Leeham News and Analysis
There's more to real news than a news release.
There's more to real news than a news release.
Leeham News and Analysis
- How Trump tariffs affected, and could affect, Airbus, Boeing and Embraer December 6, 2024
- Start-up hybrid plane OEM MAEVE teams with MHIRJ for sales, more December 5, 2024
- Production increase delays hurt Airbus costs December 2, 2024
- Books to consider for Christmas November 29, 2024
- Slow, methodical process to restore Boeing’s trust, efficiencies November 28, 2024
Boeing strike is over; IAM members approve new contract by 59% vote
Nov. 4, 2024, (c) Leeham News: Just in: the International Association of Machinists District 751 members approved a new four year contract with Boeing by a vote of 59% to 41%, ending a nearly two-month strike.
Coverage continues tomorrow.
Once again, the IAM sides Boeing with goes to war on it’s own members.
What an absurdity , its a democracy in the union not a bolshevik class struggle
Even if it was 1% it still majority rules.
The union leaders job is to negotiate ..period. The members decide the outcome of the negotiations if they just want to get back to work.
The leadership hoodwinked them, trying to leverage the pension to stoke fervor. When the Frankenstein monster acted accordingly, they were shocked. The second offer was an affront to them, that’s why no
vote. But the third?
That’s when they contrived this Ortberg temper tantrum story to drop the pension like a hot rock, intimidate the membership via gaslighting, and end the strike they never wanted in the first place.
Pensions and other benefits don’t drive up union dues, only wage increases do that. Thus the emphasis….and the incentive.
Boeing offers a pension plan. always has. This offer improves the ‘deal’
Is that accordion music I hear….. , there seems to be grievance monkeys doing their thing
401(k) is not the same as pension AFAIK.
I think the seriousness of Boeings position has sunk in & everybody understands they need to move forward. Not out of ambition, but out of survival..
I think the offer was high enough and enough workers were running out of savings to pay the bills.
Easy to say get a different job, but that is a hiring process, new work, not as good benefits even if the salary is good etc etc. And do you want to move boxes or build airplanes? Obviously the Union workers choose to build airplanes.
Simple fact is Boeing made the offer high enough and got enough votes to end it and now it is trying to clean up the mess.
Great…so 41% of the striking workforce will be going back to work in an unmotivated / angry state.
That bodes well for manufacturing quality 🙈
—
Next up: for the partially-finished frames that have been sitting on the line for the past 7 weeks, is there any proper log of work done vs. work yet to be done?
I doubt it.
I wouldn’t like to be flying in one of those frames — assuming they’re ever finished at all, and not just scrapped.
Good questions..
Other good questions. Does the UFWD volunteers check their scripts before posting answers or is the central hive always right ?
Their predictions of financial disaster a few weeks back was instead refuted when the Boeing equity raising was over subscribed . The market wanted more
I’m glad you’re around, DoU. Hey- while you’re here: do you have a link for the “retraction” from ABC that you claimed was imminent re: their 737MAX article- several years ago?
Thanks in advance.
Oversubscribed? “The market wanted more”
Oversubscribed by how many times, do you know?? 🙄
You must be new to the capital market and how it’s run. Hehe.
The institutional buyers got a 7.7% discount compared to the closing price on the prior trading day.
Holders of the depository shares will pick up a 6% yield while waiting to convert.
BA payed $400M in fees.
Pretty clear who benefitted most from this 👀
Check my evidence below.
Since when UFWD volunteers use evidence
https://www.kirkland.com/news/press-release/2024/11/boeing-closes-24-25-billion-equity-offering-marking-largest-follow-on-in-history
The final amount was higher than initial estimates
LEAD underwriters, who knew !
Exercise of the greenshoe doesn’t mean “oversubsription”, it’s more like par for the course. On the contrary, if there’s no exercise of the greenshoe, that means the market reaction is pretty bad (the fund raising is badly run) and the underwriters would have to put up their money!
would (likely)* have to
@Abalone
Recently Japanese automaker Honda priced secondary share sale at 3%* discount only. That’s a true indication of both the sponsors’ and investors’ confidence in the company.
All storage units, whether in the factory or out in the field for the past seven weeks, have records kept of all the maintenance and storage activities.
You mean like the records kept on the re-worked door plug on that Alaska frame?
We had a whistleblower here on LNA who told us in detail how sub-par the record-keeping systems in question were/are.
Hi Abalone – your question was specific to the partially finished units that had been “sitting on the line for the past 7 weeks, is there any proper log of work done vs. work yet to be done? I doubt it.” I certainly can’t speak to the other incident, can only share that storage records are kept up and reviewed in accordance with engineering and quality requirements. In other words – yes.
⁸Abalone wrote……
Next up: for the partially-finished frames that have been sitting on the line for the past 7 weeks, is there any proper log of work done vs. work yet to be done?
Absolutely. Each control code has a work packge consisting of the Installation Plans as configured for that specific line number. Its a very structured sequence of events using a master precedence network to keep all the work packages arranged in the most logical sequence. You just pick up the work flow from where it was paused and march on……. There is no difference to the work flow between Christmas shutdown and a strike pause other than duration. Why doesnt the Cbristmas sbutdown worry you? Perhaps theres not enough drama to be needlessly created………
Thanks for elucidating the *theory* — what happens in *practice* is a very different matter.
—
From just after the Alaska incident:
“Therefore, in the official build records of the airplane, a pressure seal that cannot be accessed without opening the door (and thereby removing retaining bolts) is documented as being replaced, but the door is never officially opened and thus no QA inspection is required.”
https://viewfromthewing.com/boeing-whistleblower-production-line-has-enormous-volume-of-defects-bolts-on-max-9-werent-installed/
—
Where BA is concerned, “show me” is a much more trustworthy policy than “tell me”.
What happened once in thousands of fuselages ?
While it should never have occurred it also is not the norm.
Anyone that works with data, even including a simple grunt engineer like me knows you don’t go by a one off.
Confirmation bias at its worst or superstitions but its not technically valid and aircart fly on technicality not superstition.
And then some just want the strike to continue as its entertainment for them.
BA/BCA are good to make up some slogans and posters on the wall.
In practice, it’s a diff. story, according to a recent article by D Gates:
“A mechanic whose job is to take care of those 777-9Xs to make sure the systems don’t deteriorate in storage said parts have been removed several times without any notice to his team or documentation of the removal — a serious breach of Federal Aviation Administration regulations.”
More revealing details:
““They were stealing parts from some planes and putting them on others,” he said.
In addition to the three employees quoted, an additional mechanic and another who recently left Boeing — both of whom also worked on 777/777Xs and also requested anonymity to protect their jobs — said mechanics sometimes have even cannibalized the completed 777-9Xs in long-term storage on Paine Field.”
“Another aspect of the out-of-sequence work, according to the systems installer, is that due to supply chain shortages some parts had to be taken from other planes inside the factory and put on 777s close to delivery.”
“Due to parts shortages of things like power panels and electrical components, he said only “the bare minimum” of systems were installed on five 777 cargo planes before they moved out of the factory.
Only after the wiring was completed could freighter interior features — such as sidewall liners and light fixtures — be installed, again out on the airfield.”
Abalone wrote
Thanks for elucidating the *theory* — what happens in *practice* is a very different matter.
I agree, Standard practice does not include loss of control of a rework event by skipping the removal documentation process. Standard *practice* IS to work the Installation Plan sequence in each control code sequentially as defined by the Industrial Engineers on the Bar Chart. It’s the planned production method for in sequence work. The lack of adverse effects of shutdowns is shown to you each Christmas or Holiday shutdown. The factory closes and the work is picked up on the next Mday. You seem to be confusing an unplanned rework event failure with the planned assembly process. Thats not surprising since very few practitioners of the art post here. I suggest you don’t know what you don’t know……
“You seem to be confusing an unplanned rework event failure with the planned assembly process.”
No — I’m talking about the generic underlying lack of reliability in BA’s logging systems — whether in tracking incorporation of sub-spec composite parts in the 787 fleet, or recording door plug replacements in the MAX, or managing the part switch-out chaos on the 777 line (see @Pedro’s post).
And a 7-week strike pause is very different to a few days’ break at Christmas.
We’ll see/hear soon enough : one never has to wait long for a new, shocking revelation at BA.
“After the 7-week strike, Boeing will now take weeks to ramp up 737 MAX and 777 production”
“Boeing will now take weeks to ramp up plane production and boost cash flow, with 737 MAX output expected to languish in the single digits per month for some time, according to two people briefed on the matter, far short of the 38 a month targeted before the strike.”
https://airlive.net/news/2024/11/05/after-the-7-week-strike-boeing-will-now-take-weeks-to-ramp-up-737-max-and-777-production/
Haha weeks? Months and months.
