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crankypants
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Re: 737 Max - What Airlines Really Pay

Mon Mar 01, 2021 2:49 pm

Revelation wrote:
crankypants wrote:
No, this was not a BA vs AB thread, but the question was asked by Revelation - how do we measure the performance of Boeing? Who else do we compare Boeing to, if not Airbus? We do it all the time, in other threads and in the market side of things, when we look at financial health.

We do it all the time because they often are in comparable positions.

Now you want to have a race between a person with a bad cold vs a person undergoing chemotherapy and radiation.

You don't think that's a willy waiving contest?

Well, the person who has cancer smoked and drank, so let's go ahead anyway.

What?


You mentioned covid in your post - is not the covid mess equal for both BA and AB? Both OEM's have carriers that are suffering and cancelling orders. both have had to trim staff, both have had to shuffle their delivery schedule. Everyone is dealing with the pandemic. This topic wasn't about covid and benchmarks - it was about how much LUV is paying for it's aircraft and a financial analysis.

You've mentioned how revenues in the future will be increased due to BA Services profiting. I propose to you that Boeing had to trade off service credits as well, in order to move those aircraft. Financially, Services is a small contributor to the BA bottom line, as I detailed to you.

You proposed a measuring bar - what would you suggest as an apt metric to measure how Boeing is doing? I have quoted their past financial history (specifically y/e 2018) as the benchmark and have continually drawn upon details from there, and nowhere else - save the LUV financials.

You have stated that 'money is coming from somewhere' - I proposed that it has been by taking on debt, that this is NOT from revenues.

I have tried to remain completely realistic in my analysis and on topic.

The only willy that matters in this case, is the one that Boeing stuck in the fan. Over and over again. The stepped on it with golf shoes. Then gave it to the dog to eat.
 
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Revelation
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Re: 737 Max - What Airlines Really Pay

Mon Mar 01, 2021 3:01 pm

CRJockey wrote:
You know, due to my personal inherent lack of fanboyism for either manufacturer, I really don’t care who gets critically discussed or outright roasted.

But I can’t remember any kind of similar reservation when a good Airbus critique was held.

Why do you feel there should be any restraint? Or do I misunderstand you?

Critique is fine as long as it's put into an appropriate context.

I feel that's not happening here.

The expectation seems to be that the cancer patient should be able to run as fast as the one with the bad cold.

It's a pretty meaningless comparison to me, one that would be made by fanboys trying to score points rather than understand the situation as it is.
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Wake now, discover that you are the song that the morning brings
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Ziyulu
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Re: 737 Max - What Airlines Really Pay

Mon Mar 01, 2021 3:01 pm

Just like when you buy a car. You never know what others paid. It can be different even in the same dealership and same salesperson.
 
JonesNL
Posts: 361
Joined: Tue Aug 06, 2019 2:40 pm

Re: 737 Max - What Airlines Really Pay

Mon Mar 01, 2021 3:12 pm

crankypants wrote:
JonesNL wrote:
crankypants wrote:

No, this is not a urinating contest - it was never intended to be. It's just a cold hard look at some numbers and is perhaps a wake up call to those who bandied about the usual dog whistle refrains:

- Boeing is one member of a duopoly
- The 737 Max inventory is a pile of cash waiting to happen
- The NMA orders will flow in
- SWA would never order the A220
- 787 program is fantastic for BA
- Wait 'til the 777X is flying around

and a host of other reasons that get thrown out without analysing the underlying premises.

Boeing just had to write off $6.5 billion on the 777X program, which will now have an EIS of 2023 - 10 years after launch. A profit will never be booked on that aircraft. Neither will the 787 program. Neither will the 737 Max program.

While the deaths in the Max situation are indeed a tragedy for those involved, for Boeing it is completely self inflicted, they did it to themselves and continue to do so with their other aircraft. Their mindset doesn't seem to be changing anytime soon.

No, this was not a BA vs AB thread, but the question was asked by Revelation - how do we measure the performance of Boeing? Who else do we compare Boeing to, if not Airbus? We do it all the time, in other threads and in the market side of things, when we look at financial health.

I did not take the conversation there and my only focus was on what I believed to be fresh insight into the financial situation regarding the Max - and Boeing, at large,

BTW - I kind of looked around and am involved at a few other aviation/financial websites. I'd love to read more about the SWA/737Max cost structure and what others have come up with, regarding this numerical analysis. Since this is not news for you, I'd appreciate it if you could point me in the right direction and pass along a few other sources. Thanks and sorry if you thought I was trying to re-invent the wheel. I guess I didn't realise that everyone had parsed the financials, run the numbers on this and come to the same conclusion. My bad.


No need to apologize, and your financial analysis is more then appreciated. The exact numbers were not known by me (and most others I guess). So, you analysis is really helpful, but the story that the numbers are telling is not an revelation, there are in line with the communication of Boeing and industry stakeholders. There are to many articles to dig through to come up with the data you want, but SWA's relationship with Boeing and Boeings financial cashflow details are widespread available.

The refrains you mention are just opinions of avid fans who are trying to look at it from the bright side. Like mentioned up thread; things are being told or not being told on earning calls give you a much better idea of what really is going on.


Jonesy - those earnings calls are pretty tricky, if you ask me. The current crop of c-suite boys seem to be mainly concerned with keeping the share price high, as opposed to revealing just how deep a hole they are in. Some reading between the lines is definitely required, but then it can be explained away as alarmist interpretations, by those same fans you mention.

Who saw the $6.5 billion write down on the 777X coming? Everything from the genX engine issues to the fuselage stress test was down played, until the bill came due.

On a side note: given your handle - are you a Brad Gushue fan?
Regards


They are legally obliged to inform shareholders truthfully. That they are using optimal phrasing and try to hide it in their filings doesn't mean that information is not true. How deep is the hole they in are according to you?

777x write down was not caused by the technical problems you mentioned, but mainly due to the lowering of the accounting block of deffered development costs and the new required certification efforts. From an share value perspective it was done quite smoothly as Wallstreet expected bad results and Boeing just cleaned up shop by putting all known accounting problems in 2020 by blaming the pandemic and regulatory issues. Thanks to the write down the 777x might even bring in profits in the future years as it needs to pay less deferred development/production costs compared to the 787. Off course this depends a lot on demand recovery.

NL stands for Netherlands and not Newfoundland, so had no idea who Brad Gushue was.
 
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Phosphorus
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Re: 737 Max - What Airlines Really Pay

Mon Mar 01, 2021 8:18 pm

Revelation wrote:
CRJockey wrote:
You know, due to my personal inherent lack of fanboyism for either manufacturer, I really don’t care who gets critically discussed or outright roasted.

But I can’t remember any kind of similar reservation when a good Airbus critique was held.

Why do you feel there should be any restraint? Or do I misunderstand you?

Critique is fine as long as it's put into an appropriate context.

I feel that's not happening here.

The expectation seems to be that the cancer patient should be able to run as fast as the one with the bad cold.

It's a pretty meaningless comparison to me, one that would be made by fanboys trying to score points rather than understand the situation as it is.

This is a look trough financial prism. As crankypants mentioned, you don't necessarily want to be long stock, you can be short stock. Which stock do you short -- a stock of a company that is having a cold? or a company that has a malignant tumor, stage 4, metastases in several critical organs, faces manslaughter liabilities, and has negative net worth, so pays his medical bills by borrowing money?
(and while I don't feel Boeing is a good stock to short -- for the entire "too big to fail" set of reasons, that can catch short-sellers in cross-fire -- I understand where he's coming from).
So yes, if that cancer patient is actually expected to generate a lot of cash, because he has a lot of inventory of stuff, and then an astute observer figures out, that stuff is literally being given away, to keep the show going -- that is a fairly big deal, TBH.
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crankypants
Topic Author
Posts: 57
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Re: 737 Max - What Airlines Really Pay

Mon Mar 01, 2021 9:48 pm

JonesNL wrote:
crankypants wrote:
JonesNL wrote:

No need to apologize, and your financial analysis is more then appreciated. The exact numbers were not known by me (and most others I guess). So, you analysis is really helpful, but the story that the numbers are telling is not an revelation, there are in line with the communication of Boeing and industry stakeholders. There are to many articles to dig through to come up with the data you want, but SWA's relationship with Boeing and Boeings financial cashflow details are widespread available.

The refrains you mention are just opinions of avid fans who are trying to look at it from the bright side. Like mentioned up thread; things are being told or not being told on earning calls give you a much better idea of what really is going on.


Jonesy - those earnings calls are pretty tricky, if you ask me. The current crop of c-suite boys seem to be mainly concerned with keeping the share price high, as opposed to revealing just how deep a hole they are in. Some reading between the lines is definitely required, but then it can be explained away as alarmist interpretations, by those same fans you mention.

Who saw the $6.5 billion write down on the 777X coming? Everything from the genX engine issues to the fuselage stress test was down played, until the bill came due.

On a side note: given your handle - are you a Brad Gushue fan?
Regards


They are legally obliged to inform shareholders truthfully. That they are using optimal phrasing and try to hide it in their filings doesn't mean that information is not true. How deep is the hole they in are according to you?

777x write down was not caused by the technical problems you mentioned, but mainly due to the lowering of the accounting block of deffered development costs and the new required certification efforts. From an share value perspective it was done quite smoothly as Wallstreet expected bad results and Boeing just cleaned up shop by putting all known accounting problems in 2020 by blaming the pandemic and regulatory issues. Thanks to the write down the 777x might even bring in profits in the future years as it needs to pay less deferred development/production costs compared to the 787. Off course this depends a lot on demand recovery.

