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WIederling
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 4:42 pm

Opus99 wrote:
The thing is, everybody asks about market share all the time, especially now. Before MAX, I didn’t hear much about market share? Or is it just me?


Before MAX "Airbus was just catching up". The unconvincing numbers could carefully be stepped around.
( Go back on A.net browse some product offering / market share topics. Wide range of posters stood with the official PR line )

Today the elephant in the room occupies a major piece of the floor space. You have to change the lyrics some!

Other thing: Where (and why) do some posters see a cost advantage for Boeing and the MAX?
Boeing production seems to be in a state where they have to check all production items for conformity.
The rare sample test for a well managed production line doesn't suffice at all apparently.
( This was the major difference between West and East Germany:
production variance smaller than tolerances vs production needing full screening/selection).
That alone is a major cost factor.
Murphy is an optimist
 
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Stitch
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 4:46 pm

Gremlinzzzz wrote:
There is a fallacy that Boeing is not capital constrained, or that it may not have issues raising capital for a new program. Take a $15-20B loan/bond on top of the current debt and this company is done. Yet, this is what they need to do.


Well evidently the capital markets are dumb enough to allow Boeing to be "done" because in their last capital call in May 2020, lenders were willing to give them a significantly larger amount than the $25 billion bond they raised.

And they could still get a significant cash input from the US Government if they change their mind and are willing to become partially "state-owned" under the CARES Act.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 4:54 pm

Stitch wrote:
Gremlinzzzz wrote:
There is a fallacy that Boeing is not capital constrained, or that it may not have issues raising capital for a new program. Take a $15-20B loan/bond on top of the current debt and this company is done. Yet, this is what they need to do.


Well evidently the capital markets are dumb enough to allow Boeing to be "done" because in their last capital call in May 2020, lenders were willing to give them a significantly larger amount than the $25 billion bond they raised.

And they could still get a significant cash input from the US Government if they change their mind and are willing to become partially "state-owned" under the CARES Act.
There is a lot of money looking for a home. You are not making money off bank deposits because of artificially low interest rates and the Federal Reserve printing money like there is no tomorrow. This money makes it to the stock market or the bond market. Look at how many companies that should be dead are attracting money, it is crazy.

Should inflation hit main street, interest rates would have to go up. We would see a recession for the ages. In such a scenario, how would you save Boeing or even the airlines? Same Boeing that does not want government cash because it would come with caveats.
 
FluidFlow
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 6:14 pm

Revelation wrote:
iamlucky13 wrote:
Revelation wrote:
I don't think the rest of the industry or the followers here are going to grant him that reset of the clock.

I don't understand what you're trying to say here. If the 737 "only" matches the A320 sales 1:1 (or even 1:1.25 as I speculate), what is the industry going to do that amounts to not "granting a reset of the clock?"

In essence Calhoun is asking for a "mulligan", Boeing lost a year's production (due to their own ineptitude if not malfeasance), he's suggesting that not be included when comparing figures going forward, presumably production but perhaps also orders. He's trying to draw a line under the mcas tragedy and start a new era. Yet it's not that simple, the impact of mcas is still going to be present for many years to come, fiscally as well as emotionally.

Opus99 wrote:
The thing is, everybody asks about market share all the time, especially now. Before MAX, I didn’t hear much about market share? Or is it just me?

Boeing's posturing pre-tragedy was to not focus on market share, but focus on profitability. Now it seems Calhoun is deviating from that posturing, obviously because their post-tragedy debt load means they can't focus on profitability any time soon, they won't even be at break even till next year best case. Therefore he asks for a reset of the clock so he doesn't feel the pressure of the massive hits taken during mcas and covid. Seems to me he needs to work harder at sharpening this new posture he's taking.

iamlucky13 wrote:
The question was asked specifically about narrowbodies, but it sounds like Calhoun answered with a goal of 50:50 overall, not just 737 vs. A320. And he's clearly talking longer term, so I suspect he means the NMA will be a part of it.

Thanks for posting the transcript, but sorry, I don't read it that way. He gets asked about MAX vs NEO/XLR, makes his "split the market" comment then goes into a statement that can only apply to 737 production. The "segments" comment probably refers to MAX10 vs XLR and MAX8 vs A320neo given how the question was framed. I don't see how we can justify saying he was thinking about the overall market based on the comments.

iamlucky13 wrote:
The statement was not a planned, carefully articulated strategy, but a response to a question, and therefore I think should be interpreted as reflecting the general intent, rather than an explicitly quantified goal.