Same applies to the 787, which appears to be heavily dependent on WA for re-work.
Only two 787s were delivered from the line in October.
Also delivered was a 4-year-old 787 from the parking lot.
Still plenty of 3-4 year-old 787s sitting in the parking lot, for all sorts of airlines — Oman, Scoot, TAAG, Vietnam, Korean, various Chinese carriers, …
maybe 787 freighter conversion candidates?
Does this mean they *won’t* be producing 38 MAXes p/m by year-end, as Boeing previously
announced (with a strike on the horizon att)?
Don’t worry: @DOU has informed us that cashflow is all that matters 🙈
Mind you, cashflow is negative — but that doesn’t seem to be cause for concern 🤭
Yes, I saw that from that one.
What a hoot-
At least airline planners will know when this new contract will end and so can pencil in the next scheduled strike at BCA. And all sorted in good time for the new Presidential elect.
Fingers crossed KO uses this to KO a Boeing revival.
By law, unionized workers can’t be fired during a strike.
But the strike is over now — so when will the first layoffs begin?
Any word on where (foreign) regulatory approval is for BA’s planned acquisition of Spirit Aero?
The BBC reported a few days ago that AB’s acquisition of Spirit Belfast is expected to be approved by regulators in “mid-2025″…though it’s not clear which regulators were being referred to.
https://www.bbc.com/news/articles/c5ymg5plxyro
The UK regulator will be the Competition & Markets Authority.
As it says in the BBC article you linked to – the process only starts once the deal is finalised.
The deal will have to pass muster in many more jurisdictions than just the UK.
Looking forward to what Chinese regulators have to say on the matter.
“Report: China increasingly uses merger reviews to make demands of US companies”
https://arstechnica.com/tech-policy/2023/04/china-fights-us-export-bans-by-slowing-down-reviews-of-tech-mergers-report-says/
I think this is a good move.
“Boeing also promised to build the next airplane in the Seattle area. “They’ve never given us a commitment” to a new airplane before launch, Holden said.”
https://www.reuters.com/business/aerospace-defense/boeing-workers-vote-wage-deal-that-could-end-strike-2024-11-04/
This is the best part.
I’m not a fan of unions in general, however previous Boeing management trying to “screw over” the unions has cost Boeing……BIG TIME!
I’ve also been advocating here for people to pick up some “cheap” Boeing shares. Once things start to settle in, Boeing stock will start appreciating, if not in anticipation of the company starting to increase deliveries, etc.
Just because BA shares are “cheap” …doesn”t mean that they can’t get a lot cheaper 🙈
The strike may be over, but that doesn’t mean that the company is (anywhere near) out of the woods.
Don’t forget: the recent equity issuance diluted the share pool by about 20%.
That thus means an automatic downward revision of future EPS estimates by 20%.
Markets don’t like downward EPS revisions…🙈
“The offerings were upsized from the original announcement, and the underwriters have already exercised their over-allotment option in both offerings. ”
Much more successful than they thought
https://www.kirkland.com/news/press-release/2024/11/boeing-closes-24-25-billion-equity-offering-marking-largest-follow-on-in-history
Boeing is of course is in process of buying Spirit
EPS doesnt matter , its free cash flow now
EPS only mattered in the days of dividends, remember those.
Those fools that predicted Chapter 11 have egg all over their face. But that was only UFWD talking points they were spouting…hehehehehe
See my response regarding exercise of the greenshoe above ☝
Total incompetence from both Boeing and the union’s management.Why didn’t either of these highly paid office boys bother to talk to the actual workforce?I can’t understand any of the strategy of either party and the strike and massive damage to the workers bank accounts and the company could have been avoided.How can it be possible that Boeing is not legally able to be allowed to speak to its own employees to ask them about their aspirations?Both sides appear to have been more interested in ego ,or worse,their own pockets
@Grubbie
I am shaking my head too. Holden will never be heard from again. A lot of ego to go around. It is never a good idea to forget who you work for. Management was tone deaf and condescending.
The IAM should be happy though. It was not a total victory but you take your winnings off the table and move on.
““include a 38% wage increase over the contract’s four-year span that would push average pay for the workers to just shy of $120,000 a year.” IAM President
Your comments about labor negotiations are too silly for words.
The Union puts forwards its claims to the company at the beginning of contract negotiations .
The defined benefit pension plan- the sticking point for the strike was always in the union ask .
Boeing always had its payments into the personal 401K as part of its offer. A 401K moves with the employee into different jobs over their working life.
If some wants a defined ‘pension payment’ once the retire they just buy an annuity ! or they live on the US Social Security pension and just use 401K investment for unexpected costs
US Social Security, that’s a laugh. my social security “pension”, taken at 62 will equate to 16.1% of my current salary.
meanwhile I’ve payed 15% of my salary every year (between my contribution and employer match). had that gone into a 401K I controlled, my retirement income would exceed my current income.
the 401K is in ADDITION to the federal Social security payments.
Plus a 401K is an asset if you die early your survivors can use it .
A defined pension plan doesnt do that , swings and roundabouts
The USG is running a $1.83 trillion fiscal deficit at a time when the economy is growing (at least according to the government), not during a recession or a depression or a war emergency! Somewhere things have to let go, either becomes a banana republic and defaults the debts or other measures (wink wink), it can’t continue. Both candidates talk up spending but there’s no discussion of any tax increases or cuts to the entitlements. Living in fantasy land.
duh.
point is SS is garbage and the fact that the politicians use it as a fear lever while stealing from the “trust fund” makes it worse.
Get it out the door!Another dangerous period for Boeing is about to begin
FAA oversight of the production process still there
Is that supposed to be reassuring…?
+100
@Abalone:
“Just because BA shares are “cheap” …doesn”t mean that they can’t get a lot cheaper 🙈”
I wrote why IMO the shares are “cheap”. Also, the large dilution had very little effect on the stock (which is a good sign). The money from the stock dilution is going to be used as a “cushion”, not necessarily spent.
Yes, I saw your opinion — but I don’t attach much weight to it. Profits aren’t determined solely by deliveries — they also depend on the *margins* on those deliveries. BA has “delivered” lots of aircraft since 2019 — but it has’t made a penny of profit on them.
Not sure about your “cushion” — BA already has a whole load of near-term liabilities lined up that will eat through that extra cash very quickly…including near-term debt repayments, the acquisition price for (loss-making) Spirit, the assumption of Spirit’s debt, $14B in accounts payable, $20B in accrued liabilities, etc.
And the EPS now automatically goes down by that extra 20% — whether that suits you or not.
“Yes, I saw your opinion — but I don’t attach much weight to it.”
-LOL..that’s fine by me. So far, ostensibly it seems “The Street” likes it (stock is up pre-market). Coincidentally, even during the strike and Boeing’s dilution announcement, the stock hasn’t moved too much. Again, ostensibly, that means “The Street” doesn’t believe the dilution will hurt Boeing long-term. Of course, situations change however I’m talking about as of today – 11/05/2024.
” they also depend on the *margins* on those deliveries. ” –
-Have you seen Airbus profit margins? —->5%.
“Not sure about your “cushion”
-Going by what Boeing recently stated.
“And the EPS now automatically goes down by that extra 20% — whether that suits you or not.”
-It’s not as if they were making lots of profits (or even revenues) in the first place.
The strike is ending and Boeing (hopefully) will get back to what they should be doing – building and delivering planes.
The extra shares issued last week haven’t even hit the market yet — they were sold in OTC transactions to institutional investors. And the preferential shares in that mix haven’t even been converted to ordinary shares yet — they’ll be traded under a separate ticker until the conversion date.
The dilution will manifest itself in the stock price once some of the institutional investors decide to unload. If the share price drops below $147, those shares will no longer be above water.
But, by all means immerse yourself in optimism 👍
Regardless if the ordinary and preferred shares have been issued or not is rather moot as it’s already known what the dilution factor is and how that will affect earnings, etc. Those are very easy calculations.
Apropos, I’m doing well in my Boeing investments…don’t need your advice on Boeing, thank you very much.
There’s no pop – buy the rumor, sell the news.
BA is down more than $2 rn.
All major indices on Wall Street are green today…but BA is sinking further into the red (currently down more than 2%).
Time for a sobering reality check now that the strike is over 🙈
Nov 6 will begin a new era of BCA mfg in Renton and Everett Gone are the days of the Boeing CEO tucked away in Chicago, DC or their mansion on the east coast The new CEO will be hands on being on shop floor weekly. Time to start a lean mfg practices and reduce headcount from 33k (getting rid of rework will cover some of pay increases)
With Amazon going to 5 day RTO I wouldn’t be surprised Boeing bands personal electronic devices (e.g. cell phones) on the shop floor during working hours.
