Boeing posts loss in 4Q

Update, 3:30 PM PST:

It’s been a busy day responding to media requests for comment about Boeing’s financial results and earnings call. This gives us a feel for how the media viewed the call and the issues they see.

Here are our thoughts after all that.

  • Many media viewed Boeing as pointing the finger at the IAM strike for its 4Q loss. There’s no question that the shortfall of some 70 aircraft in 4Q deliveries caused a big hit to the revenue, and that the full year shortfall of some 100 aircraft hit the full year revenue. But don’t overlook the cost-base. Continuing costs for the delayed 747-8 and 787 programs were significant and costs hurt profitability. So did the legal costs. Pointing the finger at the IAM is simplistic.
  • Is the 10,000 job reduction the result of the IAM strike and contract? We don’t think so. We think this is Boeing’s prudent response to a lousy global economy.
  • We received media questions about whether Boeing is in serious trouble. Our answer is a resounding No. As we’ve previously written, we view 2009 as the year of recovery for Boeing’s airplane development programs. Production lines are returning to pre-strike levels. The one-off nutplate issues are largely resolved for the new airplanes and a program is likely in place for those faulty nutplates on delivered airplanes. Mature airplane programs are humming along.
  • What about production this year and next? Boeing personnel meet at least weekly and perhaps more often to assess market conditions. We’re confident they have a good feel for what’s going on in the world and are prepared to take whatever steps are necessary to respond. The question is how quickly can a monolithic organization respond. It takes 18 months to ramp up production with the supply chain. How quickly can it be ramped down, should that become necessary? A key point in the earnings call is that for the first time, Boeing is sounding caution about production beyond this year. Officials refuse to give earnings and production guidance for 2010 at this time.

We remain cautious about Boeing due to the 747 and 787 programs–these need to get flying–and the general global economy, but there is no reason to worry about Boeing itself. The media questions on this score are totally without foundation.

Original Post follows:

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Boeing reports 787 order cancellation

Update, 10:00 PST

We’ve learned that the cancellation is not from the customer we thought, so that one is still pending.

So who’s got 15 orders?

Air China

China Eastern

Dubai Aerospace

S7 Group

Virgin Atlantic

We know it is not Virgin Atlantic. Airfinance Journal reports that it is S7 Group.

10:20 AM PST: We can now add that it is not Dubai Aerospace. James Wallace of The Seattle P-I reports that his sources confirm that S7 is the airline.

Original Post:

Boeing has quietly reported that a customer cancelled orders for 15 787s.

We alluded to this pending cancellation in this post.

The news is on Page 4 of its press release announcing its 2008 fourth quarter and full year earnings. The customer is not identified in the release and Boeing doesn’t update its website until tomorrow (Thursday).

We are pretty sure we know who it is, but have not confirmed it so we’ll not mention names yet. Perhaps Boeing will identify the customer in its earnings call beginning at 10:30 EST.

If we’re correct, the significance goes beyond the quanity of 15 and we’ll explain why when we confirm.

EADS/Airbus says ‘No’ to Air Force One competition

EADS and its subsidiary Airbus won’t compete for the Air Force competition to replace the US President’s Air Force One.

The very idea of the President of the United States possibly flying around in a French airplane was blasphemous, even for us. With only three orders in the USAF Request for Information (RFI), there was no way EADS would assemble the A380 in the US, in contrast with the prospect of building the KC-30 air force tanker in Mobile (AL), meaning the airplane would have been assembled in France.

This leaves Boeing as the sole-source supplier for the new Air Force One and its two backup airplanes. Boeing will in all likelihood offer the 747-8 (as opposed to the 777 or, even more far-fetched, the 787). The 777 and 787 are considerably smaller than the 747-8, and the new composite technology for the 787 is something the Secret Service probably would like to see proved before entrusting POTUS to it.

Boeing has eight VIP orders for the 747-8I.

EADS’ statement is below:

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Financing Airbus, Boeing customers

Too much is being made over a decision by France to funnel cash through French banks for the express purpose of providing financing to Airbus customers.

France will provide $6.5 billion to the banks for loans to the airlines. The US government should follow suit. Bloomberg News has this report about the lack of financing available to customers potentially hurting Boeing.

The French stories headline or write about the money to the banks being aid to Airbus. In a round-about way, it is, but more to the point the world credit crisis is putting the squeeze on airlines. Depending on who you believe, there is a funding gap of $10bn to $28bn this year for customers buying airliners. Even though Airbus and Boeing pledged up to $1.5bn and $1bn respectively in customer financing this year, and other OEMs will likely step up as well, and even though the export credit agencies are doubling their participation, this isn’t enough.

The Obama Administration proposes around $900bn as a stimulus for the US economy, some of it for dubious project the Republicans rightly question, such as millions to resod the National Mall in Washington, hundreds of millions to engineer social policy via Planned Parenthood and (at least at one point) funding to build a museum in Las Vegas about the history of the mob.

Boeing is the USA’s largest exporter. Instead of funding dubious projects, Obama should earmark money for the banks that would be required to put into the credit markets to finance Boeing airplanes.

France got it right. The US should follow its example.

2009 ‘Year of Boeing tanker’

The head of the Boeing Tanker Program call this the ‘Year of the Tanker,” according to a news release from the company.

