202640338944?cxt=HHwWgMC–b2mhukqAAAA
-> In the middle of the summer, when we should be saving as much natural gas as possible for winter, European nations are burning lots of gas for electricity generation.
The UK is now generating >60% of its electricity output burning gas. We will come to regret it this winter.
https://mobile.twitter.com/JavierBlas/status/1542759108914323456
“Perhaps they’re just enjoying the record profits they’re raking in, ”
How much is siphoned off in the intermediary stages?
IMU most of the EU price hike profits went into the coffers of resellers. ( real or virtual vi a forward transactions.)
I don’t think it is much different with oil.
The coffer is empty, the cupboard is bare.
-> The company and the Air Force are going back and forth over the terms of a 2018 contract, which stipulates that Boeing, not taxpayers, must pay for any cost overages
https://mobile.twitter.com/DefenseOne/status/1541801600221691904?cxt=HHwWgIC-9d6YyuUqAAAA
AW: Boeing’s Digital-Design New Airliner Plan Faces Long Road Ahead
Reuters: IAG converts 14 Airbus options into orders
A third customer expressing confidence:
https://skift-com.cdn.ampproject.org/v/s/skift.com/2021/11/17/aircraft-leasing-exec-cites-frustration-over-boeings-production-problems/amp/?amp_gsa=1&_js_v=a9&usqp=mq331AQKKAFQArABIIACAw%3D%3D#amp_tf=From%20%251%24s&aoh=16568138216721&referrer=https%3A%2F%2Fwww.google.com&share=https%3A%2F%2Fskift.com%2F2021%2F11%2F17%2Faircraft-leasing-exec-cites-frustration-over-boeings-production-problems%2F