“Lean manufacturing” practices are the last thing Boeing needs ATM.
Forbes:
“With a backlog of more than seven years and airlines clamoring for aircraft to meet demand that has returned following the pandemic, the strategy is clear – produce aircraft, realize profit on each unit delivered and dig out of the financial hole in which Boeing finds itself.”
(1) “produce aircraft”
Will take years to get back up to meaningful line rates — see recent LNA article.
(2) “realize profit on each unit delivered”
Hasn’t happened for the past 5 years, and won’t be happening any time soon. Costs have gone up — not down — and margins on the order book are too thin (over-discounting).
(3) “dig out of the financial hole”
Loan servicing costs have gone up, not down. Soon, Spirit’s debt will be added to Boeing’s. Cash on hand isn’t even enough to cover accounts payable + accrued liabilities…yet alone reduce debt.
https://www.forbes.com/sites/jerroldlundquist/2024/11/05/boeing-machinists-strike-ends-setting-the-stage-for-a-lengthy-recovery/
BA stock currently down 0,84% (16:08 CET) — one can only guess why 🙈
Let’s see how it goes:
It takes time to clean up or at least for BDS to have a firm footing …
https://www.marketwatch.com/story/boeings-stock-fails-to-hold-gains-after-strike-ends-but-bonds-are-holding-up-1c43f18a
From your link:
“Customer flows show net selling of the company’s longer-dated maturities, however, suggesting some are taking a “sell-the-news” approach. Customers may also be taking duration off on a potentially divisive Election Day, said one source.”
Reached the low of the day three minutes ago ~15:05
Will Trump win??
Forbes: A Trump Win Could Be Costly For Boeing And Aerospace & Defense (paywall)
You get the vibe…
is this the same contract offer they rejected a few weeks ago?
No.
Specially for you, because I know this topic is a favorite of yours 🤭
“Boeing Dismantles DEI Team as Pressure Builds on New CEO”
“Boeing Co. has dismantled its global diversity, equity and inclusion department, making it the latest high-profile corporation to make changes to its DEI policy as its new top leader oversees a broader revamp of the company’s workforce.
“Staff from Boeing’s DEI office will be combined with another human resources team focused on talent and employee experience, according to people familiar with the matter. Sara Liang Bowen, a Boeing vice president who led the now-defunct department, left the company on Thursday.”
“Boeing’s new Chief Executive Officer Kelly Ortberg is streamlining the planemaker’s operations and trimming its executive ranks as part of a broader 10% reduction in headcount. The shift also comes as large US companies face increasing pressure from conservative activists to dismantle or downplay their efforts on diversity, equity and inclusion.”
https://www.insurancejournal.com/news/national/2024/11/05/800130.htm
A step in the right direction, anyway. 😉
how is it different?
Larger pay increase, larger signing bonus, very slightly lower healthcare costs.
Anyone has a guesstimate of the demographic splits of yeas and nays vote?
That’s a very interesting question.
However, I doubt that the union will disclose that information (assuming that they tracked it at all).
Perhaps LNA can do an analysis, based on its industry sources.
+1
@Abalone
Pretty sure it was secret ballot. Given the nature of variance wrt the last offer, it does not take a lot of guesswork to presume the swing votes came from younger workers.
A ballot can be secret…but can still potentially contain boxes for age range, gender, etc.
I don’t necessarily agree that the younger workers were the ones who swung: they were doing gig work at a similar wage level.
“Great…so 41% of the striking workforce will be going back to work in an unmotivated / angry state.”
this is a good “Tell” for Boeing that the new commercial aircraft FAL should be located in SC with high level of automation designed into the mfg. processes
Wunderbar!
Bloomberg: Cathay Pacific Eyes Talks for New Long-Range Jet Order From 2025
Which aircraft would you bet??
And Riyadh said yesterday that it, too, will be placing a widebody order in 2025.
https://www.ch-aviation.com/news/146470-saudis-riyadh-air-plans-widebody-order-in-2025-cfo#:~:text=Riyadh%20Air%2C%20which%20hopes%20to,more%20than%20120%20by%202035.
A350, no? There won’t be any of the other outfit’s “product” available in 2025- if ever.
Just offer (meaningless) “early slots” and sell at a loss — it’s a policy that has clocked-up a lot of orders to date, hasn’t it..? 🙈
..sell at a loss but make it up in valium, right?
For growth in the next decade.
👇
Oct 16, 2024
https://www.bnnbloomberg.ca/business/2024/10/16/cathay-asks-boeing-to-remain-transparent-about-aircraft-delays/
May be BCA is enticed to double the compensation doling out! 👍
“2026” for the 777-X, eh?
here, pull the other one.. 😉 😉
#nagahappen
#delusion-all
‘Brian Bryant, IAM International President, issued the following statement:
“This agreement represents a new standard in the aerospace industry – one that sends a clear statement that aerospace jobs must be middle class careers in which workers can thrive. Workers in the aerospace industry, led by the IAM — the most powerful aerospace union in the world — will not settle for anything less than the respect and family-sustaining wages and benefits they need and deserve. This agreement reflects the positive results of workers sticking together, participating in workplace democracy, and demonstrating solidarity with each other and with the community during a necessary and effective strike. ”
interesting “aerospace jobs must be middle class careers”
“include a 38% wage increase over the contract’s four-year span that would push average pay for the workers to just shy of $120,000 a year.”
I didn’t know that “middle class careers” are now $120k a year before OT
what do you think they are (and what is the definition of the middle class to you?)
middle class means not struggling to pay your bills, have enough to build a nest egg and own a home and support your family of 4 on 1 salary.
you certainly can’t do that for less than 120k in Seattle, or most of the rest of the country either. 20 years ago 120k was upper middle class, now it is barely middle class.
in 2002, the average IAM 751 worker made $54k/yr, currently the average worker makes $75.6k. $54K adjusted for inflation is $94.6k today, so they are way way behind where they were in 2002. so this contract basically (by the end of it) gets them back to inflation adjusted par when you factor in elimination of the pension and increased out of pocket health care costs.
and that’s what we learned during the strike…Seattle is too expensive to live in and produce commercial aircraft
as for what middle income is
“South Carolina’s median household income was $69,100 in 2023, up from $61,770 in 2022”
“The average home value in South Carolina is $296987, up 2.7% over the past year.” (compared to “The median listing home price in Seattle, WA was $799K in September 2024)
as for living one income in the US ….
“About 33% of families with children in the United States have only one spouse employed”
Seems like the Seattle region lives in their own economic world compared to the rest of the US
SFO, NYC, Long Island, etc are more than Seattle.
But they don’t build commercial aircraft in those areas……
and yet somehow, Airbus manages to sell aircraft at a profit making aircraft in Germany, England and France with extremely powerful unions, high pay and benefits that put american worker benefits to shame.
labor cost is not the problem. management greed is the problem.
+1
‘Godfather Of Aircraft Leasing Outlines Boeing’s Next Steps’:
https://airlineratings.com/articles/godfather-of-aircraft-leasing-outlines-boeings-next-steps-
Some interesting Udvar-Hazy content.
AW: “USAF Expects KC-46 Deliveries To End In 2031, KC-135 Recap To Follow
can the 787 be modified to be a tanker? (without becoming a frankentanker) If so, use that for the next bid (newer engines than 767) Close down the tanker line in Everett in 2032 and build a new stand alone 787 tanker building in SC
I think that a HGW 787 — with freighter/tanker variants — would be an intelligent addition to BA’s lineup.
There are challenges to making cutouts for cargo doors in the 787 fuselage, but they don’t sound insurmountable to me.
I personally don’t think that the 777X is ever going to be certified…but beefing up the 787 lineup might fill that vacuum to some extent. And, as you point out, it would probably cause fewer headaches than the KC-46A.
A350F is a carbon fibre fuselage freighter in development.
The B787 uses the same thin skin with closely spaced internal ring frames semi- monocoque structural design [ note for TW its not a full monocoque without internal frames ]
The existing belly cargo and passenger door cut-outs have appropriate additional reinforced features
Abalone wrote
November 5, 2024
I think that a HGW 787 — with freighter/tanker variants — would be an intelligent addition to BA’s lineup. There are challenges to making cutouts for cargo doors in the 787 fuselage, but they don’t sound insurmountable to me.
OMG we agree on stuff, it was bound to happen….
The 787 freighter offering was protected in the initial design
The 787 has already added the provisions for cargo work to the passenger plane. Main deck floor beams and stanchions are sized for pallet loads which are greater than seat track and self loading freight loads. Cutting the doors is relatively easy as the frames at the door outline are doubled with a kerf line built in between them. These minimal weight additions were done to make conversions easier in the future. The thing that gives me the willies about a 787 tanker is the fact that its a fully electric airplane and that creates a much larger body of work recreating the entire airplane electrical system with explosive/vapor proof wiring. Thats really hard. The EBond package will be immense
“assume a can opener, and a self-building, self-QCing aircraft..”