NL stands for Netherlands and not Newfoundland, so had no idea who Brad Gushue was.


I had a 50/50 shot on the NL thing. Given your name....I went with Gushue.

If only the C-suite boys of all publicly traded firms followed those rules...maybe if the punishments actually meant something.

I have two friends I am in regular contact with; one is a former Boeing engineer who is regularly kept in the loop on the shop talk by the guys still there and another is a structures engineer who worked for both BA and AB as a sub contractor. I kinda get the dirt under the nails stuff.

On the 777X the ramp talk is that there is also a high alpha issue BA is dealing with. To your point though (and this goes to the veracity of what the c-suite guys say) IIRC the accounting block dropped from 400 to 350, in the most recent filing, correct? Therefore they still expect to sell 350 units and amortise the sunk costs over those units. Not sure how a drop of 50 aircraft would mean a loss of $6.5 billion. That would imply a $130 million cost allocated on R&D to each aircraft.

The other shoe to drop, is that this is only a portion of the money spent on the 777X. There are other costs that will be allocated to the accounting block - some rumblings are that the $6.5 billion is HALF of what was spent (or being spent). My guy is a plane guy, not a numbers guy - so he doesn't get the scoop from the finance people...but some shop guys talk to office guys - so there is some trickle down of info.

From a program standpoint - just because you've acknowledged an expense for a particular period, does not mean that all of a sudden a program is profitable. That $6.5 billion has been spent. Money has been borrowed to fund it. Interest will also be paid for as long as it needs to be paid off. 'From now on' is a horrible position - it's kind of like some who say 'the Max will now be the safest plane in the world'...you can't just undo the crashes and deaths.

For Wall Street and for the profitability of a program are two different things.

How bad is it at BA, you ask?

It's an ongoing situation, but a very conservative estimate is that;

1) They're down $6.5 billion on the 777X
2) The're down $20 billion on the Max
3) They're down $18 billion on the 787

All 3 of those numbers are going up. The 777X for what I mentioned. The Max number was a Mar 2020 estimate by Boeing and the 787 has a huge issue with the fuselage joints. The $18 billion is the previous bill for the sunk costs, not this stuff. I expect them to take a forward loss on the program.

Borrowing costs alone are at $2.6 billion a year. How many aircraft do you have to sell to cover $2.6 billion?

Just to put it all into SWA context:

If Boeing TODAY were to be able to build and sell all 280 Max's that SWA has/had on order, and get paid for each one, they would get some $10.3 billion in revenue. If we use the 2018 margin number of 13% (which includes the margins for both wide and narrow bodies) they would make $1.346 billion on the entire order.

That would pay HALF of the interest expense for the year. Half.

(A side note on the margin: the 2018 margin is when BA sold over 800 aircraft. Fixed costs were allocated over a large number of units sold. There are some costs BA can cut, others they cannot - whether they sell 1 or 800 planes. You still gotta keep the lights on, the place heated and a host of other expenses. Margins are not going to be as good, as they were in 2018)

Q1/21 is coming up soon. I guess we'll see...
 
JonesNL
Posts: 361
Joined: Tue Aug 06, 2019 2:40 pm

Re: 737 Max - What Airlines Really Pay

Tue Mar 02, 2021 6:26 am

crankypants wrote:
JonesNL wrote:
crankypants wrote:

Jonesy - those earnings calls are pretty tricky, if you ask me. The current crop of c-suite boys seem to be mainly concerned with keeping the share price high, as opposed to revealing just how deep a hole they are in. Some reading between the lines is definitely required, but then it can be explained away as alarmist interpretations, by those same fans you mention.

Who saw the $6.5 billion write down on the 777X coming? Everything from the genX engine issues to the fuselage stress test was down played, until the bill came due.

On a side note: given your handle - are you a Brad Gushue fan?
Regards


They are legally obliged to inform shareholders truthfully. That they are using optimal phrasing and try to hide it in their filings doesn't mean that information is not true. How deep is the hole they in are according to you?

777x write down was not caused by the technical problems you mentioned, but mainly due to the lowering of the accounting block of deffered development costs and the new required certification efforts. From an share value perspective it was done quite smoothly as Wallstreet expected bad results and Boeing just cleaned up shop by putting all known accounting problems in 2020 by blaming the pandemic and regulatory issues. Thanks to the write down the 777x might even bring in profits in the future years as it needs to pay less deferred development/production costs compared to the 787. Off course this depends a lot on demand recovery.

NL stands for Netherlands and not Newfoundland, so had no idea who Brad Gushue was.


I had a 50/50 shot on the NL thing. Given your name....I went with Gushue.

If only the C-suite boys of all publicly traded firms followed those rules...maybe if the punishments actually meant something.

I have two friends I am in regular contact with; one is a former Boeing engineer who is regularly kept in the loop on the shop talk by the guys still there and another is a structures engineer who worked for both BA and AB as a sub contractor. I kinda get the dirt under the nails stuff.

On the 777X the ramp talk is that there is also a high alpha issue BA is dealing with. To your point though (and this goes to the veracity of what the c-suite guys say) IIRC the accounting block dropped from 400 to 350, in the most recent filing, correct? Therefore they still expect to sell 350 units and amortise the sunk costs over those units. Not sure how a drop of 50 aircraft would mean a loss of $6.5 billion. That would imply a $130 million cost allocated on R&D to each aircraft.

The other shoe to drop, is that this is only a portion of the money spent on the 777X. There are other costs that will be allocated to the accounting block - some rumblings are that the $6.5 billion is HALF of what was spent (or being spent). My guy is a plane guy, not a numbers guy - so he doesn't get the scoop from the finance people...but some shop guys talk to office guys - so there is some trickle down of info.

From a program standpoint - just because you've acknowledged an expense for a particular period, does not mean that all of a sudden a program is profitable. That $6.5 billion has been spent. Money has been borrowed to fund it. Interest will also be paid for as long as it needs to be paid off. 'From now on' is a horrible position - it's kind of like some who say 'the Max will now be the safest plane in the world'...you can't just undo the crashes and deaths.

For Wall Street and for the profitability of a program are two different things.

How bad is it at BA, you ask?

It's an ongoing situation, but a very conservative estimate is that;

1) They're down $6.5 billion on the 777X
2) The're down $20 billion on the Max
3) They're down $18 billion on the 787

All 3 of those numbers are going up. The 777X for what I mentioned. The Max number was a Mar 2020 estimate by Boeing and the 787 has a huge issue with the fuselage joints. The $18 billion is the previous bill for the sunk costs, not this stuff. I expect them to take a forward loss on the program.

Borrowing costs alone are at $2.6 billion a year. How many aircraft do you have to sell to cover $2.6 billion?

Just to put it all into SWA context:

If Boeing TODAY were to be able to build and sell all 280 Max's that SWA has/had on order, and get paid for each one, they would get some $10.3 billion in revenue. If we use the 2018 margin number of 13% (which includes the margins for both wide and narrow bodies) they would make $1.346 billion on the entire order.

That would pay HALF of the interest expense for the year. Half.

(A side note on the margin: the 2018 margin is when BA sold over 800 aircraft. Fixed costs were allocated over a large number of units sold. There are some costs BA can cut, others they cannot - whether they sell 1 or 800 planes. You still gotta keep the lights on, the place heated and a host of other expenses. Margins are not going to be as good, as they were in 2018)

Q1/21 is coming up soon. I guess we'll see...


I agree that the debt is going to hurt them quite a lot, but I believe they still have the opportunity to turn there destiny around. Look at GE, they unloaded massive amount of debt the last couple of years. They started with over $300 billion in 2015 and now are at $80 billion. The $60 billion at Boeing is not unmanageable.

Image

$6.5 was an accumulation of extra certification costs, delivery delay penalties and the accounting block drop. The exact size of each post was not communicated. So, your guess is as good as any.

Wallstreet has an short memory + attention span and is not concerned with program profitability. There concern is the yearly or profitability of the company, as they do not invest in programs but in companies. I completely agree that the program might never make dime of profit, but it can generate profit on an quarterly/yearly basis thanks to the write off. This was also communicated by Boeing with the forward loss messages. Same is the case for the 787, the program might make a loss but it showed some nice profits on paper during 2014-2019.

The execution of the NMA will make or break the company. They need perfect execution on the development side. On the sales side it is actually quite good if they can create an 50-50 balance against the A321 and future A322. The numbers in that segment are high enough to easily support the business case for 50% market share. NMA also decides the future of the NSA. If the NMA fails like previous programs, then the NSA is probably doomed and as such Boeing Commercial Aviation...
 
crankypants
Topic Author
Posts: 57
Joined: Wed Jan 22, 2020 1:11 pm

Re: 737 Max - What Airlines Really Pay

Tue Mar 02, 2021 2:41 pm

JonesNL wrote:
crankypants wrote:
JonesNL wrote:

They are legally obliged to inform shareholders truthfully. That they are using optimal phrasing and try to hide it in their filings doesn't mean that information is not true. How deep is the hole they in are according to you?

777x write down was not caused by the technical problems you mentioned, but mainly due to the lowering of the accounting block of deffered development costs and the new required certification efforts. From an share value perspective it was done quite smoothly as Wallstreet expected bad results and Boeing just cleaned up shop by putting all known accounting problems in 2020 by blaming the pandemic and regulatory issues. Thanks to the write down the 777x might even bring in profits in the future years as it needs to pay less deferred development/production costs compared to the 787. Off course this depends a lot on demand recovery.

NL stands for Netherlands and not Newfoundland, so had no idea who Brad Gushue was.


