By Bjorn Fehrm
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Introduction
January 16, 2020, © Leeham News: Last week we started the analysis of how much margin the Boeing 787 program is generating to cover the costs for The Boeing Company’s Commercial Airplanes division when the other cash cow, the 737 MAX program, brings no revenue or margin.
The 787 program is now in a state where it generates significant revenue and margin. The other programs, the 767 and 747 freighters, the 737NG (P-8A Poseidon) and 777 Classic make up less than 45% of deliveries with the 787 covering 55% of deliveries, and these programs are in phases where they deliver less margin.
By Scott Hamilton
Analysis
Jan. 15, 2020, © Leeham News: The extent of the damage to Boeing from the 737 MAX crisis still is unfolding.
Billions of dollars in new costs and charges are expected to be announced on the 2019 earnings release and call, Jan. 29.
But the long-term effects, only surmised until now, are beginning to become evident following information obtained by LNA from multiple sources.
Boeing hasn’t hit bottom yet. The worst is yet to come for suppliers.
By Scott Hamilton
Jan. 14, 2020, © Leeham News: Boeing likely faces an extended timeline to clear its inventory of 400 737 MAXes. LNA estimates it will be well into 2022 before these new-production airplanes are delivered to customers.
The new timeline is based on LNA discussions with key people and our analysis. Boeing won’t comment. Wall Street analysts so far haven’t significantly shifted their forecasts of 3Q or 4Q2021.
The decision last year by the Federal Aviation Administration to assume responsibility to certify each Boeing 737 MAX before delivery is key to LNA’s estimate.
Jan. 13, 2020, © Leeham News: Today is David Calhoun’s first day as the president and CEO of The Boeing Co.
To say that he’s got his work cut out for him is an understatement.
I’ve put together a list below, which probably is only half of the important tasks at hand. Most of this list is obvious and doesn’t need any additional reporting because of all the coverage in 2019.
This column is focused on another task that should be, and in the view of many, must be done.
Boeing’s Board is preoccupied with the MAX crisis, but on the theory it can do more than one thing at a time, it need to also turn its attention to some introspection.
By Richard Aboulafia
Vice President of Analysis
The Teal Group
Guest Column
December 2019
Dear Fellow C-Suite Watchers,
Person of the year awards go to people who did something noteworthy in the past year. Instead, why not appoint a person in advance, for the year ahead? That’s more exciting, since that person has yet to do the something for which he or she is being recognized. Incoming Boeing CEO Dave Calhoun is the perfect recipient of this, for the choice he will make. In 2020, he will choose either to be a fantastic nine-month CEO, or he will stay on, becoming a potentially disastrous multi-year CEO. This is a pivotal decision for Boeing, and for the industry.
Calhoun is replacing Dennis Muilenburg because the latter CEO’s year has been disastrous. The company’s communications with Congress, the FAA, international regulators, airline and lessor customers, suppliers, the victims’ families, and pretty much the entire outside world were a master class in bad crisis management. This month’s 737MAX line shutdown, with no guidance at all provided to suppliers, was the final swirl in a downward spiral. The company’s legal department chief, another key player in Boeing’s MAX strategy, has also departed.
By Bjorn Fehrm
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January 9, 2020, © Leeham News: What a difference a decade made. In January 2010, the Boeing 787 Dreamliner had just made its much delayed first flight and its crisis was at its deepest. The aircraft would soon be more than three years late and its costs had more than doubled. One questioned if it would ever be a profitable program and how deep this money pit would drag Boeing?
Today, 10 years later, the 787 is Boeing Commercial Airplane’s sole cash cow, with a 737 MAX which can’t be delivered, the 777 in difficult migration to 777X and the 767 freighters just hanging in there profitability-wise.
But how profitable is the 787, eight years after its first delivery and coming from very red numbers? We look behind Boeing’s accounting rules to find how much of the company bills can be paid by Dreamliner profits when other programs can’t contribute.
By Scott Hamilton
Commentary
Jan. 8, 2020, © Leeham News: Some news reports of the Ukraine Airlines crash yesterday in Tehran linking the event to the Boeing 737 MAX crisis are irresponsible.
The Ukraine airplane is a 737-800, a highly reliable aircraft with thousands in service around the world.
Drawing any conclusions about the crash at this stage and under the unique circumstances of open, armed conflict in the region is also irresponsible.
None of the news reports LNA has seen so far indicates possible radio communication from the pilot. The flight and voice recorders apparently have been recovered, but no information has been released of what information these contain. It’s unlikely any information has been downloaded at this point.
Here’s what investigators routinely consider in a crash investigation:
By Scott Hamilton
Jan. 7, 2020, © Leeham News: Boeing internally sees production suspension of the 737 MAX of at least 60 days, LNA has learned.
The last inventory MAX fuselages entered final assembly this week and will roll out of the factory shortly.
Then, production is suspended. Boeing publicly has not said how long the suspension will last and it’s unclear how much information has been passed down the supply chain. Without knowing when the FAA will recertify the MAX, Boeing can’t truly gauge when production will resume.
Jan. 6, 2020, © Leeham News: This may be the year that Airbus is hit with the negative consequences of the Boeing 737 MAX crisis.
Most observers see Airbus benefitting with greater A320 family sales while the MAX remains grounded.
In LNA’s 2020 Outlook last week, we pointed out that the long-running trade war between the US and European Union could be coming to a head this year. Airbus and the EU are waiting for the World Trade Organization’s authorization to impose tariffs on US products. This decision is expected in May or June. Boeing is expected to be the first target. The Trump Administration last year imposed a 10% tariff on Airbus aircraft.
The MAX crisis could ratchet up tariffs on Airbus aircraft.
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By the Leeham News team.
Jan. 2, 2020, © Leeham News: This will be a pivotal year for Boeing.
It will be a year of challenges for Airbus.
Embraer Commercial Aviation should disappear.
Mitsubishi Heavy Industries faces final decisions for the SpaceJet.
Overhanging international trade is the US presidential election.
These are just some of the headlines to look for in 2020.
Leeham News and Analysis provides its annual outlook as the new year, and the new decade, begins.