I think Ortberg seeded the negotiations to the in place people as he was not up to speed.
Huge mistake. It also seems he did not negotiate full control when he took the job, also a huge mistake.
Having worked in a toxic and dysfunctional operation for many years, you plug on through because you have to pay the mortgage. Its no fun but its not the end of the world.
More typical US situation than not.
Boeing has bigger problems than the strike though allowing it to happen was stupid.
Now its back to 3 and 6 month snapshots. Day in day out alarms are not relevant, its the trajectory over time, up or down that matters.
Oct 9, 2024
LNA: “The last strike by the union, in 2008, ran 57 days. It took two years for Boeing to fully recover from that one. Then, its production system was operating smoothly.”
Uh oh.. D’OH!!!
17:33
“Breaking: Boeing supplier @SpiritAero says there is “substantial doubt” whether it can continue to operate as a going concern”
https://x.com/davidshepardson/status/1853928759016951810
What’s the fallout tomorrow? How’ll the open of BA look like?
#shouldbeFine
I suspect the AB>Spirit absorbtion will be somehow smoother.
😉
Adding: maybe Boeing’s Partnering for Poverty schtick
had some unanticipated consequences?
[chortles heartily]
I hope the new shares were all* picked up by “long-term” investors. Let’s see.
Unfortunately, the newly established $10 billion credit facility was canceled along with the recent fund raising. Oops.
Forgot to add:
“In our coverage late last night, we specifically called out the weakness of the supply chain and specifically the state of @SpiritAero coming out of the 53-day strike.”
https://x.com/jonostrower/status/1853939216532811776
The patient released from the hospital is now back in the ER??
My *short-term* prediction is that Boing’s stock will continue levitating for awhile, against all odds.
Viewing the Situation with interest. 😉
Reuters:
“Spirit’s cash balance at the end of the third quarter of 2024 was $218 million, according to an October filing.”
“Spirit Aero said in October it had drawn down an entire $350-million bridge loan set up when Boeing agreed to acquire the supplier in June, confirming an earlier report from Reuters. Spirit Aero has previously disclosed it used up a $425-million customer advance from Boeing.”
https://ca.finance.yahoo.com/news/spirit-aero-raises-doubts-over-222526624.html
A few hundred million dollar is no big deal for BA, right?
It seems it’s part of the 10Q filing, so… harrah!?!
https://x.com/davidshepardson/status/1853928759016951810/photo/1
Somehow Spirit Aero gets warmed over long enough for the acquisition to occur. The only thing that would stop this is if there is a regulatory concern. It is too much in Boeing’s interest to see to it that they have a continuity of supply. Maybe making all those fuselages and stacking them up outdoors as poor quality WIP was not the brightest idea. Even if Spirit goes bust…Airbus and Boeing will pick the carcas clean of the assets it wants.
Spirit the airline will go bust before Spirit the supplier.
@Casey
Cash flow is an issue, you can’t tell your employees and suppliers to postpone their wages and payments due until BA actually takes over.
@Vincent
No they won’t work for free. By “warmed over” I mean Boeing and Airbus will ensure enough cash to continue operations. They may need to modify terms of buyout slightly to contemplate the purchase price.
@ Casey
The Spirit takeover may indeed fail — or get really slowed down — when reviewed by regulators.
And what happens if/when Tr#mp says that he won’t allow the sale of “our great American industries” to a European competitor?
Don’t try to invoke any form of logic in your answer, because logic is now defunct — all bets are off for the coming 4 years.
So, looks like BA will be giving (yet another) cash handout to Spirit, to keep the lights on until a merger can be consummated.
Mind you, consummation isn’t expected until mid 2025 (nominally), so that’s going to be one hell of a cash bleed for BA in the meantime.
Just in time when BA is flush w/$$$$!
One wonders if this was disclosed to investors before last week’s equity float…?
Oh, dear — I sense lawsuits in the pipeline…
Nah, no big deal. The standard rules do not apply to BA.
Now OTOH, if another, third aircraft from that beleagured outfit were to crash, all bets would be off.
Oct 15, 2024
https://aviationweek.com/air-transport/aircraft-propulsion/daily-memo-boeings-breakup-not-if-how-when
“While practically no one in industry expects Boeing to reach and maintain a production rate of 50 new 737s a month within the next two years.”
Don’t forget: yet another FAA review of BA processes was announced last week –> further drag on line rates.
To be fair, that rhetoric is likely FAA Theatre, meant for “we’re on the ball!” public consumption.
“If it’s Boing, I’m not going” still fully applies- at least for me. Imagine the consequences of a third-in-a-row MaxCrash..
Agreed on all points.
But a review still won’t be conducive to short-term rate increases.
Yes- I linked that one a number of days ago. Makes sense to me.
Sorry. Missed that.
“Spirit the airline will go bust before Spirit the supplier.”
Fully agreed- though I’ll point out that a culture can ill afford very many TBTFs.
#interestingTimes
“Could be a decade before Boeing is back to normal, analyst says”
[Spoiler — the analyst is Scott Hamilton]
“That’s according to Scott Hamilton, an aviation analyst with Leeham Company, an aviation news outlet. Hamilton told KUOW’s Angela King that the labor contract Boeing’s machinist union approved Monday is just one hurdle the company is facing. Boeing has a lot of work ahead to build itself back up.”
“”The future is going to be bleak in the near term, because they are losing billions of dollars a year, and the cash flow is still negative,” Hamilton said. “The cash flow is probably going to be negative well into next year … Here at Leeham company, we think it’ll take Boeing a decade to get itself back to its 2018 level, where everything was going smoothly, all the production lines were producing a good rates, they were making profits, good cash flow.””
“While Hamilton believes it will take Boeing about a decade to get back to smooth operations, the relationship between the company and its employees could take even longer.
“It’s going to take decades, because the relationship between management and labor at Boeing has been toxic for a long, long time, and [new Boeing CEO Kelly Ortberg] is not going to come in and be able to walk the factory floor, and glad hand, and just say, ‘Everything’s fine. Let’s do a reset.’ Some of the way that Boeing handled these contract offers really irritated some of the members. This one was characterized as an ultimatum. Well, none of us like to be faced with an ultimatum. It’s going to take him a long time to change the tone here.”
https://www.kuow.org/stories/could-be-a-decade-before-boeing-is-back-to-normal-analyst-says
Isn’t there a commenter (or two) here who says “free cash flow is everything” ? So does *negative* cash flow count, too?
Can’t recall the voluble expert dude here’s name right now.. maybe he’ll chime in.
🙂
Some people think a minus sign is just a hyphen 🤭
Wasn’t that same commenter regularly telling us that inventory was worth a fortune? Mmhh…that worked out well.
Don’t forget: prosperity is just around the corner!
Based on the news right now, it looks as if we’ll be talking about tariffs and (trade) wars for the next 4 years 🙈
Is this necessarily the end of the world for Boeing considering that they can sell far more than they can make at the moment?
Not necessarily a huge problem for Boeing Commercial: they’d already lost China one way or another, and there’s sharply decreased interest for BA planes in Europe. That having been said, it’s worth remembering that a huge portion of the BCA order book can be cancelled without penalty: most of the 777Xs and MAXs, and a sizable portion of the 787s.
I can also imagine that interest in BA’s defense products will be (rapidly) cooling — there are other places to buy advanced weaponry without all the drama.
I wouldn’t be surprised if the PW GTF gets caught up in the trade mess. At least CFM is a 50/50 JV between GE and Safran, so it may be able to de-couple relatively “easily”.
Airbus needs to sit up, pay attention and get (ex-Spirit) A350 and A220 part production off US soil.
More disruptions to the (much weakened) supply chain? Is that truly what BA needs right now??
LT interest rate may go up unless there’s YCC but the world is changing … FAFO.
US interest rates up explosively today, indicating mass dumping of treasuries.
Concurrently, interest rates on loans, corporate bonds and mortgages are rising.
Not good news for companies engaging in debt rollovers.
A lot more of that to come 🙈
Which interest rates are up explosively? I can’t see mention of this.
@ Woody
10-year treasury bonds, for example — highest levels since july. At one point up more than 40 basis points.
Other maturities also up.
https://www.cnbc.com/2024/11/05/us-treasury-yields-as-traders-await-results-of-presidential-race.html
“Notably, China, which was once the largest foreign holder of U.S. debt, has reduced its holdings significantly, from a peak of $1.316 trillion in 2013 to about $749 billion by mid-2024. This reduction is part of a broader trend of decreasing foreign ownership of U.S. debt, driven by geopolitical shifts and policy changes both in the U.S. and abroad. Such a reduction in foreign investment could force the U.S. to offer higher interest rates to attract new investors, thereby increasing borrowing costs further.”