In the news release, Dave Bowman, VP and GM of the program, vows to win the KC-X competition that is to be resumed this year. It’s unclear yet whether the Pentagon will simply pick up where it left off last September when suspending the competition or whether an entirely new process will be started.

Boeing claims 44,000 jobs will be supported by its KC-767 tanker. Northrop claims 48,000 jobs for its KC-30. Boeing claims its tanker is 85% American content by value; Northrop claims its tanker is 60% US content (and that the KC-767 is 69% US content). Boeing’s supporters, notably Sen. Murray, challenge Northrop’s jobs claims but have nothing concrete to back up the challenge. (We’re highly skeptical of both claims, for reasons we’ve written about many times.)

But what is truly “American built?” The Wall Street Journal today (Jan. 26)  has a very interesting article asking this question of the automotive industry. The parallels to aerospace are apt.

Boeing’s internal press release on the tanker follows.

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787 test planes to retain temp fasteners

All six Boeing 787s slated to be test airplanes in the certification program will retain an undisclosed number of temporary fasteners, we’ve learned.

Temporary fasteners became a cause célèbre, it will be remembered, when Airplane #1 used for the July 8, 2007, roll-out to an international media extravaganza was revealed to have thousands of temporary fasteners as a result of a shortage of the proper fasteners. This required non-standard ones be used to assemble the display airplane.

Since then, fasteners have been a continuing source of frustration for Boeing. Shortages, followed by incorrect installation at the Global Aeronautica industrial partner and then the revelation that thousands of them were designed incorrectly and have to be removed and replaced, adding further delays to the program.

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A320 Enhancement

Fortunately we can laugh about this one.


Lessor LCAL in 787 talks

Middle East lessor LCAL is in compensation talks with Boeing over delays to the 787 program.

LCAL was created to lease 787s and has 21 on order. With the delays to the program, the lessor’s business plan is in disarray. Steve Clarke, president of LCAL, gave us this statement when we inquired:

For several months LCAL has, like a number of other B787 customers, been in compensation negotiations with Boeing over the delays to the aircraft we have on order. These negotiations are progressing slowly but have yet to be concluded.

It would be inappropriate for LCAL to comment further on the details of its negotiations.

Thoughts on US 1549

Update, January 19:

More information continues to emerge over the remarkable saga of US Airways flight 1549. Readers can Google the news stories and get plenty; we linked to New York Times pieces at the end of this column, below the jump. A good resource is Flight International, which always excels at accident reporting.

Here are some more of our thoughts, none of which has made it into the media so far as we know.

This isn’t the first time an airliner was brought down by birds. Way back around 1961-62, an Eastern Airlines Lockheed Electra crashed on take-off from Boston’s Logan Airport after hitting a flock of starlings so thick that all four turbo-prop engines failed. This happened right at lift-off. All aboard were killed, if memory serves correctly.

Did the Airbus flight envelope protection system help US 1549’s pilots control the airplane as it descended to the Hudson River? The system is designed to prevent stalls, and it’s believed the captain properly had a nose-up attitude in order to hit the water with the tail of the plane and minimize impact to the front of the aircraft. The maneuver was tricky to say the least without engine power. Did the computer system help prevent a crash? Update, 8:00 PM PST January 19: The Wall Street Journal, in an article dated January 20 and posted on its website January 19, confirms that the flight envelope system was operating and contributed to the safe landing of the airplane.

Was this a crash, like the media reported? In fact, this was a controlled water landing and, yup, the aircraft was destroyed–but was it a crash in the classic sense of the word? Even the flight attendants described the contact with the water like a “hard landing.”

Hand-wringing over birds around the airport was overblown in this case. The A320 didn’t strike the birds around the airport; the plane was miles away at 3,200 ft. Birds at the airport had nothing to do with this accident.

Speaking of over-wrought hand-wringing, Fox News’ Sean Hannity was worse than usual. This dip claimed the accident was the fault of US Sen. Charles Schumer (D-NY), the environmentalists and liberals because of laws protecting Canadian geese around airports. This one is over the top even for this right-wing wack job.

Speaking of wack jobs, KIRO Radio (Seattle) conservative talk show host Dori Monson had one call into his program as he was doing a superb job interviewing pilots about the US Airways incident. This caller wanted President Bush to invade Canada because the birds thought to have struck the A320 were Canadian geese. Dori, a bit of a wack job himself on occasion, exceled at his coverage and knows the ridiculous when he sees it. He so wanted to talk to this lady, but she hung up before he got to her. (Dori’s screener got her subject matter.)

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Airbus 2008 orders 4th best

Airbus announced its 2008 order book today, with 777 net orders, reflecting cancellations of 65 A319s from bankrupt US discount airline Skybus, the last of the original A350 orders and a few others.

The tally is the fourth best Airbus posted going back through 1995, that last data immediately available from the company.

Gross orders were 900.

Airbus  Orders
1 2007 1458
2 2005 1111
3 2006 824
4 2008 777
5 1998 454
6 1997 389
7 2004 270
8 1999 244
9 2000 243
10 2002 219
11 1996 208
12 2003 186
13 2001 184
14 1994 80
15 1995 77