I had a 50/50 shot on the NL thing. Given your name....I went with Gushue.

If only the C-suite boys of all publicly traded firms followed those rules...maybe if the punishments actually meant something.

I have two friends I am in regular contact with; one is a former Boeing engineer who is regularly kept in the loop on the shop talk by the guys still there and another is a structures engineer who worked for both BA and AB as a sub contractor. I kinda get the dirt under the nails stuff.

On the 777X the ramp talk is that there is also a high alpha issue BA is dealing with. To your point though (and this goes to the veracity of what the c-suite guys say) IIRC the accounting block dropped from 400 to 350, in the most recent filing, correct? Therefore they still expect to sell 350 units and amortise the sunk costs over those units. Not sure how a drop of 50 aircraft would mean a loss of $6.5 billion. That would imply a $130 million cost allocated on R&D to each aircraft.

The other shoe to drop, is that this is only a portion of the money spent on the 777X. There are other costs that will be allocated to the accounting block - some rumblings are that the $6.5 billion is HALF of what was spent (or being spent). My guy is a plane guy, not a numbers guy - so he doesn't get the scoop from the finance people...but some shop guys talk to office guys - so there is some trickle down of info.

From a program standpoint - just because you've acknowledged an expense for a particular period, does not mean that all of a sudden a program is profitable. That $6.5 billion has been spent. Money has been borrowed to fund it. Interest will also be paid for as long as it needs to be paid off. 'From now on' is a horrible position - it's kind of like some who say 'the Max will now be the safest plane in the world'...you can't just undo the crashes and deaths.

For Wall Street and for the profitability of a program are two different things.

How bad is it at BA, you ask?

It's an ongoing situation, but a very conservative estimate is that;

1) They're down $6.5 billion on the 777X
2) The're down $20 billion on the Max
3) They're down $18 billion on the 787

All 3 of those numbers are going up. The 777X for what I mentioned. The Max number was a Mar 2020 estimate by Boeing and the 787 has a huge issue with the fuselage joints. The $18 billion is the previous bill for the sunk costs, not this stuff. I expect them to take a forward loss on the program.

Borrowing costs alone are at $2.6 billion a year. How many aircraft do you have to sell to cover $2.6 billion?

Just to put it all into SWA context:

If Boeing TODAY were to be able to build and sell all 280 Max's that SWA has/had on order, and get paid for each one, they would get some $10.3 billion in revenue. If we use the 2018 margin number of 13% (which includes the margins for both wide and narrow bodies) they would make $1.346 billion on the entire order.

That would pay HALF of the interest expense for the year. Half.

(A side note on the margin: the 2018 margin is when BA sold over 800 aircraft. Fixed costs were allocated over a large number of units sold. There are some costs BA can cut, others they cannot - whether they sell 1 or 800 planes. You still gotta keep the lights on, the place heated and a host of other expenses. Margins are not going to be as good, as they were in 2018)

Q1/21 is coming up soon. I guess we'll see...


I agree that the debt is going to hurt them quite a lot, but I believe they still have the opportunity to turn there destiny around. Look at GE, they unloaded massive amount of debt the last couple of years. They started with over $300 billion in 2015 and now are at $80 billion. The $60 billion at Boeing is not unmanageable.

Image

$6.5 was an accumulation of extra certification costs, delivery delay penalties and the accounting block drop. The exact size of each post was not communicated. So, your guess is as good as any.

Wallstreet has an short memory + attention span and is not concerned with program profitability. There concern is the yearly or profitability of the company, as they do not invest in programs but in companies. I completely agree that the program might never make dime of profit, but it can generate profit on an quarterly/yearly basis thanks to the write off. This was also communicated by Boeing with the forward loss messages. Same is the case for the 787, the program might make a loss but it showed some nice profits on paper during 2014-2019.

The execution of the NMA will make or break the company. They need perfect execution on the development side. On the sales side it is actually quite good if they can create an 50-50 balance against the A321 and future A322. The numbers in that segment are high enough to easily support the business case for 50% market share. NMA also decides the future of the NSA. If the NMA fails like previous programs, then the NSA is probably doomed and as such Boeing Commercial Aviation...


Interesting comparison. How did GE do this? By spinning off pieces of itself, like it's Biopharma division to Danaher for $21 billion. Acquisitions were generally how GE got itself into their mess in the first place, so they had stuff to sell to reduce debt (hello there Baker Hughes).

You think Boeing is going to spin off Defence or Services to raise capital? Some have mentioned that is a possibility. Selling the stock they bought back with that $43 billion might also be an option, but it would drive down share price, a big no-no. Besides, Boeing needs the shares to fund the pension/medical liabilities, like it did in Q4 with $3 billion.

Accrued retiree health care 2020:$4,137 2019: $4,540
Accrued pension plan liability, net 2020:$14,408 2019: $16,276

That's $18.5 billion that they seem to want to pay off through equity. On top of the $62 billion in long term debt.

Wall Street is kind of crazy right now, due to the glut of cash. Financials don't seem to mean a damn thing.

But the ways GE and BA got themselves into trouble are two fundamentally different things.

IMO Boeing got itself into this mess two ways;
One, they cheaped out on product and tried to milk as much profit as possible.
Two, they used the proceeds not to fund future development, but to enrich shareholders.
They essentially killed the golden goose.

But here is a fun exercise;

Let's say that Boeing was able today, to produce and deliver every aircraft it has in it's commercial backlog, without incurring any additional debts, without giving any other discounts, getting full bang for their buck - what would we have? We'll even use their best year ever of 2018 as a benchmark for margins....13%.

Right off their report: Commercial Airplanes $281,588
They would make almost $37 billion dollars, at the rosiest outlook. They'd only be some $25 billion short of paying off their long term debt.

But Boeing is far from finished with it's borrowing, isn't it? They just took on almost $14 more billion to pay off their revolver, which now gives them space on the credit card.

Let's look at your projection for the NMA;

On the sales side it is actually quite good if they can create an 50-50 balance against the A321 and future A322. The numbers in that segment are high enough to easily support the business case for 50% market share.

Really? Let's not talk about any hypothetical A322, but let's look at the reality of the current market.

The 321Neo variant has some 3,500 orders. Are you saying there is the market for that many NMA's? That's what BA would have to sell to have 50/50 there. How many 757's & 767's did Boeing sell combined? 1.050 & 1,280. That includes tankers & freighters. All of a sudden, the market for that niche is 7,000 units and Boeing would have to win EVERY SINGLE BID of that, to get to 50/50.

BTW - where is Boeing going to get the $15-20 billion to launch this thing? Put it on the credit card, too? I guess if you're already paying some $2.6 billion in annual interest payments, another billion or so isn't going to make much difference, is it?

(BTW, on the 777X issue, here's the official corporate verbiage BA put out:

As discussed above, Commercial Airplanes now expects first delivery of the 777X to occur in late 2023 and
has recorded a $6.5 billion reach-forward loss on the 777X program. Among the factors contributing to the revised
first delivery schedule and reach-forward loss are an updated assessment of certification requirements based on
ongoing communication with civil aviation authorities, an updated assessment of market demand based on
continued dialogue with customers, resulting adjustments to production rates and the program accounting quantity,
increased change incorporation costs, and associated customer and supply chain impacts. The production rate
expectation for the combined 777/777X program remains at 2 per month in 2021.


Now YOU guess what that actually means and how big an effect of reducing the block by 50 really has....)

The problem with saying that once a loss is taken, it's gone and forgotten, is that it isn't. It's right there, sitting on your balance sheet and income statement, staring at you. It's name has changed, but it's there. It's now LONG TERM DEBT & INTEREST EXPENSE.

And because you've taken a loss and had to borrow money to cover it, it's costing you more money. it will continue to cost you more money because all you've done is kicked the can down the road. But in Boeing's case, they aren't borrowing this money to acquire something they can later sell or profit from, they aren't borrowing this money to fund future developments - they've had to borrow this money because they were stupid and greedy.
 
JonesNL
Posts: 361
Joined: Tue Aug 06, 2019 2:40 pm

Re: 737 Max - What Airlines Really Pay

Tue Mar 02, 2021 6:29 pm

crankypants wrote:

Interesting comparison. How did GE do this? By spinning off pieces of itself, like it's Biopharma division to Danaher for $21 billion. Acquisitions were generally how GE got itself into their mess in the first place, so they had stuff to sell to reduce debt (hello there Baker Hughes).

You think Boeing is going to spin off Defence or Services to raise capital? Some have mentioned that is a possibility. Selling the stock they bought back with that $43 billion might also be an option, but it would drive down share price, a big no-no. Besides, Boeing needs the shares to fund the pension/medical liabilities, like it did in Q4 with $3 billion.

Accrued retiree health care 2020:$4,137 2019: $4,540
Accrued pension plan liability, net 2020:$14,408 2019: $16,276

That's $18.5 billion that they seem to want to pay off through equity. On top of the $62 billion in long term debt.

Wall Street is kind of crazy right now, due to the glut of cash. Financials don't seem to mean a damn thing.

But the ways GE and BA got themselves into trouble are two fundamentally different things.

IMO Boeing got itself into this mess two ways;
One, they cheaped out on product and tried to milk as much profit as possible.
Two, they used the proceeds not to fund future development, but to enrich shareholders.
They essentially killed the golden goose.

But here is a fun exercise;

Let's say that Boeing was able today, to produce and deliver every aircraft it has in it's commercial backlog, without incurring any additional debts, without giving any other discounts, getting full bang for their buck - what would we have? We'll even use their best year ever of 2018 as a benchmark for margins....13%.