It was a question he should have been prepared for, the questioner even says he asked a lead-in question on the last earnings call. The CEO needs to be able to speak to this kind of question with ease, IMO. He does need to clearly articulate strategy, it's a big part of his job.

iamlucky13 wrote:
It was also informative to hear confirmed that the current delivery constraint is the customers. And of course, he brought up the big political concern, which is probably more significant for Boeing than Airbus, considering the Tianjin A320 final assembly line.

The situation is in deadlock, and IMO not likely to be solved any time soon. China's regulators still haven't said word one about the MCAS fixes, and once they do, it's going to be months before the airlines install training programs, get them approved, get the fixes improved, and finally get back in the air. China holds all the cards.

astuteman wrote:
So what is the issue that MAX customers have that NEO customers don't?

The MCAS tragedy meant Boeing missed delivery dates, so customers had all the leverage in demanding deferrals or cancellations as covid hit. Since you can't sell an airplane that's illegal to fly, Boeing still can't deliver MAXes to Chinese airlines.

Meanwhile, Airbus customers have no built-in grounds for deferrals even though many want them, Airbus itself does not want to grant deferrals so it often doesn't, and Chinese customers have no regulatory impediments to accepting new NEOs. Their main problem is airlines like AAX who are refusing deliveries regardless of the consequences, they simply cannot cut the checks needed to make payments due to their financial situation.

Given China's domestic airlines are pretty much back to pre-covid levels and have been for a while and Chinese airlines have huge orders on the books, Team A has a big advantage over Team B.

astuteman wrote:
I wonder where the focus on revenue and profit went?

Exactly my point. Calhoun is shifting gears, and isn't being very graceful and lucid as he does so.

FluidFlow wrote:
If the market recovers fast, Airbus will be going back to Plan A with what, 80 A32X produced a month?, Boeing is in no position to match those numbers any time soon.

Airbus peaked at rate 60, and were preparing for rate 63, when the coronavirus crisis hit.

Now, from Airbus's own lips:

The new average production rates for the A320 Family will now lead to a gradual increase in production from the current rate of 40 per month to 43 in Q3 and 45 in Q4 2021. This latest production plan represents a slower ramp up than the previously anticipated 47 aircraft per month from July.

Ref: https://www.airbus.com/newsroom/press-r ... nment.html

Clearly they are in a better situation, but not 80 per month!!!

JonesNL wrote:
Looking at it from the current situation; It would be an dream scenario if Boeing could go back to 50/50 deliveries. The supply chain has shrunk drastically, QC problems are still occurring, airlines are not taking the planes so ramp up is not possible. Boeing going back to 500 deliveries per year within 3 years would be nothing short of an miracle.

While the frequently touted orders are nice, nothing beats deliveries…

As above, they had already dipped below 50:50 deliveries before the mcas tragedy, but they were OK with it. They were making every 737 they could possibly make, they and their supply chain were MAX'd out (lol) and lots of cash and profit were being generated. That's what their corporate messaging reflected, don't focus on A vs B stuff, we're making every cent we think we can make.

Now we see them asking to change focus, and doing so without much grace. I'm still not sure what overall message we're supposed to be receiving. Granted, they are in a difficult place (even if it is largely one of their own making) so coming up with a clear message isn't simple, but I'd hope for more clarity than what we're getting.

Good point on the ramp up, supply chain and QC issues. We're going to have to see strong execution going forward, and some movement on the China situation, for them to get back into the game.


Sorry it is hard to quote on the phone. Long term plans were 75 per month:

https://www.google.ch/amp/s/mobile.reuters.com/article/amp/idUSKBN1HW1Z2
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 6:19 pm

Gremlinzzzz wrote:
morrisond wrote:
I disagree.

Back in February the Boeing CFO did float the idea of a large Primary Issue of stock as one of the routes they go down. One analyst pegged it at $30B. The Boeing stock price barely budged that day and rose almost 30% in the weeks after. If they want to do a large equity raise to fund new programs or pay off debt that is definitely an option - the market would barely blink.

In the latest Quarterly report Boeing actually cited MAX deliveries as one of the reasons for the improved negative margin. Large negative cash flow in the quarter but a lot of that can probably be pinned on undelivered 787. Eyeballing the revenue line and assuming $100Million a piece for everything not MAX delivered in Q1 that leaves about $3B for the MAX in the first quarter (or over $50 Million per frame - but that is what they recognized not necessarily cash in the door on delivery). However they didn't get to where they are in debt by not paying suppliers for parts to keep them solvent for undelivered MAX's. Yes compensation credits will be used to defer some of the cash airlines have to pay - but Boeing has already set aside that money. The debt balance will reduce substantially when MAX (and 787) deliveries resume as Boeing will get the bulk of the money that comes in the door . Will it be 1 for 1 - probably not but it should be substantial. Plus they have over $20B in cash/marketable securities.