@ David Pritchard
Correct regarding China.
Time now to also pay attention to Japan, with its huge holding of US treasuries. The yen keeps falling w.r.t. the dollar — not for fundamental reasons, but because of a lucrative yen-dollar carry trade (borrow in yen at low rates and invest in US bonds at high rates). The Japanese Central Bank is tired of this and has started dumping treasuries as a counterbalance. In April it dumped $37.5B worth, and in May it dumped $22B worth…
https://dailyhodl.com/2024/08/03/japan-dumps-22000000000-in-us-treasuries-in-one-month-as-government-mounts-billion-dollar-battle-to-prop-up-currency/
This effect is only going to accelerate now that we know who won the election.
As it happens, the US Treasury had a 30-year bond auction yesterday, and had to pay 4.6% yield (per year) to investors. In contrast, the German government only has to pay 2.6% on its new 30-year bonds, and the Japanese government only 2.19%.
Think about that.
This effect is detrimental for any entity borrowimg in dollars (such as US companies). It’s forcing some entities to issue yuan debt instead, at much lower rates — such as the recent Turkish airline leasing deal in yuan.
AW: Airbus has matured its concept for a maritime patrol aircraft based on its A320 narrowbody product line with proposals for a platform based on the newest member of the family, the proposed A321XLR.
https://x.com/AviationWeek/status/1853812022384665001
Good move 👍
Major de-coupling coming.
Market broadly up…but BA stock down again.
Currently down 2.15% (18:10 CET).
Now at $147.76…sinking closer to the $143 price paid for last week’s share float.
Looks like investors expect that BA will suffer under the effects of more tariffs.
“Bottoming” continues…
I heard the market is approaching a peak, what’s the impact for BA stock if the market goes down?
BA stock closed yesterday down 2.54% — on a day in which all the major indices were up at new records.
Currently down another 0.13% in out-of-hours trading, at $146.97.
Must be making those new holders nervous — they bought at $143, and thought they were getting a bargain…
“Iberia’s New Airbus A321XLR Makes 1st Revenue Flight From Madrid To Paris CDG”
“Iberia has just completed the world’s first passenger flight with the Airbus A321XLR, touching down at Paris Charles de Gaulle (CDG) this morning. ”
https://simpleflying.com/iberia-new-airbus-a321xlr-1st-flight-madrid-paris-cdg/
Nice job, Airbus!
Madrid to Paris ?
You got to be kidding me ….thats it ?
After 5 years development for a new belly tank , I think the balloons are long flat.
But lets all hear it for derivatives of derivatives grandfathered in …is the cock pit displays still those 1990s style brief warning text messages
It’s called a practice run, to familiarize crew with the new frame…surely you’ve heard of those before?
For example: Qatar used its first A350 to do short hops within the Gulf, and SIA used its first A350-ULR on short hops to Hong Kong.
The article above even explains it for you:
“Indeed, these are merely the short-haul proving flights that most long-haul aircraft complete before getting their intercontinental wings”
🙈
@Duke:
You gotta take baby steps, I mean you have to sort out the latest whiz bang and make sure it works.
Its worth watching the following and the swamp of alarms Airbus throws at you vs a simpler Boeing message, Alarm, your engine just fell off. Go to the QRC. Are you Flying Still?: Yes/No. If yes, count your lucky stars and get it on the ground ASAP. If no, well it does not matter does it?
https://www.youtube.com/watch?v=lzmlyNtc_as
FYI:
AW: “For pilots, operating the [737] is like driving around in a 1968 Chevy Impala with a dashboard that has a tape deck and ashtray.
Cool.
Lol. Don’t you know these are familiarization flights for a new type?
With Spirit in distress, you can add its billion in debt to Boeing debt and then add in another billion or so to get it through to the takeover.
If I was Airbus I would be very afraid.
@TW
For the reasons you mentioned, I have little reason to believe Spirit the supplier will block on regulatory basis. Usually that is done if there is a competitive reason and sometimes pure politics come into play. Hard to imagine competitive reasons “should be” an issue since it used to be owned by Boeing. Boeing and Airbus will pick apart whatever mess is left it files for bankruptcy…just having a really hard time seeing Spirit having a viable future as a standalone company. However, the stock price is still $31 which is par for the course since the bottom fell out with the pandemic. Wall Street is not too spooked yet. I can contemplate a scenario where Airbus or Boeing co-signs on any debt instrument needed as a gap measure.
If you want an entity that is really on thin ice…spirit the airline is at $2.72.
Now I am wondering if Spirit does go bankrupt and what that does to Airbus and its “deal”.
As I understand it (and having lived through one) the court decides how to sell stuff off (assuming it goes in that direction). At the time my company was a weird multi headed monster incalculably Meat Plant sanitation, landscape, filter changes, yea weird, we were mechanical maint section). Our mechanical section was deemed worthy of a pickup and another company bought that.
So Airbus has to buy out their part, Boeing the rest (can’t see anyone else bidding). . I don’t see a benefit in Airbus actually paying for their end per Boeing as it goes towards the debt (percentages reduction of some kind) – it would be good to see Airbus pay its own way and not a clue why Spirit would pay them.
Equally the Boeing buy would be null and void. No idea if you can still buy stuff per Boeing and its increasingly worthless stock or its cash up front.
A strange situation where Spirit has serious value only to who it makes stuff for. We have seen how the Airbus structures parts did not sell and Airbus wound up keeping them.
@TW
Hypothetically if Spirit the supplier files…my guess is it goes Chapter 7. Chapter 11 is only viable if someone really wants to own the company as a standalone entity. But that is a dodgy business since Boeing and Airbus have free reign to refuse COPQ WIP. Chapter 7 allows the pieces to be sold off and really on Airbus and Boeing are interested in the pieces anyways.
Some considerations…DIP financing would be arranged prior to any filing. Unsold WIP “could be” held up but likely not since that would materially effect the viability of the sale. It is not like Spirit can immediately start making different product. Any loans from Boeing or Airbus would be written off (as well as to other creditors). All are incentivized to take a little less to preserve the sale of the company. And finally, the sale of Spirit to Boeing is a stock swap. Spirit can always take on new debt or issue new equity to cover the cash flow bridge.
The TWA (the airline) bankruptcy is an example to follow for Spirit (the Boeing supplier). TWA went into Chapter 11 as a pre-condition for American to buy it.
@Scott
BCA can’t afford to destabilize SPR’s supply chain or anger WS.
My point was SPR won’t file Chapter 7 bankruptcy (liquidation). If anything, it would be Chapter 11 (reorganization). It could be pre-packaged, too.
“Any loans from Boeing or Airbus would be written off (as well as to other creditors).”
what happens to the $559m payment needed to complete the transfer of assets to Airbus “while Airbus will pay a nominal sum of $1 for the assets”
“My point was SPR won’t file Chapter 7 bankruptcy (liquidation). If anything, it would be Chapter 11 (reorganization). It could be pre-packaged, too.”
during the Chapter 11 process, maybe a private equity group comes in to take controlling interest of Spirit Aero and have more cash available to run operations than Boeing would
One names comes to mind Onex They were interested in parts of Spirit Aero in the past
“Our private equity platforms support talented management teams in building high-quality businesses. We have invested in more than 100 businesses and completed over 800 add-on acquisitions with a total value surpassing $110 billion.”
https://www.onex.com/private-equity
@All
As it relates to unsecured debt…that is generally always settled for pennies on the dollar. Shareholders wiped out. Contracted sales rates to AIB and BA nullifed and re-negotiated.
SPR shareholders will be incentived to issue new equity in order to maintain their sale terms. Better to take a reduced return rather than no return.
@Scott:
Thank you. Generally a murky subject for most of us I suspect, certainly me.
Our bankrupt operation was different in that the company just went belly up.
A bit of a revelation in that it then got funding and to keep it from falling apart and no value, I got a big raise (they needed to keep key people or it had no value).
The outfit that bought our section out then drove it into the ground. Call it a mini Boeing. Difference is it was a service and the employees would work for anyone that paid them, the value was in the employees (or some of them).
After 30 years FedEx decided they had enough of the Chaos of outsourcing and took it in house. 5 years too late for me.
My value was in the combination of skills and knowing the systems. But if a company does not care, then its meaningless.
I lived through the whole airline bankruptcy period, as an employee and as an aviation journalist, from 1982-1995. Most airlines take a long time to die and nearly all (at least in the US) filed for Chapter 11 first before finally merging or liquidating. American, Continental, Delta and United all successfully reorganized out of Chapter 11. Eastern, Pan Am, TWA and many others disappeared.