Right off their report: Commercial Airplanes $281,588
They would make almost $37 billion dollars, at the rosiest outlook. They'd only be some $25 billion short of paying off their long term debt.

But Boeing is far from finished with it's borrowing, isn't it? They just took on almost $14 more billion to pay off their revolver, which now gives them space on the credit card.

Let's look at your projection for the NMA;

On the sales side it is actually quite good if they can create an 50-50 balance against the A321 and future A322. The numbers in that segment are high enough to easily support the business case for 50% market share.

Really? Let's not talk about any hypothetical A322, but let's look at the reality of the current market.

The 321Neo variant has some 3,500 orders. Are you saying there is the market for that many NMA's? That's what BA would have to sell to have 50/50 there. How many 757's & 767's did Boeing sell combined? 1.050 & 1,280. That includes tankers & freighters. All of a sudden, the market for that niche is 7,000 units and Boeing would have to win EVERY SINGLE BID of that, to get to 50/50.

BTW - where is Boeing going to get the $15-20 billion to launch this thing? Put it on the credit card, too? I guess if you're already paying some $2.6 billion in annual interest payments, another billion or so isn't going to make much difference, is it?

(BTW, on the 777X issue, here's the official corporate verbiage BA put out:

As discussed above, Commercial Airplanes now expects first delivery of the 777X to occur in late 2023 and
has recorded a $6.5 billion reach-forward loss on the 777X program. Among the factors contributing to the revised
first delivery schedule and reach-forward loss are an updated assessment of certification requirements based on
ongoing communication with civil aviation authorities, an updated assessment of market demand based on
continued dialogue with customers, resulting adjustments to production rates and the program accounting quantity,
increased change incorporation costs, and associated customer and supply chain impacts. The production rate
expectation for the combined 777/777X program remains at 2 per month in 2021.


Now YOU guess what that actually means and how big an effect of reducing the block by 50 really has....)

The problem with saying that once a loss is taken, it's gone and forgotten, is that it isn't. It's right there, sitting on your balance sheet and income statement, staring at you. It's name has changed, but it's there. It's now LONG TERM DEBT & INTEREST EXPENSE.

And because you've taken a loss and had to borrow money to cover it, it's costing you more money. it will continue to cost you more money because all you've done is kicked the can down the road. But in Boeing's case, they aren't borrowing this money to acquire something they can later sell or profit from, they aren't borrowing this money to fund future developments - they've had to borrow this money because they were stupid and greedy.


GE was just a simple example that big corporations have a lot clout to change the look of their balance sheet in their favour. Don’t need to look to deep in to the details. I do agree with the financial premises that the current backlog is not enough to cover debt. But that is with the assumption that they won’t have any new order, which is not realistic.

The 50/50 split is based on new orders close to EIS. So if there are 7000 orders from 2030 to 2050 A en B will each have 3500.

What would you do? Just let company default instead of loading on debt to survive? Mistakes have been made and can’t be unmade. They have to learn and make sure that the future will be better. And that will have the possibility to achieve that, but they need to execute like the original 777...
 
WIederling
Posts: 10043
Joined: Sun Sep 13, 2015 2:15 pm

Re: 737 Max - What Airlines Really Pay

Tue Mar 02, 2021 6:33 pm

crankypants wrote:
Borrowing costs alone are at $2.6 billion a year. How many aircraft do you have to sell to cover $2.6 billion?


Infinite.

.. if you sell them at cost or below.
I do wonder what kind of offer has been made to potential defectors and recent signer ups.

Will taking up these "gifted" offers be at least beneficial to the airlines takers?
( or will the MAX blow again with a much delayed fuse.)
Murphy is an optimist
 
crankypants
Topic Author
Posts: 57
Joined: Wed Jan 22, 2020 1:11 pm

Re: 737 Max - What Airlines Really Pay

Tue Mar 02, 2021 10:16 pm

JonesNL wrote:
crankypants wrote:

Interesting comparison. How did GE do this? By spinning off pieces of itself, like it's Biopharma division to Danaher for $21 billion. Acquisitions were generally how GE got itself into their mess in the first place, so they had stuff to sell to reduce debt (hello there Baker Hughes).

You think Boeing is going to spin off Defence or Services to raise capital? Some have mentioned that is a possibility. Selling the stock they bought back with that $43 billion might also be an option, but it would drive down share price, a big no-no. Besides, Boeing needs the shares to fund the pension/medical liabilities, like it did in Q4 with $3 billion.

Accrued retiree health care 2020:$4,137 2019: $4,540
Accrued pension plan liability, net 2020:$14,408 2019: $16,276

That's $18.5 billion that they seem to want to pay off through equity. On top of the $62 billion in long term debt.

Wall Street is kind of crazy right now, due to the glut of cash. Financials don't seem to mean a damn thing.

But the ways GE and BA got themselves into trouble are two fundamentally different things.

IMO Boeing got itself into this mess two ways;
One, they cheaped out on product and tried to milk as much profit as possible.
Two, they used the proceeds not to fund future development, but to enrich shareholders.
They essentially killed the golden goose.

But here is a fun exercise;

Let's say that Boeing was able today, to produce and deliver every aircraft it has in it's commercial backlog, without incurring any additional debts, without giving any other discounts, getting full bang for their buck - what would we have? We'll even use their best year ever of 2018 as a benchmark for margins....13%.

Right off their report: Commercial Airplanes $281,588
They would make almost $37 billion dollars, at the rosiest outlook. They'd only be some $25 billion short of paying off their long term debt.

But Boeing is far from finished with it's borrowing, isn't it? They just took on almost $14 more billion to pay off their revolver, which now gives them space on the credit card.

Let's look at your projection for the NMA;

On the sales side it is actually quite good if they can create an 50-50 balance against the A321 and future A322. The numbers in that segment are high enough to easily support the business case for 50% market share.

Really? Let's not talk about any hypothetical A322, but let's look at the reality of the current market.

The 321Neo variant has some 3,500 orders. Are you saying there is the market for that many NMA's? That's what BA would have to sell to have 50/50 there. How many 757's & 767's did Boeing sell combined? 1.050 & 1,280. That includes tankers & freighters. All of a sudden, the market for that niche is 7,000 units and Boeing would have to win EVERY SINGLE BID of that, to get to 50/50.

BTW - where is Boeing going to get the $15-20 billion to launch this thing? Put it on the credit card, too? I guess if you're already paying some $2.6 billion in annual interest payments, another billion or so isn't going to make much difference, is it?

(BTW, on the 777X issue, here's the official corporate verbiage BA put out:

As discussed above, Commercial Airplanes now expects first delivery of the 777X to occur in late 2023 and
has recorded a $6.5 billion reach-forward loss on the 777X program. Among the factors contributing to the revised
first delivery schedule and reach-forward loss are an updated assessment of certification requirements based on
ongoing communication with civil aviation authorities, an updated assessment of market demand based on
continued dialogue with customers, resulting adjustments to production rates and the program accounting quantity,
increased change incorporation costs, and associated customer and supply chain impacts. The production rate
expectation for the combined 777/777X program remains at 2 per month in 2021.


Now YOU guess what that actually means and how big an effect of reducing the block by 50 really has....)

The problem with saying that once a loss is taken, it's gone and forgotten, is that it isn't. It's right there, sitting on your balance sheet and income statement, staring at you. It's name has changed, but it's there. It's now LONG TERM DEBT & INTEREST EXPENSE.

And because you've taken a loss and had to borrow money to cover it, it's costing you more money. it will continue to cost you more money because all you've done is kicked the can down the road. But in Boeing's case, they aren't borrowing this money to acquire something they can later sell or profit from, they aren't borrowing this money to fund future developments - they've had to borrow this money because they were stupid and greedy.


GE was just a simple example that big corporations have a lot clout to change the look of their balance sheet in their favour. Don’t need to look to deep in to the details. I do agree with the financial premises that the current backlog is not enough to cover debt. But that is with the assumption that they won’t have any new order, which is not realistic.

The 50/50 split is based on new orders close to EIS. So if there are 7000 orders from 2030 to 2050 A en B will each have 3500.

What would you do? Just let company default instead of loading on debt to survive? Mistakes have been made and can’t be unmade. They have to learn and make sure that the future will be better. And that will have the possibility to achieve that, but they need to execute like the original 777...


Don’t need to look to deep in to the details.


I disagree - the devil is always in the details. Attention to detail (especially when building aircraft) is so very important. Just because GE was able to lower their long term debt - which you proposed as a template, does not mean Boeing can follow suit. Two very different animals.

Digging for the details is how this thread started. What it is based upon.

If there is an EIS of 2030, the 757 market will pretty much all be gone. All that will be left is the 767 segment.

What would I do?

Clean house. Get airplane people in there. Listen to what the airlines want. Get the engineers to plan it. Get aircraft people to build it. Stop subcontracting out so much of the aircraft, that you have fit/manufacturing issues. Get out of Chicago and South Carolina. All those shares they spent billions on? Sell them. Pay down the debt. Wall street doesn't like it? Too bad.

You know - the simple things that would make Boeing a great aircraft company, again...

...and you?
 
User avatar
par13del
Posts: 10819
Joined: Sun Dec 18, 2005 9:14 pm

Re: 737 Max - What Airlines Really Pay

Tue Mar 02, 2021 11:59 pm

crankypants wrote:
What would I do?

Clean house. Get airplane people in there. Listen to what the airlines want. Get the engineers to plan it. Get aircraft people to build it. Stop subcontracting out so much of the aircraft, that you have fit/manufacturing issues. Get out of Chicago and South Carolina. All those shares they spent billions on? Sell them. Pay down the debt. Wall street doesn't like it? Too bad.