However it is really hard to figure out what is going on in the financial statements due to delivery stoppage(s). We probably won't know the real story until we get a clean quarter of 737 and 787 deliveries to see if BCA is cash flow positive/profitable again.

Boeing did say they are going to rate 31 in early 2022 - that plus the remaining backlog could put them over 600 MAX for 2022 (if the Airlines can pay for them).

The balance sheet should be in significantly better shape by the end of 2022, and cash flow should be positive.

They aren't going anywhere.
Boeing stock went up on one thing and one thing alone; financial engineering. The people that made a lot of money that way will lose money the moment they start offering new stock. You cannot reap the benefits of stock buybacks and expect stagnant stock prices when you re-issue stock into the market. If anything, you are likely to see the stock plummet the moment they make such an announcement.
They would also be going against the vulture investors whose every whim they acquiesced. How do you sell a long term plan to someone who only sees the next quarter earnings and/or guidance?

Secondly, Boeing's management and board are mostly short term thinkers who benefit from short term strategy. The company is where it is today because of short term thinking and I for one do not think that the people that got the company in this position are good enough to dig it out of the hole.

I also think that you underestimate just how finite a resource money is for any company that has this much debt and these many issues. Profitable companies do a few things:
i) They invest in themselves. Taking some proceeds from profits and putting them aside for future product development.
ii) They plan for the worst case scenarios, and this means having a substantial rainy day fund (see Mary Barra and GM).
iii) They invest in processes that make them more efficient, or allow them to put out a more reliable product i.e. investments in assembly plants.
iv) Give a return to shareholders.

Boeing has done more of (iv) than they have done of anything else.

Boeing is only going to be around because of their military business and because they are needed to make the balance of payments less egregious than they are. This alone ensures that if they land into issues, the US government will nationalize it. It will not be the strength of their balance sheet, or that they will be powered by really great positive cash flow.

Right now? Boeing is simply there to survive, to try and get the plane flying in areas where it is grounded and to keep banging to the Biden administration that they need to make some sales in China for it to all make sense. In the meantime, they are going to bleed cash because production numbers are down (and they bled suppliers by promising higher output), they are going to bleed cash repairing wiring and the new grounding issue and maybe they come up with a fix for majority of the delivered 787's out there. All this as they navigate cases in the courts.

Money is finite, and Boeing needs to make enough to pay its bills, keep suppliers in a state where it makes sense for them to continue, pay back the creditors and to get back to a better credit rating. They also need to invest in better manufacturing, better quality assurance and having a better culture. These cost time and a whole lot of money. Boeing as is, is in negative equity i.e. if you sold every asset and tried paying off what they owe, you would still need money. It is the definition of a zombie company and were they not in a duopoly, they would get out of business.

I am rooting for them to try and get back to being a great company because aviation as a whole needs it. Looking at everything they do, does not fill me with confidence.


If the stock was going to plummet due to an equity issue in the future we would have seen the stock react at least a little on the day the CFO mulled it. I believe it actually went up slightly and has continued to rise with that issue overhanging the market. Clearly the market sees it as a non-event, even if they issue $20-30Billion in shares (14.7-22.1% of the market cap). Personally I doubt they would ever do that.

I can see them doing $15B, getting $10-15B from the Undelivered MAX's and taking their Cash back down to under $10B would put them down to about $25-30B in total debt. That is not a big number given how much cash they could throw off in the future. They were at about $14B in total debt pre-max - it was not a highly leveraged financially engineered company where they were issuing debt to buy back stock - they were using cash flow. That is a big difference.

Currently they have $22B in cash and marketable securities and have a $15B undrawn Revolving credit facility they can draw from. $37B is more than sufficient liquidity.

Pre-MAX they had $15B in operating cash flow in 2018 and bought back $9.0B in stock. They were projecting $17-17.5B for 2019.

In 2022 they should deliver about 360 MAX new builds (presumably they get paid on them as all the Compensation credits would have been used on the already built MAX's) - 60 or so 787's, 24 777's, 30 or 767F/2C - for a total of about 475 Frames - with the reduction in Boeing overhead - that should be cash flow positive - combined with Defense they may be somewhere around $5-7B. Pay a minimal dividend, bump up R&D for NMA and pay back some more debt.

By 2025 they should be throwing off significant cash again and able to retire more debt. It is not inconceivable that by the end of 2025 they are back to $15-20B in debt.

Yes - better quality assurance would be a good thing to invest in but the one thing Boeing has put a lot of money into is more efficient manufacturing which was evidenced by the very nice margin advantage they held before MAX/COVID.