Scott, Is there a good book that you recommend that covers the Continental, Northwest bankruptcies including the names of Frank Lorenzo, maybe Al Checci, etc.,… I know when they decided to bankrupt Northwest they brought in the creative lawyers that handled the Continental proceedings. I think the creditors didn’t mind it because they were spared. Common stock was wiped out as were union pension obligations.
Airbus doesnt ‘get a cent’ for any transfer of assets.
In northern Ireland Short Bros PLC is still the company entity running the factories and owning the IP.
Spirit is the sole shareholder They could tip it into british insolvency administration by Mon if they wished to stop funding the company over the weekend.
Whats Airbus to do but pay £ billions to become the sole shareholder of Short Bros PLC and any debts .
Also important to realize not all bankruptcies are created equal. Airlines are many things…but at their basest level they are a means of monetizing aircraft. They are service companies with little in the way of assets (since most now lease their aircraft) except maybe prized gate slots at constrained airports. Air travel is now one of the most commoditized products you will find. Spirit the airline could disappear tomorrow and those aircraft will fly somewhere else.
Spirit the supplier sells very specific product to a captive audience that cannot meaningfully move their work anywhere else. They simply cannot be replaced (not in a rational way). Whatever happens with the finances the pieces of Spirit the supplier will continue to make aerostructures for Boeing and Airbus. I would say that will likely be as part of those companies but stranger things have happened and maybe there is a scenario where SPR goes bust and someone tries to stand them up as a standalone company.
@DoU
“The transaction would cover the acquisition of these activities. Airbus will be compensated by payment of $559 million from Spirit AeroSystems, for a nominal consideration of $1.00, subject to adjustments including based on the final transaction perimeter.”
https://www.airbus.com/en/newsroom/press-releases/2024-07-airbus-enters-agreement-with-spirit-aerosystems
—
Earlier, from 2019:
“Bombardier has agreed to sell its historic wing-making factory in Belfast to the US aerospace manufacturer Spirit Aerosystems as part of a $1.1bn (£850m) deal that ends months of uncertainty over the jobs of 3,500 highly skilled workers.
“The Canadian aerospace company put the historic Short Brothers plant up for sale in May after a difficult period for the factory, where wings are made for Airbus’s A220 aircraft and which supplies parts for Airbus’s A320neo and Bombardier business and regional jets.”
https://www.theguardian.com/business/2019/oct/31/bombardiers-belfast-factory-sold-to-spirit-in-850m-deal
@DoU
Another jump into the fantasy game with half-baked idea.
Does BA/BCA still dream of taking back control of the 737 fuselage production? GL.
P.S.: Any competent lawyer would ensure the IP is held under ACLP when AB took 51% of the program. LMAO.
Trans
Ortberg already got his hair-on-fire, fighting on all fronts. Would be fun to watch: “Now I am wondering if Spirit does go bankrupt and what that does to Boeing”. We all know which company has scrxwed up its suppliers thru PFS/PFS 2.0. Time to shoot its arms &legs all at once?? 🤣
Think about how it’d impact Boeing first and foremost, SPR is the most important supplier in BA/BCA’s supply chain rn. We know which company is heavily in debt. You play stupid game, don’t complain when you are hit with a stupid prize.
Boeing is now flush with cash. They can advance cash to Spirit for fuselage’s to be delivered. Or Boeing could simply
Accounts receivable, net 572.6
Decide to cut a check to pay for whatever they owe them, whatever is theirs, out of this.
SPR’s financial crisis is mainly due to BCA paused the fuselage delivery.
Trans is fantasizing that BA could hurt AB by pulling the bk lever: however, there’s a deal for BA to “merge” w/ SPR, so I’d expect there are plenty of lawsuits, from SPR’s shareholders (and AB & others like banks that granted SPR a bridging credit facility recently) that can drag out for years. See you in court, BA.
For anyone who still live in fantasy, think of which one is tied down with the sinking ship Spirit. I would believe AB can survive longer.
On second thought, I’d love to see SPR files for bk. I’d like to see which company would be hurt most.
If BA didn’t file the trade dispute, Bombardier’s C-series would still not have a strong backer. “Karma is a bxtch”, or so I heard.
Looks like China Airlines (Taiwan) has decided to split its recently-rumored widebody order equally, by ordering 10 777X and 10 A350-1000.
A decision on cargo aircraft has yet to be made.
https://finance.yahoo.com/news/exclusive-boeing-airbus-share-taiwans-041453061.html
Interesting that CAL took delivery of the last deluvered 747-400 passenger aircraft in 2005 and retired it by 2021.
“Airbus Adds 82 Aircraft To Order Book In October & Delivers 62”
“56 narrowbody and six widebody deliveries”
“…in the past few months, quite a few airlines, including US-based Frontier Airlines, JetBlue, and Spirit Airlines, deferred their A320neo/A321neo deliveries to the late 2020s and early 2030s.
“As a result, there could be a fair share of delivery slots that Airbus would be happy to fill with new or existing customers’ orders.”
https://simpleflying.com/airbus-adds-82-aircraft-order-book-october-delivers-62/
“…said it had won 749 orders this year, or a net total of 730 after cancellations.”
https://finance.yahoo.com/news/airbus-delivered-62-airplanes-october-084756963.html
—
So, AB now (nominally) has early slots available for A320neo-family aircraft…that will deflate a commonly heard sales pitch at a certain competitor…
@Abalone
There was a lot of irrational buying years ago. Of note too, some of the original leases are coming up on neo. I never could understand where all this Tier2 inventory was going to end up.
No new slots available, Airbus always overbooked this is just re balancing by lowering the current skyline
No doubt they were ‘paid to defer’, or especially LCC who book standby for their new planes delivery anyway…but now are bumped
Wide scale import tariffs would make US based exporters less competitive, not more. Mark my word.
On that subject, here’s a detailed and informative dissertation by a group of economists:
https://www.piie.com/blogs/realtime-economics/2024/what-populists-dont-understand-about-tariffs-economists-do
https://www.cnbc.com/2024/11/07/americans-flock-to-expat-websites-after-the-election-they-want-out-fast.html
Pedro
you are correct
As for the dreamers thinking that US companies are going to onshore in the US, its not going to happen…US companies may move suppliers from China to Vietnam (or other Southeast Asia locations) to avoid a super high China tariffs but still pass the tariff costs on to the US consumers
Do you think US consumers will be able to buy 55 inch LCD TV from Walmart for $380 if it was made in the US?
interesting this happen one day after the US election results…
Sumitomo Rubber announces immediate closure of Tonawanda plant
“Sen. Ryan also took aim at President-elect Donald Trump’s tariff plans.”
“The coming tariffs that President-elect Trump plans to implement will devastate New York’s economy, causing prices to spike and inflicting untold damage,” wrote Ryan. “Combine that with Speaker Johnson’s pledge to repeal the Chips and Science Act, and I am very concerned about what’s to come and the impact it will have on New York manufacturing and jobs.”
https://www.wbfo.org/from-wbfo-and-our-partners/2024-11-07/breaking-sumitomo-rubber-announces-immediate-closure-of-tonawanda-plant
as a side note…will foreign companies that have unions start to calculate their future US investments based on large pay increases that are happening the US?…UPS (while full-time workers will average $49 an hour.), East Coast Longshoremen (61.5% wage increase over the life of the six-year contract) and Boeing IAM (38% general wage increase over four years)
You are so right: it’s very important to keep the many people who *actually do the work very poor* so that the tiny, parasitic, supra-national investing class can Remain Happy and continue to afford their hookers n’ blow.
/s
import VAT tax for Germany is 19% for non EU countries
Includes transports costs, tariffs, customs costs as the base cost before VAT
wonder if/when “new tariffs” on Chinese imports (aka 60%) to the US will affect the pricing to Spirit Aero…Shenyang with four 737 sub-assemblies used on section 48…
VAT isn’s an import tax — it’s a sales tax.
It’s levied on any sale of goods/services within the country in question, regardless of chain of origin.
Companies can claim back any VAT that they pay — it’s purely an end consumer tax.
🙈
BCA, over last couple of years, has difficulty to find the right talent for its FAL etc.
And it’s not just BCA, across the whole MIC, they have a talent issue for like a decade.
Imagine how easy to restore 167,000 manufacturing jobs, or 330,000.
Look at INTC, can doling more subsidies & advances solve the problem?
https://www.tomshardware.com/tech-industry/intel-might-be-too-big-to-fail-washington-policymakers-are-already-discussing-potential-solutions-if-the-chipmaker-cannot-recover
Dear “expert”
GPT1, what is VAT? What is import tariff? 🙄
“FAA to strengthen oversight as Boeing set to resume 737 MAX production”
“WASHINGTON (Reuters) -The Federal Aviation Administration said on Thursday it will boost its oversight of Boeing as the planemaker prepares to resume production of its 737 MAX jets following a 53-day strike that ended earlier this week.