You know - the simple things that would make Boeing a great aircraft company, again...

...and you?

Clean house, where? Washington where they screwed up the 787, 748, 77X, KC-46, South Carolina where they already invested billions to also bring back some production in house at lower cost than Washington?
Get airplane people in, from where Europe, Russia, China, obviously no talent exist in Boeing or they would have resigned as their professional ethics would not allow them to produce the faulty products that exist now. Sub-contracting seems to be working all over the world, in aviation Airbus has it all over the world and folks said it was a Boeing weakness.
Or we can look at your earlier post where you said Boeing was in a mess because of greed, whose greed, the engineers, designers the plane people, or the board and the powerful shareholders? If the latter then maybe the airplane people are in Boeing but were just sidelined and perhaps cleaning house has to be limited?
Just a thought....
 
crankypants
Topic Author
Posts: 57
Joined: Wed Jan 22, 2020 1:11 pm

Re: 737 Max - What Airlines Really Pay

Wed Mar 03, 2021 11:33 am

par13del wrote:
crankypants wrote:
What would I do?

Clean house. Get airplane people in there. Listen to what the airlines want. Get the engineers to plan it. Get aircraft people to build it. Stop subcontracting out so much of the aircraft, that you have fit/manufacturing issues. Get out of Chicago and South Carolina. All those shares they spent billions on? Sell them. Pay down the debt. Wall street doesn't like it? Too bad.

You know - the simple things that would make Boeing a great aircraft company, again...

...and you?

Clean house, where? Washington where they screwed up the 787, 748, 77X, KC-46, South Carolina where they already invested billions to also bring back some production in house at lower cost than Washington?
Get airplane people in, from where Europe, Russia, China, obviously no talent exist in Boeing or they would have resigned as their professional ethics would not allow them to produce the faulty products that exist now. Sub-contracting seems to be working all over the world, in aviation Airbus has it all over the world and folks said it was a Boeing weakness.
Or we can look at your earlier post where you said Boeing was in a mess because of greed, whose greed, the engineers, designers the plane people, or the board and the powerful shareholders? If the latter then maybe the airplane people are in Boeing but were just sidelined and perhaps cleaning house has to be limited?
Just a thought....


Yes - if it wasn't apparent, I was referring to the c-suite and BoD. The engineers, the design people, the aircraft guys - weren't the ones who decided to move HQ to Chicago. They have (from what I've heard, they still do, even with the cuts.buyouts) the a/c people there. They need to be heard and not ignored - this is what got BA into trouble. Listening to the MBA's over the people who make aircraft.

There is sub-contracting, then there is subcontracting. Everything in moderation, is the key. You get what you pay for.
 
JonesNL
Posts: 361
Joined: Tue Aug 06, 2019 2:40 pm

Re: 737 Max - What Airlines Really Pay

Wed Mar 03, 2021 3:57 pm

crankypants wrote:
JonesNL wrote:
crankypants wrote:

Interesting comparison. How did GE do this? By spinning off pieces of itself, like it's Biopharma division to Danaher for $21 billion. Acquisitions were generally how GE got itself into their mess in the first place, so they had stuff to sell to reduce debt (hello there Baker Hughes).

You think Boeing is going to spin off Defence or Services to raise capital? Some have mentioned that is a possibility. Selling the stock they bought back with that $43 billion might also be an option, but it would drive down share price, a big no-no. Besides, Boeing needs the shares to fund the pension/medical liabilities, like it did in Q4 with $3 billion.

Accrued retiree health care 2020:$4,137 2019: $4,540
Accrued pension plan liability, net 2020:$14,408 2019: $16,276

That's $18.5 billion that they seem to want to pay off through equity. On top of the $62 billion in long term debt.

Wall Street is kind of crazy right now, due to the glut of cash. Financials don't seem to mean a damn thing.

But the ways GE and BA got themselves into trouble are two fundamentally different things.

IMO Boeing got itself into this mess two ways;
One, they cheaped out on product and tried to milk as much profit as possible.
Two, they used the proceeds not to fund future development, but to enrich shareholders.
They essentially killed the golden goose.

But here is a fun exercise;

Let's say that Boeing was able today, to produce and deliver every aircraft it has in it's commercial backlog, without incurring any additional debts, without giving any other discounts, getting full bang for their buck - what would we have? We'll even use their best year ever of 2018 as a benchmark for margins....13%.

Right off their report: Commercial Airplanes $281,588
They would make almost $37 billion dollars, at the rosiest outlook. They'd only be some $25 billion short of paying off their long term debt.

But Boeing is far from finished with it's borrowing, isn't it? They just took on almost $14 more billion to pay off their revolver, which now gives them space on the credit card.

Let's look at your projection for the NMA;

On the sales side it is actually quite good if they can create an 50-50 balance against the A321 and future A322. The numbers in that segment are high enough to easily support the business case for 50% market share.

Really? Let's not talk about any hypothetical A322, but let's look at the reality of the current market.

The 321Neo variant has some 3,500 orders. Are you saying there is the market for that many NMA's? That's what BA would have to sell to have 50/50 there. How many 757's & 767's did Boeing sell combined? 1.050 & 1,280. That includes tankers & freighters. All of a sudden, the market for that niche is 7,000 units and Boeing would have to win EVERY SINGLE BID of that, to get to 50/50.

BTW - where is Boeing going to get the $15-20 billion to launch this thing? Put it on the credit card, too? I guess if you're already paying some $2.6 billion in annual interest payments, another billion or so isn't going to make much difference, is it?

(BTW, on the 777X issue, here's the official corporate verbiage BA put out:

As discussed above, Commercial Airplanes now expects first delivery of the 777X to occur in late 2023 and
has recorded a $6.5 billion reach-forward loss on the 777X program. Among the factors contributing to the revised
first delivery schedule and reach-forward loss are an updated assessment of certification requirements based on
ongoing communication with civil aviation authorities, an updated assessment of market demand based on
continued dialogue with customers, resulting adjustments to production rates and the program accounting quantity,
increased change incorporation costs, and associated customer and supply chain impacts. The production rate
expectation for the combined 777/777X program remains at 2 per month in 2021.


Now YOU guess what that actually means and how big an effect of reducing the block by 50 really has....)

The problem with saying that once a loss is taken, it's gone and forgotten, is that it isn't. It's right there, sitting on your balance sheet and income statement, staring at you. It's name has changed, but it's there. It's now LONG TERM DEBT & INTEREST EXPENSE.

And because you've taken a loss and had to borrow money to cover it, it's costing you more money. it will continue to cost you more money because all you've done is kicked the can down the road. But in Boeing's case, they aren't borrowing this money to acquire something they can later sell or profit from, they aren't borrowing this money to fund future developments - they've had to borrow this money because they were stupid and greedy.


GE was just a simple example that big corporations have a lot clout to change the look of their balance sheet in their favour. Don’t need to look to deep in to the details. I do agree with the financial premises that the current backlog is not enough to cover debt. But that is with the assumption that they won’t have any new order, which is not realistic.

The 50/50 split is based on new orders close to EIS. So if there are 7000 orders from 2030 to 2050 A en B will each have 3500.

What would you do? Just let company default instead of loading on debt to survive? Mistakes have been made and can’t be unmade. They have to learn and make sure that the future will be better. And that will have the possibility to achieve that, but they need to execute like the original 777...


Don’t need to look to deep in to the details.


I disagree - the devil is always in the details. Attention to detail (especially when building aircraft) is so very important. Just because GE was able to lower their long term debt - which you proposed as a template, does not mean Boeing can follow suit. Two very different animals.

Digging for the details is how this thread started. What it is based upon.

If there is an EIS of 2030, the 757 market will pretty much all be gone. All that will be left is the 767 segment.

What would I do?

Clean house. Get airplane people in there. Listen to what the airlines want. Get the engineers to plan it. Get aircraft people to build it. Stop subcontracting out so much of the aircraft, that you have fit/manufacturing issues. Get out of Chicago and South Carolina. All those shares they spent billions on? Sell them. Pay down the debt. Wall street doesn't like it? Too bad.

You know - the simple things that would make Boeing a great aircraft company, again...

...and you?


So, you are suggesting the whole board and C-suite to fire itself/resign. Good luck with that...
 
Sokes
Posts: 2775
Joined: Sat Mar 09, 2019 4:48 pm

Re: 737 Max - What Airlines Really Pay

Wed Mar 03, 2021 5:02 pm

I believe development costs are not related to deferred production cost. I'm not sure about the first few frames for testing which are never delivered, but I believe deferred production cost starts with the first delivered plane.

Contradicting evidence:
If development costs are written down as incurred, how did Boeing write off 6,5 billion $?
Anybody can enlighten us?
Why can't the world be a little bit more autistic?
 
WIederling
Posts: 10043
Joined: Sun Sep 13, 2015 2:15 pm

Re: 737 Max - What Airlines Really Pay

Wed Mar 03, 2021 6:41 pm

Sokes wrote:
I believe development costs are not related to deferred production cost. I'm not sure about the first few frames for testing which are never delivered, but I believe deferred production cost starts with the first delivered plane.

Contradicting evidence:
If development costs are written down as incurred, how did Boeing write off 6,5 billion $?
Anybody can enlighten us?


prototypes go under development cost.
Except you intend to sell them afterwards.
Then they are production cost and can go in the deferred cost basket.
(explains why Boeing takes extreme effort to sell of prototypes where Airbus is rather cavalier and keeps them for fun :-)

When (some of) the 787 prototypes were demoted to not merchandiseable their cost was written down.
Expulsed from paradise so to speak.

