Leeham News and Analysis
There's more to real news than a news release.
Pontifications: Critical step in Boeing MAX recertification target: May
By Scott Hamilton
March 30, 2020, © Leeham News: Barring further issues, the FAA Type Inspection Authorization for the MAX is targeted for the second half of May, LNA learned.
This is a critical step in recertifying the airplane.
Also barring more unexpected events in a year filled with them, Boeing should resume production of the 737 MAX in May, LNA confirmed.
The meaning and consequences of frozen credit markets
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By Vincent Valery
Introduction
March 26, 2020, © Leeham News: Credit markets are effectively frozen for many businesses, Boeing said this week.
That’s why the company asked Congress for $60bn in federal aid for itself and the aerospace industry as part of the $2 trillion emergency stimulus package. Although the bill, which at this writing is awaiting Congressional approval, doesn’t name Boeing specifically, The Washington Post indicated $17bn is for Boeing.
Related article
- See this article discussing Boeing CEO David Calhoun’s comments on the company’s liquidity and ability to raise debt in the current environment. Calhoun pointed
out that credit markets aren’t open now. Boeing CFO Greg Smith made a similar comment later in the day - The current market stress has similarities but fundamentally different origins from 2008. LNA analyses its causes and consequences for airlines and OEMs.
Summary
- A different economic shock from 2008 freezes credit markets;
- Significant consequences for nonfinancial corporations;
- Airlines and OEMs at the forefront of turmoil;
- Programs to re-open credit markets;
- Long-term consequences.
HOTR: Boeing has options to federal bailout, CEO says
By the Leeham News Staff
March 25, 2020: First, Boeing CEO David Calhoun said he wasn’t an insider (after 10 years on the Board of Directors, and as lead director for many of them). No, he merely had a front row seat in the movie theatre.
Then he trashed his predecessor, Dennis Muilenburg, for stock buyback and dividend policies (that the Board approved).
Next, Boeing said it needs a portion of the $60bn in federal aid it requested for the aerospace industry.
Now, Calhoun appears to have put his foot in his mouth again. Or did he?
When asked about the possibility of the government taking an equity position in Boeing as a condition to a bailout, Calhoun said Boeing has options to federal money.
The Wall Street Journal wrote yesterday, “I don’t have a need for an equity stake,” Boeing CEO Calhoun said Tuesday on Fox Business Network. “If they forced it, we’d just look at all the other options, and we have got plenty.”
There’s a very practical reason for Boeing to object to government taking an equity stake. It would effectively shut down bidding on some key defense contracts.
But wait a minute: if you’ve got all these other options, why ask for a federal bailout for Boeing?
Or was this a message to the street that Boeing is OK?
Still, on CNBC’s Squawk Box, Calhoun said if the credit markets stayed closed for eight months, it would be tough for Boeing to remain healthy.
Boeing has $15bn in liquidity and can survive in short term; credit markets need to reopen
By Scott Hamilton
Boeing CEO David Calhoun. Source: CNBC.
March 24, 2020, © Leeham News: Boeing CEO David Calhoun said the company has $15bn in liquidity and can survive in the short term, but federal aid is needed as long as the credit markets aren’t open.
The US Defense Department is working to accelerate payments to Boeing, which has a large defense business. Revenue at Boeing Global Services is down as airlines across the globe shut down or sharply reduced operations.
Calhoun made his remark on CNBC’s Squawk Box today.
Boeing suspends production of wide-bodies
March 23, 2020, (c) Leeham News: Boeing today announced it will suspend production of its wide-bodies for 14 days, beginning Wednesday. 
Production slowdown begins today.
The move is in response to the COVID-19 crisis. Boeing is the last of the Big Three aircraft manufacturers to do so. Airbus last week suspended production in France and Germany, restarting slowly today. Embraer suspended production last week.
Airbus expands virus precautions across production lines, company
By Scott Hamilton
Guillaume Faury
March 23, 2022, (c) Leeham News: Airbus is working to make its production lines safe, but will have lower rates than before the coronavirus pandemic caused lockdowns in France and Spain, the CEO said today.
Airbus temporarily shut production lines in these two countries last Monday. Production resume at a low, unspecified rate. He said initially production “efficiency” may be very low.
Guillaume Faury, the CEO, however, pointed to China as perhaps an example to follow with its other lines.
The Tianjin line was shut down for several weeks as the COVID-19 virus spread across China. It recently resumed and is back near the pre-shut down level of 6/mo. Faury said 99% of the employees are back at work.
Chinese airlines are back to 30% of pre-grounding levels.
Coronavirus upends Airbus, Embraer in addition to Boeing woes
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By Scott Hamilton
Introduction
March 23, 2020, © Leeham News: The dramatically and continuously worsening impact of coronavirus worldwide is upending Boeing—more than it has been—and Airbus.
Boeing is considering shutting the wide-body production lines, The Seattle Times reported. It also wants US government aid.
Source: CDC.
Airbus shut its assembly lines in France and Spain for four days in response to federal restrictions.
LNA previously wrote about the impact it sees on Boeing and, to a degree, on Airbus.
These analyses are updated to the latest circumstances.
We also add a look at Embraer delivery stream for March-December.
Summary
- Even if Boeing recertifies the 737 MAX by mid-year, deliveries now in doubt.
- Customers can cancel MAXes without penalty.
- Airbus faces massive deferrals under the circumstances. Penalties apply.
- Embraer’s customer concentration is in USA.
Before handing $60bn to Boeing, consider this
By Scott Hamilton
Commentary
March 20, 2020, © Leeham News: Before the Trump Administration hands $60bn over to Boeing for its own purposes and to serve as a conduit to aid the supply chain, there are just one or two issues to address.
Boeing workers delay production over Covid-19 fears
By Bryan Corliss
March 20, 2020, © Leeham News: Sources close to Boeing tell Leeham News & Analysis that Machinists Union members in Puget Sound have shut down production on several occasions this week over fears that the corona virus had made their work stations unsafe.
According to two insiders, workers at sites across Puget Sound are invoking Article 16 of the IAM’s contract with Boeing, which is commonly known as the “Imminent Danger Clause.” It gives workers the ability to shut down work in their area if they have a reasonable concern that they’re working under conditions likely to cause death or serious injury.
Boeing management has been responsive, the insiders said, quickly bringing in environmental health and safety experts to perform assessments and order extensive cleaning in areas where potentially infected people may have worked.
But it’s reasonable to assume that these temporary shutdowns for cleaning will lead to further delays in production, and that they will increase in frequency as the pandemic spreads – particularly after the union sent a reminder to its stewards about the safety language in their contract.
Read more
Why bailouts make sense under these circumstances
By Scott Hamilton
Commentary
By Scott Hamilton
March 18, 2020, © Leeham News: The Federal government is preparing a bailout, said to be more than $1 trillion, to pump into the US economy.
Airlines want $50bn. Boeing wants $60bn for the aerospace industry. It’s unclear how much is for Boeing and how much is for industry.
Opposition for the airlines and Boeing was quick to emerge. The objection: how much each spent in recent years on shareholder buybacks.
The bailout package goes across the US economy and includes direct cash grants to individuals. In keeping with LNA’s business, I focus in the column only on aviation.