“FAA Administrator Mike Whitaker spoke with Boeing CEO Kelly Ortberg this week and stressed the importance of Boeing using its system for managing safety risks as it resumes production, the agency said.”
“The FAA noted that it maintained its enhanced on-site presence at Boeing factories throughout the strike “and will further strengthen and target our oversight as the company begins its return-to-work plan.” Boeing has not said yet when it plans to resume production, but workers do not have to return until Nov. 12.”
https://finance.yahoo.com/news/faa-strengthen-oversight-boeing-prepares-154414831.html
Under the new admin, regulators will be available for the highest bidder in name of reducing red-tape. 😉
A new generation of techo billionaires are going to be handsomely rewarded.
M#sk will be put in charge of streamlining/downsizing government, and we know that he isn’t a fan of regulation.
So, we’ll see how long the FAA will be allowed to nose around in BA’s kitchen.
How many times now have we heard the “we’re strengthening oversight at BCA!” story in the last five years?
..PR theatre [yawn].
“AI” (whatever that is) will soon be doing this oversight work for the FAA 🤭
Provided, of course, by xAi…which is owned by M#sk.
According to an analyst, during 2015 to 2019 BA bought back stock aggressively and now sold them all back in one-go, at half the price. LMAO.
Decision-makers in BA made decisions with consequences of twenty to forty years, they knew they wouldn’t be around (in BA at least) to be held accountable I guess.
lack of understanding of basic finance.
2015-19 the stock buy backs were because thats how the shareholders are rewarded instead of increased dividends Thats what Wall St wants is the core issue.
new shares are issued now ( plus some treasury stock) to RAISE money.
Next you will be saying the leninist party-state-business system is better where the government owns it all and runs the unions too- its business is called COMAC….and runs the UFWD volunteers as a side hustle.
Buy high, sell low. Short-sight mgmt decisions come back to bite the back.
To reward shareholders, MD ran down its commercial aircraft business. The same happened to BA after the merger. Financialization has a cost, there is no free lunch in economics. The same fan would defend BA’s action at all costs, no matter how detrimental the decisions are.
He doesn’t seem to grasp your point about the cumulative *size* of the buybacks…🙈
Paid to not understand..
😉
From Greg Ip of WSJ:
“Unhappy companies are all unhappy in their own way but Intel and Boeing, like General Electric a decade ago, share certain flaws: their culture shifted from producing the best most exciting products to hitting financial targets.”
It’s reported that: the French Ministry of Defence has selected the Airbus A321XLR for the future French ASW/MPA requirement.
https://t.co/s2RkmSmYiW
Mais naturellement 👍
Others will follow.
Compared to the main competitor — bigger, greater range, better fuel economy, more modern kit.
BA has *no way* to hurt AB for the foreseeable future, the latter having
a long backlog, strong cash position, and essentially no debt.
To think otherwise is fantasy: when the BA fanbois are reduced to whining because the A321XLR’s first revenue-earning flight is a short one, there’s not much to talk about (except COMAC, maybe. 😉 ).
Short of a drastic, highly unlikely turnaround, BA is past history. And please don’t wish PE on them: then they’ll *certainly* go the way of Sears Roebuck and K-Mart.
“NEWS: In an internal message to employees, Boeing CEO Kelly Ortberg tells workers who went on furlough during the 53-day IAM strike that their lost pay would be repaid by the company.”
https://x.com/jonostrower/status/1854692146349326573
Does that mean the SPEEA et al members get repaid, but the striking IAM members don’t? If so, it’d be a monumentally stupid, divisive move- but remember we’re talking about Boeing, here..
SPEEA declined to participate in the furlough. Their contract forbids it.
for the sake of variety
from AW
Comac Starts C929 Launch Customer Selection
“Yang said that the C929 is currently in the preliminary design stage, but did not give additional details on the selection. It is likely that the launch customer will be one of China’s “big three” state-owned airlines: Air China, China Eastern Airlines and China Southern Airlines.
Comac’s latest C929 specifications indicate the aircraft has a maximum takeoff weight of 247.5 tons, a maximum landing weight of 190 tons and a range of 12,000 km (6,500 nm) flying at maximum speed of Mach 0.85. The OEM is proposing a three-class configuration that accommodates 281 passengers, as well as a high-density layout with room for 440 passengers.”
Step by step..
I wonder how that EASA cert. for the C919 is going.
maybe an update at the China airshow
On that note:
“Multi-role stealth fighter J-35A to make debut at 15th China Airshow”
https://news.cgtn.com/news/2024-11-07/Multi-role-stealth-fighter-J-35A-to-make-debut-at-15th-China-Airshow-1yjzuXMphpm/p.html
Thank goodness we’ve been assured by various readers here that China is totally incompetent in the aerospace sector…otherwise we might find this report “unsettling” 🙈
Yes, that would be quite an announcement!
Related:
“As COMAC matures, it finds its MoJo”
https://airinsight.com/as-comac-matures-it-finds-its-mojo/
One wonders what engine will be used on the C929.
I’m betting either a domestic offering or an existing RR engine.
not commercial but Chinese
J-35A Fighter Jet’s First Flight Ahead of Zhuhai Airshow 2024
https://www.youtube.com/watch?v=owmLRJM2KkU
Hah! Our posts crossed eachother — see above.
One wonders if the J-35 is as replete with shortcomings as the hapless F-35?
its been a slow development for C929 (not CR929) since May 2017…my bet is domestic engine
now over to India
Pioneering ‘Make in India’ in aerospace with the Airbus C295
“The industrial ecosystem created in India begins with the sourcing of raw materials and the manufacture of up to 13,000 detailed parts at three main locations: Nagpur, Bangalore and Hyderabad. The parts are then assembled into larger components at the Main Component Assembly (MCA) site in Hyderabad, and then shipped to the FAL in Vadodara.
“We have all MCAs built under one roof,” explains Udbhav. “This improves the efficiency of the industrial process. Contrary to the perception that large defence programmes have long lead times, we have achieved the MCA industrialisation phase in 36 months. We expect to make similar progress and complete the remaining industrialisation of detail parts and FAL over the next two years.”
https://www.airbus.com/sites/g/files/jlcbta136/files/2024-11/c295_india_highlight_quotes.mp4
Seems like a good model to follow for a A320 FAL in India
now moving to the EU
“Guillaume Faury, the CEO of the airline Airbus, expressed more concern about how tariffs might affect prices.
Addressing Trump’s tariff proposals during Airbus’ third-quarter earnings call the day before the election, Faury said the cost of any new tariffs would be passed along to Airbus’ airline customers, as in 2020.”
Or not. Delta insisted Airbus absorb the tariffs.
how does US tariffs play out with US A320 FAL? Back to US content discussion? A320 US engines, US interior, US FAL and US test and delivery center?
hmmm….787 US content percentage? I don’t know if this the latest 787 workshare diagram…but reaching 50% US content was always questionable
https://www.researchgate.net/publication/324771646/figure/fig1/AS:619563133718531@1524726770808/Global-partners-of-the-Boeing-787-Dreamliner-Source-Boeing.png
But who will take the US tariff hit for importing all that foreign content for the 787
“Trump’s proposed across-the-board 20 percent tariffs (60 percent for China) would be collected at U.S. ports of entry by Customs and Border Protection. They must be paid by the importer of record before the products can clear customs and be delivered to their U.S. market destinations. No tariff bill is ever sent to foreign producers for goods exported to the U.S.”
@David: Initially Trump exempted all Mobile-produced A320s from tariffs. I think later on, some incoming components were taxed but my memory is a little fuzzy. But Alabama is solid red and Trump accommodated. I’m sure he will again.
ok…let’s do some simple math
List price of new A320 $100m less 50% discount nets out $50m selling price
So $50m selling price and less say the fuselage and wing from EU is 50% of the aircraft (probably more)….$50m x 50% is $25m foreign content x 20% US import tariff…that’s $5 million a per plane import tariff Airbus needs to pay (importer on record) (that takes away Airbus profit on the sale)
@ David Pritchard
The EU has already announced that it will match any tariffs imposed upon it, pound for pound. You can be sure that organizations such as BRICS and ASEAN will be responding in a similar manner.
Under such circumstances: good luck to BA trying to deliver any products abroad. Remember that a huge portion of BA’s order book can be cancelled without penalty, due to ongoing delivery delays.