I expect machinery for production also goes into the deferred cost basket.
The fuselage upright production method for 777(X) was scrapped.
i.e. a valuable investment turned into scrap value.

instant expulsion from "deferred cost" ? no idea.
Murphy is an optimist
 
User avatar
Phosphorus
Posts: 1213
Joined: Tue May 16, 2017 11:38 am

Re: 737 Max - What Airlines Really Pay

Wed Mar 03, 2021 9:47 pm

crankypants wrote:
par13del wrote:
crankypants wrote:
What would I do?

Clean house. Get airplane people in there. Listen to what the airlines want. Get the engineers to plan it. Get aircraft people to build it. Stop subcontracting out so much of the aircraft, that you have fit/manufacturing issues. Get out of Chicago and South Carolina. All those shares they spent billions on? Sell them. Pay down the debt. Wall street doesn't like it? Too bad.

You know - the simple things that would make Boeing a great aircraft company, again...

...and you?

Clean house, where? Washington where they screwed up the 787, 748, 77X, KC-46, South Carolina where they already invested billions to also bring back some production in house at lower cost than Washington?
Get airplane people in, from where Europe, Russia, China, obviously no talent exist in Boeing or they would have resigned as their professional ethics would not allow them to produce the faulty products that exist now. Sub-contracting seems to be working all over the world, in aviation Airbus has it all over the world and folks said it was a Boeing weakness.
Or we can look at your earlier post where you said Boeing was in a mess because of greed, whose greed, the engineers, designers the plane people, or the board and the powerful shareholders? If the latter then maybe the airplane people are in Boeing but were just sidelined and perhaps cleaning house has to be limited?
Just a thought....


Yes - if it wasn't apparent, I was referring to the c-suite and BoD. The engineers, the design people, the aircraft guys - weren't the ones who decided to move HQ to Chicago. They have (from what I've heard, they still do, even with the cuts.buyouts) the a/c people there. They need to be heard and not ignored - this is what got BA into trouble. Listening to the MBA's over the people who make aircraft.

There is sub-contracting, then there is subcontracting. Everything in moderation, is the key. You get what you pay for.


That's one of the problems with companies who hollowed out the asset base, to dress up the quarterly results. If you do it for too long, you might be in too deep.
Specifically, Boeing has negative equity for the moment. Apparently, it's not illegal in the US (though it is illegal in multiple jurisdictions worldwide) for a limited liability company to have negative equity.
Some of its assets have unobvious value. Like billions in deferred production costs on some airplane programs. Or inventory -- that, as you have so astutely figured out -- needs to be almost given away, to keep the show going. So, the ground is already shaky, and announcing that current game is up, and "chase of share price, and beating the numbers for the quarter" are over, analysts might actually take a glimpse at the fundamentals...

IMHO, they need "Project Ark" (shameless self-quoting plugged in):
viewtopic.php?f=3&t=1449687&start=50#p22346211
viewtopic.php?f=3&t=1444971#p22172907
The question is if this would happen in an orderly manner, and if the resolution would include actual cleanup of the mess, and throwing the current crew out, or would it be just shafting of creditors and suppliers, with Modus Operandi staying the same?
AN4 A40 L4T TU3 TU5 IL6 ILW I93 F50 F70 100 146 ARJ AT7 DH4 L10 CRJ ERJ E90 E95 DC-9 MD-8X YK4 YK2 SF3 S20 319 320 321 332 333 343 346 722 732 733 734 735 73G 738 739 744 74M 757 767 777
Ceterum autem censeo, Moscovia esse delendam
 
crankypants
Topic Author
Posts: 57
Joined: Wed Jan 22, 2020 1:11 pm

Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 12:51 am

Phosphorus wrote:
crankypants wrote:
par13del wrote:
Clean house, where? Washington where they screwed up the 787, 748, 77X, KC-46, South Carolina where they already invested billions to also bring back some production in house at lower cost than Washington?
Get airplane people in, from where Europe, Russia, China, obviously no talent exist in Boeing or they would have resigned as their professional ethics would not allow them to produce the faulty products that exist now. Sub-contracting seems to be working all over the world, in aviation Airbus has it all over the world and folks said it was a Boeing weakness.
Or we can look at your earlier post where you said Boeing was in a mess because of greed, whose greed, the engineers, designers the plane people, or the board and the powerful shareholders? If the latter then maybe the airplane people are in Boeing but were just sidelined and perhaps cleaning house has to be limited?
Just a thought....


Yes - if it wasn't apparent, I was referring to the c-suite and BoD. The engineers, the design people, the aircraft guys - weren't the ones who decided to move HQ to Chicago. They have (from what I've heard, they still do, even with the cuts.buyouts) the a/c people there. They need to be heard and not ignored - this is what got BA into trouble. Listening to the MBA's over the people who make aircraft.

There is sub-contracting, then there is subcontracting. Everything in moderation, is the key. You get what you pay for.


and throwing the current crew out, or would it be just shafting of creditors and suppliers, with Modus Operandi staying the same?


If you were in the C-suite, making mad coin - would you walk the plank willingly?
(well, you might - but those guys up there hate to have to give up their Johnny Walker Blue & Green. God forbid they have to drink Black...)
 
crankypants
Topic Author
Posts: 57
Joined: Wed Jan 22, 2020 1:11 pm

Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 1:01 am

JonesNL wrote:
crankypants wrote:
JonesNL wrote:

GE was just a simple example that big corporations have a lot clout to change the look of their balance sheet in their favour. Don’t need to look to deep in to the details. I do agree with the financial premises that the current backlog is not enough to cover debt. But that is with the assumption that they won’t have any new order, which is not realistic.

The 50/50 split is based on new orders close to EIS. So if there are 7000 orders from 2030 to 2050 A en B will each have 3500.

What would you do? Just let company default instead of loading on debt to survive? Mistakes have been made and can’t be unmade. They have to learn and make sure that the future will be better. And that will have the possibility to achieve that, but they need to execute like the original 777...


Don’t need to look to deep in to the details.


I disagree - the devil is always in the details. Attention to detail (especially when building aircraft) is so very important. Just because GE was able to lower their long term debt - which you proposed as a template, does not mean Boeing can follow suit. Two very different animals.

Digging for the details is how this thread started. What it is based upon.

If there is an EIS of 2030, the 757 market will pretty much all be gone. All that will be left is the 767 segment.

What would I do?

Clean house. Get airplane people in there. Listen to what the airlines want. Get the engineers to plan it. Get aircraft people to build it. Stop subcontracting out so much of the aircraft, that you have fit/manufacturing issues. Get out of Chicago and South Carolina. All those shares they spent billions on? Sell them. Pay down the debt. Wall street doesn't like it? Too bad.

You know - the simple things that would make Boeing a great aircraft company, again...

...and you?


So, you are suggesting the whole board and C-suite to fire itself/resign. Good luck with that...


You didn't ask me what I thought was going to happen - you asked me what I would do, did you not?
 
User avatar
Phosphorus
Posts: 1213
Joined: Tue May 16, 2017 11:38 am

Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 6:48 am

crankypants wrote:
Phosphorus wrote:
crankypants wrote:

Yes - if it wasn't apparent, I was referring to the c-suite and BoD. The engineers, the design people, the aircraft guys - weren't the ones who decided to move HQ to Chicago. They have (from what I've heard, they still do, even with the cuts.buyouts) the a/c people there. They need to be heard and not ignored - this is what got BA into trouble. Listening to the MBA's over the people who make aircraft.

There is sub-contracting, then there is subcontracting. Everything in moderation, is the key. You get what you pay for.


and throwing the current crew out, or would it be just shafting of creditors and suppliers, with Modus Operandi staying the same?


If you were in the C-suite, making mad coin - would you walk the plank willingly?
(well, you might - but those guys up there hate to have to give up their Johnny Walker Blue & Green. God forbid they have to drink Black...)


Well, if you are in the C-suite, making that mad coin, you might want to be THE one to stay with that 26-year Glenfiddich, or Macallan M, rather than that cheapo Johnny Walker Blue stuff. You'd pad your nest, claw out the GoodCo for yourself, staff it with engineers who owe their ascent to you, and let the crowds with pitchforks rampage through the C-suite of the OldCo. Because the pitchforks ARE a risk.
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crankypants
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 11:09 am

Phosphorus wrote:
crankypants wrote:
Phosphorus wrote:

and throwing the current crew out, or would it be just shafting of creditors and suppliers, with Modus Operandi staying the same?


If you were in the C-suite, making mad coin - would you walk the plank willingly?
(well, you might - but those guys up there hate to have to give up their Johnny Walker Blue & Green. God forbid they have to drink Black...)


Well, if you are in the C-suite, making that mad coin, you might want to be THE one to stay with that 26-year Glenfiddich, or Macallan M, rather than that cheapo Johnny Walker Blue stuff. You'd pad your nest, claw out the GoodCo for yourself, staff it with engineers who owe their ascent to you, and let the crowds with pitchforks rampage through the C-suite of the OldCo. Because the pitchforks ARE a risk.


So, I am more of a spiced rum kinda guy, but from time to time do enjoy a good scotch - but that Macallan M...in the 6 litre bottle...600k....wow! The Constantine, I like that.

https://money.cnn.com/2014/01/21/news/e ... y-auction/

The problem with the hero play, is that it would probably take a long time to bear fruit. If your compensation is linked to performance, you might get knocked all the way back to Johnnie Red. These guys know they'll get paid if they just go with the flow and milk the company.
 
VS11
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 1:14 pm

crankypants wrote:
Digging for the details is how this thread started. What it is based upon.



You bring up very interesting points, worthy of a Harvard Business School case study, and I am not being sarcastic. I am sure plenty of HBS case studies are being written about Boeing.

However, you still have to look at the global secular trends - air transportation is not going anywhere. There are several general global trends at the moment:
1. The world population is still growing
2. More and more emerging economies are increasing the size of their middle class
3. International tourism is still a great source of revenue for many economies
4. The economic effect of the pandemic was overall less than feared
5. Monetary authorities have been providing great credit support, even cross-border

So while Boeing might be revenue challenged in the next several years, they can still plug their cash shortage for a while. There is still plenty of appetite to either own Boeing or lend them money. If anything, the rebound in air traffic might be happening sooner so with all the aircraft retirements of the past year, the demand for new aircraft might in fact come sooner as well.

So if you are a long-term investor, buying BA stock now is probably a good idea as the stock has been trending up. If you are a day trader, the stock has been giving plenty of chances to day trade - barely a week ago it went up $17 in a day, an 8% increase.
 
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Phosphorus
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 3:45 pm

VS11 wrote:
crankypants wrote:
Digging for the details is how this thread started. What it is based upon.



You bring up very interesting points, worthy of a Harvard Business School case study, and I am not being sarcastic. I am sure plenty of HBS case studies are being written about Boeing.

However, you still have to look at the global secular trends - air transportation is not going anywhere. There are several general global trends at the moment:
1. The world population is still growing
2. More and more emerging economies are increasing the size of their middle class
3. International tourism is still a great source of revenue for many economies
4. The economic effect of the pandemic was overall less than feared
5. Monetary authorities have been providing great credit support, even cross-border

So while Boeing might be revenue challenged in the next several years, they can still plug their cash shortage for a while. There is still plenty of appetite to either own Boeing or lend them money. If anything, the rebound in air traffic might be happening sooner so with all the aircraft retirements of the past year, the demand for new aircraft might in fact come sooner as well.

So if you are a long-term investor, buying BA stock now is probably a good idea as the stock has been trending up. If you are a day trader, the stock has been giving plenty of chances to day trade - barely a week ago it went up $17 in a day, an 8% increase.


Good logic, but not necessarily correct conclusion. After 9/11, airline stocks have been very cheap, and UA's and AA's of this world were touted as "can't get any cheaper than that, time to buy, bargain-hunters' dream investment". Underlying logic was clear -- air transport was in poor shape at that time, but it wasn't going anywhere. It would rebound in due time. UA and AA are still with us. Their then-shareholders had to write off their investment.
So riding a correct secular trend does not insulate you from losing money, if execution of that trend is botched, right?
AN4 A40 L4T TU3 TU5 IL6 ILW I93 F50 F70 100 146 ARJ AT7 DH4 L10 CRJ ERJ E90 E95 DC-9 MD-8X YK4 YK2 SF3 S20 319 320 321 332 333 343 346 722 732 733 734 735 73G 738 739 744 74M 757 767 777
Ceterum autem censeo, Moscovia esse delendam
 
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DarkSnowyNight
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 4:17 pm

Phosphorus wrote:
After 9/11, airline stocks have been very cheap, and UA's and AA's of this world were touted as "can't get any cheaper than that, time to buy, bargain-hunters' dream investment". Underlying logic was clear -- air transport was in poor shape at that time, but it wasn't going anywhere. It would rebound in due time. UA and AA are still with us. Their then-shareholders had to write off their investment.
So riding a correct secular trend does not insulate you from losing money, if execution of that trend is botched, right?



And that is the problem. Bad Airlines do not go away. The somewhat fallacious idea that 'air transport is not going anywhere' is predicated on the acceptance of cash fires that would make Septembers in California blush. It is true that they do not go anywhere.

It is also true that because I have never tried Cocaine, I am not certain just how much white powder need be consumed before investing in an Airline —especially a legacy— starts to look like a good idea. I am sure it is a non-trivial amount though.
Well, you know what they say. Whatever doesn't kill you...
... Must not be an MD-11.
 
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Revelation
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 5:01 pm

VS11 wrote:
5. Monetary authorities have been providing great credit support, even cross-border

So while Boeing might be revenue challenged in the next several years, they can still plug their cash shortage for a while. There is still plenty of appetite to either own Boeing or lend them money. If anything, the rebound in air traffic might be happening sooner so with all the aircraft retirements of the past year, the demand for new aircraft might in fact come sooner as well.

To me, that's the key takeaway. Needing to blush is fine, a slag-fest is always great fun, but at the end of the day financiers who have massive abilities to analyze risk are still willing to loan Boeing money at something other than usary rates. They are comfortable that Boeing will recover. You may also say they feel confident because "too big to fail" but only an idiot ties up their resources in a failing entity hoping for a favorable bail out when there are other ways to invest without such risk.

TL;DR: The financial community is comfortable Boeing will recover financially, don't worry, be happy.
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
VS11
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 5:42 pm

Phosphorus wrote:
VS11 wrote:
crankypants wrote:
Digging for the details is how this thread started. What it is based upon.



You bring up very interesting points, worthy of a Harvard Business School case study, and I am not being sarcastic. I am sure plenty of HBS case studies are being written about Boeing.

However, you still have to look at the global secular trends - air transportation is not going anywhere. There are several general global trends at the moment:
1. The world population is still growing
2. More and more emerging economies are increasing the size of their middle class
3. International tourism is still a great source of revenue for many economies
4. The economic effect of the pandemic was overall less than feared
5. Monetary authorities have been providing great credit support, even cross-border

So while Boeing might be revenue challenged in the next several years, they can still plug their cash shortage for a while. There is still plenty of appetite to either own Boeing or lend them money. If anything, the rebound in air traffic might be happening sooner so with all the aircraft retirements of the past year, the demand for new aircraft might in fact come sooner as well.

So if you are a long-term investor, buying BA stock now is probably a good idea as the stock has been trending up. If you are a day trader, the stock has been giving plenty of chances to day trade - barely a week ago it went up $17 in a day, an 8% increase.


Good logic, but not necessarily correct conclusion. After 9/11, airline stocks have been very cheap, and UA's and AA's of this world were touted as "can't get any cheaper than that, time to buy, bargain-hunters' dream investment". Underlying logic was clear -- air transport was in poor shape at that time, but it wasn't going anywhere. It would rebound in due time. UA and AA are still with us. Their then-shareholders had to write off their investment.
So riding a correct secular trend does not insulate you from losing money, if execution of that trend is botched, right?


Your analogy is not quite correct though. After 9/11, did the US Federal Reserve underwrite bonds issued by most US airlines? Was there any fiscal support for the airlines?
Unfortunately, nothing ever insulates you from losing money. Even if you don't invest it, you could still lost it.
 
VS11
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 6:00 pm

Revelation wrote:
VS11 wrote:
5. Monetary authorities have been providing great credit support, even cross-border

So while Boeing might be revenue challenged in the next several years, they can still plug their cash shortage for a while. There is still plenty of appetite to either own Boeing or lend them money. If anything, the rebound in air traffic might be happening sooner so with all the aircraft retirements of the past year, the demand for new aircraft might in fact come sooner as well.

To me, that's the key takeaway. Needing to blush is fine, a slag-fest is always great fun, but at the end of the day financiers who have massive abilities to analyze risk are still willing to loan Boeing money at something other than usary rates. They are comfortable that Boeing will recover. You may also say they feel confident because "too big to fail" but only an idiot ties up their resources in a failing entity hoping for a favorable bail out when there are other ways to invest without such risk.

TL;DR: The financial community is comfortable Boeing will recover financially, don't worry, be happy.


You are correct that it comes down to the capital markets and the various participants, some of which have become very opaque. It is not just Boeing per se that is the object of analysis. A great deal of private money is invested in aircraft, airports, leasing companies, aircraft operators, etc. Just to give a quick example, after 2008/2009, Blackstone, the huge asset manager, started buying housing. At the time housing was devastated across the country but Blackstone started buying up houses, apartments and buildings and fixed them up and rented them out. People needed to live somewhere. If you have deep pockets, time is on your side.
 
CanukinUSA
Posts: 99
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 9:27 pm

Boeing said to seek another 4 billion of liquidity from Banks. For details go to:
https://www.bloomberg.com/news/articles ... from-banks
 
crankypants
Topic Author
Posts: 57
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 10:30 pm

So Boeing is going to hit 'em up for another $4 billion credit card. I'm wondering if they get Air Miles with that?

https://seekingalpha.com/news/3669695-b ... t-88207238

Boeing to pursue another $4B of liquidity from banks - Bloomberg
 
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piedmontf284000
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Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 10:38 pm

[twoid][/twoid]
CanukinUSA wrote:
Boeing said to seek another 4 billion of liquidity from Banks. For details go to:
https://www.bloomberg.com/news/articles ... from-banks


Actually a smart move by Boeing as they are perilously close to junk status. They are currently rated BBB-, the last rung before junk, by both S&P Global Ratings and Fitch Ratings. Borrow now while they can still get decent rates of interest. It is a revolver, so they don't necessarily need to use it but have 364 days to decide that.
 
crankypants
Topic Author
Posts: 57
Joined: Wed Jan 22, 2020 1:11 pm

Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 10:47 pm

Revelation wrote:
VS11 wrote:
5. Monetary authorities have been providing great credit support, even cross-border

TL;DR: The financial community is comfortable Boeing will recover financially, don't worry, be happy.