Abalone
Good info
More simple math
Net selling price for 787 $125m…totally built in US so tariffs will be on the net selling price of the aircraft EU puts 20% tariff on 787 $125m…import tariff for EU airline $25m
Net selling price for 737 $50m totally built in US so tariffs will be on the net selling price of the aircraft EU puts 20% tariff on 737 $50m…import tariff for EU airline $10m
Seems like Airbus would have about $5m advantage in single aisle aircraft in the tariff war since it has a US FAL
The EU, BRICS, ASEAN, etc., will just increase mutual trade, so as to compensate for the loss of the US as an easily accessible market/supplier.
But: with whom will the US be trading, if it hits everyone else with tariffs? Will the US be growing its own bananas and rice?
EU countries will be incentivized to cancel defense orders with US suppliers and buy European instead. The UK was already considering cancelling part of its F35 order plans — imagine what will happen if those planes get 10% more expensive? Very easy to just order (much cheaper) European 4.5 gen fighters instead. In fact, basically the only remaining reason to buy American was for purposes of “NATO standardization” — but, with NATO dead, that trade path will cease to be relevant.
Tr#mp hasn’t thought this through at all…
Abalone
Who has more tariff risk 787 or A350?
simple math (approx. numbers)
A350 backlog 710 less about 80 (Delta and American..US tariffs) 630 in backlog not at risk
787 backlog 780 less 80 in backlog (Delta and American) about 700 in backlog at risk with global tariffs
using a net selling price of $125m for A350 and 787 and 20% across the board global tariff
Airbus A350 $125m x 20% is $25 million per aircraft x 80 $2 billion USD tariff risks
Boeing 787 $125m x 20% is $25 million per aircraft x 700 is $17.5 billion USD tariff risks
@ David Pritchard
BREXIT is a good analogy: the rest of the EU lost free market access to just one country (the UK), whereas the UK lost free market access to 27 countries (the whole EU).
On that note: The French restaurant industry used to source vast quantities of fresh shellfish from Scotland. Along came BREXIT, and that trade route collapsed: the French just switched to sourcing shellfish from Ireland and northern Spain, and the Scottish shellfish sector fell into a pit. New ferry routes were set up between Ireland and France, and the UK is now just totally bypassed. The whole thing happened in just a few weeks, with no hassle.
There is relatively little trade from the US that can’t be sourced from elsewhere. On the other hand, the US is a net importer (by a huge margin) — so, will US consumers stop consuming, or just put up with paying more?
@ DP
Let’s talk aboit fuel costs for US carriers.
Will Tr#mp be placing tariffs on oil imports? The US currently imports about 6 million barrels per day (see note below). Will this now be subject to tariffs?
If/when other countries put a 10% tariff on US oil imports, they can just source their oil from elsewhere — OPEC and Russia have spare capacity at the moment.
So, will US carriers be paying more for their Jet-A?
___
Note:
The US produces low-sulfur crude, but refineries in the US are tooled to refine high-sulfur crude. So, the US exports its crude, and imports crude from elsewhere for its own refineries.
https://www.eia.gov/petroleum/imports/companylevel/#:~:text=August%202024%20Import%20Highlights&text=The%20remaining%20top%20ten%20sources,from%20imports%20during%20July%202024.
Abalone
Interesting you mentioned fuel process elsewhere…New Brunswick Canada actually refines oil from the mid west US and ships it back to the US
“The Irving Oil Refinery is a Canadian oil refinery located in Saint John, New Brunswick. It is currently the largest oil refinery in Canada, capable of processing more than 320,000 barrels (51,000 m3) of crude oil per day.[2] Over 80 per cent of the production is exported to the United States, accounting for 19 per cent of the country’s gasoline imports and 75 per cent of Canada’s gasoline exports to the US”
say you are right on Airbus eating the US tariffs
Scenario..
Say new US tariffs for EU will be at 20%, Airbus not willing eat the tariffs (and lose money) and neither is Delta or other US airlines.
Orders are pushed out 5 years or canceled order by US airlines
Shift the Airbus Mobile A320 (and A220) FAL lines for export customers (outside of the US)
Say Boeing 737 production line takes 3 years (probably more like 5 years) to get back to 50 a month rate (let’s assume China cancels all existing 737 aircraft on order)…..the US airlines will be hard pressed to increase capacity
Isn’t geopolitics fun in the commercial aircraft industry!
What do the US airlines do for their fleet replacement strategy
“What do the US airlines do for their fleet replacement strategy”
They buy Boeing, of course…fits in neatly with the “Make # Great Again” philosophy. That’s the whole intention behind tariffs: to bring a halt to the “raping” of domestic industry (not my syntax). It’s even going to usher in a “golden age”, or so we’re told.
back to the US
Boeing Is Exploring Possible $6 Billion Sale for Jeppesen Unit
“Suitors are already circling Jeppesen, which could attract sizable interest from private equity firms as well as other companies, said the people. The unit could fetch more than $6 billion, depending on the buyer appetite and peer group of comparable assets, some of the people said.”
“In a goodwill gesture to Boeing employees who were furloughed during the Machinists’ strike, new CEO Kelly Ortberg on Thursday afternoon sent out a message saying the company will return the pay they lost… A longtime nonunion employee on the quality staff, who asked not to be named to protect his job, said the furloughs had seemed ‘an odd way of taking care of the people not on strike’ and that they destroyed productivity that month as affected employees like him scrambled to figure out the impact and what to do. ‘Obviously your time is not spent focusing on work, but on OK, how am I going to handle this? How do I pay my bills? How do I apply for unemployment?’ he said. The staffer said Thursday he’s ‘really happy’ at the course reversal. ‘There’s still a lot of mistrust,’ he said. ‘There’s still this sense of, ‘Wow, can I trust the company?” And yet, he continued, “this is a step in the right direction.”
-Seattle Times. (sorry, no link yet).
A good move from Ortberg (or whomever).
Not impressed at all by Ortberg’s “reset relations” performance with his personnel.
I get the impression that he’s clumsy and totally out of touch.
I’m just happy for the striking employees. 🙂
over to the mid west
Exclusive-Boeing close to funding agreement to help supplier Spirit Aero, source says
“Spirit AeroSystems and Boeing are close to reaching a funding agreement that would give a cash lifeline to the struggling Boeing supplier, an industry source familiar with the matter said.”
“Spirit Aero is also weighing some asset sales, such as U.S. defense composites maker Fiber Materials, a fourth source said. The supplier said in January 2020 it acquired FMI for $120 million”
A prediction: the Trump II administration will be more bark than bite with the tariffs, especially
on big-ticket items. We’ll see how it goes.
I wish I could subscribe to your optimism…but I can’t at this time.
Mind you, the deficit/debt issue might balloon to such an extent as to cause an interest rate / inflation crisis — which might then divert attention from other matters, such as tariffs.
“Boeing to face civil trial over 2019 Ethiopian Airlines crash”
(multiple trials, actually)
https://www.newsbytesapp.com/news/business/boeing-faces-civil-trial-over-2019-ethiopian-airlines-crash/story
https://www.dailymail.co.uk/wires/afp/article-14061743/Boeing-face-civil-trial-2019-MAX-crash.html
“Boeing Plans 10% Workforce Cuts After Strike Ends”
“Boeing CEO Kelly Ortberg said on Thursday that employees furloughed during a seven-week strike by factory workers would be repaid by the company for lost wages, but it would proceed with plans to cut about 10% of its global workforce.”
“A spokesperson for the Society of Professional Engineering Employees in Aerospace, which represents Boeing engineers, said earlier it was informed that 60-day notices of job losses would be issued to its members on Nov. 15”
https://allwork.space/2024/11/boeing-plans-10-workforce-cuts-after-strike-ends/
—
A good-old decimation, just like in ancient Rome 🙈
That’s going to work wonders for quality and motivation 👍
Declining 787 line rates:
“Earlier in the year, the airframer had contemplated a requirement for a total of 80 shipments in 2024, rising to 112 next year. These figures were subsequently trimmed in June to 55 and 97, respectively.”
“However, Boeing’s latest plan – shared with Leonardo this month – foresees even lower delivery volumes: 49 this year and 81 in 2025. “Unfortunately, this is not enough for us to keep the division running,” says Cingolani.”
https://www.flightglobal.com/air-transport/leonardo-eyes-carve-out-of-loss-making-aerostructures-unit/160667.article
I been waiting for the supply chain to come out about low rates and how profitable they are not
What happens to the 787 suppliers in Japan (e.g. MHI wing) and Italy (fuselage) when 20% import tariffs are applied Boeing has to pay the import tariffs on the foreign made subassemblies being imported in the US, then what? Do they go back to the foreign suppliers for a price reduction to cover the tariffs? (of course these suppliers already had a hair cut under the Boeing Partnership of Poverty program in the past) Boeing tells them to reduce price or move production to the US? (interesting note MHI Canada produces wings in Toronto for Bombardier)
Or does the foreign suppliers say take your subcontracts back, we are tired of losing money