I think there are more strings to that bow - IMO the financial community is OK loaning piles of cash to BA because they know it is 1) too big to fail and 2) the fed is back stopping the bond market. The shareholders are in a lot more precarious situation...
 
crankypants
Topic Author
Posts: 57
Joined: Wed Jan 22, 2020 1:11 pm

Re: 737 Max - What Airlines Really Pay

Thu Mar 04, 2021 11:15 pm

VS11 wrote:
crankypants wrote:
Digging for the details is how this thread started. What it is based upon.



You bring up very interesting points, worthy of a Harvard Business School case study, and I am not being sarcastic. I am sure plenty of HBS case studies are being written about Boeing.

However, you still have to look at the global secular trends - air transportation is not going anywhere. There are several general global trends at the moment:
1. The world population is still growing
2. More and more emerging economies are increasing the size of their middle class
3. International tourism is still a great source of revenue for many economies
4. The economic effect of the pandemic was overall less than feared
5. Monetary authorities have been providing great credit support, even cross-border

So while Boeing might be revenue challenged in the next several years, they can still plug their cash shortage for a while. There is still plenty of appetite to either own Boeing or lend them money. If anything, the rebound in air traffic might be happening sooner so with all the aircraft retirements of the past year, the demand for new aircraft might in fact come sooner as well.

So if you are a long-term investor, buying BA stock now is probably a good idea as the stock has been trending up. If you are a day trader, the stock has been giving plenty of chances to day trade - barely a week ago it went up $17 in a day, an 8% increase.


Thank you for the kind words. I swore I was never, ever going to do a SWOT analysis again, for as long as I lived.

Here are some addendums to your list;

4) Pandemic. The airlines need a global solution - hence so does BA. Look at Australia - at one point they had zero cases. But because everyone around them was infected, they were flying nowhere. A domestic solution (which would help the likes of SWA) is great, but the bigs need to fly around the world with their widebodies.
6) China. Two years on and still haven't Ok'ed the Max. There is a political dimension here, but in terms of aircraft - time is on China's side. Every day they delay, a C919 gets closer to service. No, it will not match the 737Max/A320Neo family for reliability, efficiency or even safety and will probably be like an early model NG or CEO. It probably doesn't even need to be certified elsewhere and if some go down, it will not have much effect. The domestic market of 1.4 billion people is huge and it will take a big chunk out of BOTH BA & AB.
The real threat (here we go SWOT) is in 20 years, the plane after this, when they learn how to do it properly.
7) Business travel. Number vary but they take up ~15% of the pax carried and provide some 75% of the profit. I'm sure there is a thread around here detailing how much Zoom et al. will take away from it, as companies have learned to make do and save $$$. Some will come back - but the question is how much? Time will tell.
8) Pent up demand. When covid is somewhat under control (however and whatever that means) there will be a huge demand for fiending and weary people to get out. SWA and the likes, once again, look to be in pole position.

As an investment, I would prefer convertible bonds. Sure, the gains are not as great if it goes up - but the debt load is getting bigger and bigger. How much does it have to get to until someone says "You know, there is no way this money will ever be paid back..."
 
Sokes
Posts: 2775
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Re: 737 Max - What Airlines Really Pay

Fri Mar 05, 2021 1:10 am

Revelation wrote:
... but at the end of the day financiers who have massive abilities to analyze risk are still willing to loan Boeing money at something other than usary rates. They are comfortable that Boeing will recover. You may also say they feel confident because "too big to fail" but only an idiot ties up their resources in a failing entity hoping for a favorable bail out when there are other ways to invest without such risk.

TL;DR: The financial community is comfortable Boeing will recover financially, don't worry, be happy.

When I read "financiers who have massive ability to analyze risk" I had to think of credit default swaps.
What these bankers really have is a massive ability to get the central banks to bail them out from their gambling losses. Which I believe is the main function of a central bank.
Why can't the world be a little bit more autistic?
 
WIederling
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Re: 737 Max - What Airlines Really Pay

Mon Mar 08, 2021 11:47 am

Sokes wrote:
When I read "financiers who have massive ability to analyze risk" I had to think of credit default swaps.
What these bankers really have is a massive ability to get the central banks to bail them out from their gambling losses. Which I believe is the main function of a central bank.


What they did was taking trash equity, chopping that up and repackaging the grit and the distribute it to takers.
The insidious aspect was that the products were distributed with the quality tag of the funnel entity. ( at the time HIGH ).

The whole thing was a timed bomb. ( The developing housing bubble had been critically viewed for at least 10 years running up to 2008.)
Murphy is an optimist
 
crankypants
Topic Author
Posts: 57
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Re: 737 Max - What Airlines Really Pay

Mon Mar 08, 2021 12:12 pm

JonesNL wrote:
crankypants wrote:
JonesNL wrote:

They are legally obliged to inform shareholders truthfully. That they are using optimal phrasing and try to hide it in their filings doesn't mean that information is not true. How deep is the hole they in are according to you?

777x write down was not caused by the technical problems you mentioned, but mainly due to the lowering of the accounting block of deffered development costs and the new required certification efforts. From an share value perspective it was done quite smoothly as Wallstreet expected bad results and Boeing just cleaned up shop by putting all known accounting problems in 2020 by blaming the pandemic and regulatory issues. Thanks to the write down the 777x might even bring in profits in the future years as it needs to pay less deferred development/production costs compared to the 787. Off course this depends a lot on demand recovery.

NL stands for Netherlands and not Newfoundland, so had no idea who Brad Gushue was.


I had a 50/50 shot on the NL thing. Given your name....I went with Gushue.

If only the C-suite boys of all publicly traded firms followed those rules...maybe if the punishments actually meant something.

I have two friends I am in regular contact with; one is a former Boeing engineer who is regularly kept in the loop on the shop talk by the guys still there and another is a structures engineer who worked for both BA and AB as a sub contractor. I kinda get the dirt under the nails stuff.

On the 777X the ramp talk is that there is also a high alpha issue BA is dealing with. To your point though (and this goes to the veracity of what the c-suite guys say) IIRC the accounting block dropped from 400 to 350, in the most recent filing, correct? Therefore they still expect to sell 350 units and amortise the sunk costs over those units. Not sure how a drop of 50 aircraft would mean a loss of $6.5 billion. That would imply a $130 million cost allocated on R&D to each aircraft.

The other shoe to drop, is that this is only a portion of the money spent on the 777X. There are other costs that will be allocated to the accounting block - some rumblings are that the $6.5 billion is HALF of what was spent (or being spent). My guy is a plane guy, not a numbers guy - so he doesn't get the scoop from the finance people...but some shop guys talk to office guys - so there is some trickle down of info.

From a program standpoint - just because you've acknowledged an expense for a particular period, does not mean that all of a sudden a program is profitable. That $6.5 billion has been spent. Money has been borrowed to fund it. Interest will also be paid for as long as it needs to be paid off. 'From now on' is a horrible position - it's kind of like some who say 'the Max will now be the safest plane in the world'...you can't just undo the crashes and deaths.

For Wall Street and for the profitability of a program are two different things.

How bad is it at BA, you ask?

It's an ongoing situation, but a very conservative estimate is that;

1) They're down $6.5 billion on the 777X
2) The're down $20 billion on the Max
3) They're down $18 billion on the 787

All 3 of those numbers are going up. The 777X for what I mentioned. The Max number was a Mar 2020 estimate by Boeing and the 787 has a huge issue with the fuselage joints. The $18 billion is the previous bill for the sunk costs, not this stuff. I expect them to take a forward loss on the program.

Borrowing costs alone are at $2.6 billion a year. How many aircraft do you have to sell to cover $2.6 billion?

Just to put it all into SWA context:

If Boeing TODAY were to be able to build and sell all 280 Max's that SWA has/had on order, and get paid for each one, they would get some $10.3 billion in revenue. If we use the 2018 margin number of 13% (which includes the margins for both wide and narrow bodies) they would make $1.346 billion on the entire order.

That would pay HALF of the interest expense for the year. Half.

(A side note on the margin: the 2018 margin is when BA sold over 800 aircraft. Fixed costs were allocated over a large number of units sold. There are some costs BA can cut, others they cannot - whether they sell 1 or 800 planes. You still gotta keep the lights on, the place heated and a host of other expenses. Margins are not going to be as good, as they were in 2018)

Q1/21 is coming up soon. I guess we'll see...


I agree that the debt is going to hurt them quite a lot, but I believe they still have the opportunity to turn there destiny around. Look at GE, they unloaded massive amount of debt the last couple of years. They started with over $300 billion in 2015 and now are at $80 billion. The $60 billion at Boeing is not unmanageable.

Image

$6.5 was an accumulation of extra certification costs, delivery delay penalties and the accounting block drop. The exact size of each post was not communicated. So, your guess is as good as any.

Wallstreet has an short memory + attention span and is not concerned with program profitability. There concern is the yearly or profitability of the company, as they do not invest in programs but in companies. I completely agree that the program might never make dime of profit, but it can generate profit on an quarterly/yearly basis thanks to the write off. This was also communicated by Boeing with the forward loss messages. Same is the case for the 787, the program might make a loss but it showed some nice profits on paper during 2014-2019.

The execution of the NMA will make or break the company. They need perfect execution on the development side. On the sales side it is actually quite good if they can create an 50-50 balance against the A321 and future A322. The numbers in that segment are high enough to easily support the business case for 50% market share. NMA also decides the future of the NSA. If the NMA fails like previous programs, then the NSA is probably doomed and as such Boeing Commercial Aviation...



...and so we have GE in the news again - just like that:

https://seekingalpha.com/news/3670099-g ... p-wsj-says

GE reportedly near $30b deal to combine jet-leasing unit with AerCap, WSJ says

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