Shutting down the Everett 787 line and 747 lines will help going forward. Having all 737 in one location is a big advantage.
 
iamlucky13
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 6:41 pm

astuteman wrote:
That said don't buy into the Morrisond "the stored frames will unlock a heap of cash" either, because I think most of that will have disappeared in the compensation already written down in the P/L account. I think it will be another 2 years yet before the MAX goes "significantly" cash positive on a per frame basis.


That was discussed briefly in this and the last several quarterly reports. There's elements of truth to what both of you are saying. Those aircraft represent a heap of cash, but a lot of that cash won't be paid to Boeing. Airlines will count compensation Boeing owes them for the grounding against what they owe Boeing for some proportion of those deliveries. Airlines who have reduced orders will count the portion of predelivery payments that are refundable against some of the deliveries they are still receiving.

The result is that Boeing has been repeatedly saying for the last several quarters that the resumption of 737 deliveries won't have a significant positive effect on cash flow until later this year. At first, that is positive in the sense of "less negative." They have projected the company overall cashflow will turn positive sometime next year. So hopefully, if they are right, your 2 year estimate will prove slightly pessimistic. However, all of those costs are still a program expense, so far covered mostly by debt, that they will want to recover those costs to avoid a write off.

astuteman wrote:
So the less good news in my view is that your $680m interest in Q1 is over $2.7Bn per annum, and the company will still likely be making a loss for another 2 years, and seeing debt grow. $3Bn per annum is the sort of money that pays for a new aircraft programme - at least until it f**ks up (but that's a different story).
I don't think that's the sort of money you can just "shrug off" - it will definitely be a drag.


Agreed in general, and I think this has been an unstated factor in their plans for launching the next aircraft. Right now they have some unclear level of development spending occurring funded by the debt they took on last year, probably in part because it was a better option than laying off too many engineers. They won't want to ramp up that spending, however, until their cash flow turns positive. That means not just that $2.7 billion per year in interest, but all the other contributors to the $3.4 billion in cash burn just this quarter.

Taken together, returning to positive cash flow sometime in 2022, and rumors the next aircraft will be formally launched in 2023 seem consistent to me. If it really takes 2 years to be cash flow positive, maybe instead that launch will slide to 2024 to allow time to build up a bit of cash buffer or trim the debt slightly.

astuteman wrote:
[I don't see buying market share at the expense of margin as the best move whilst the company is trying to get out from underneath all that debt.
And with 3,000 odd frames still in backlog, and orders coming in, I don't think they need to.


I agree here, as well. I would not be surprised if they have made a few strategic deals at poor margins to show some momentum, reduce risks of customers moving to Airbus, and create some lead-time pressure for airlines to consider. In general, though, unless the long term changes necessary because of the MCAS disaster result in significantly increased expenses, they have an extremely efficient production system for the 737 that I think will allow them to maintain satisfactory margins, even if not as good as before this mess.

Gremlinzzzz wrote:
Take a $15-20B loan/bond on top of the current debt and this company is done. Yet, this is what they need to do.


Or wait until their cash flow improves enough to manage both their debt and their development costs, which I think is what they are doing, in addition to waiting for 737 and 777X engineer demand declines further.

I don't think they're going back to $8 billion per year annual net income for their commercial division any time soon, but still enough to handle the debt and move forward with development.

Revelation wrote:
FluidFlow wrote:
If the market recovers fast, Airbus will be going back to Plan A with what, 80 A32X produced a month?, Boeing is in no position to match those numbers any time soon.

Airbus peaked at rate 60, and were preparing for rate 63, when the coronavirus crisis hit.


Furthermore, when Airbus was nominally producing 60 aircraft per month, they were delivering 54. I'm not clear, but I am under the impression that 60 per month defines a nominal flow rate through the factories, but they also have planned downtimes that result in a lower average actual rate.

Regardless of whether it was 54 or 60, it took years of work and planning invested to reach that rate, just as every incremental increase in rate has. Airbus is not able to just decide to elbow Boeing out of the market, flip a switch, and be building 80 per month.

Revelation wrote:
It was a question he should have been prepared for, the questioner even says he asked a lead-in question on the last earnings call. The CEO needs to be able to speak to this kind of question with ease, IMO. He does need to clearly articulate strategy, it's a big part of his job.


Sort of. He needs to be prepared to answer questions about how they'll execute the strategy to produce the profits expected. Market share is not quite on point. Production rates and margins are. Those hint towards a certain market share when combined with their market outlook, but that would be a secondary measure, not a primary one.

I think overall this discussion reads too much significance into the 50:50 statement, and I still think he is talking about as a whole, not just 737. Actually, the more I think about the current position and the relative narrowbody and widebody strengths and weaknesses, the more strongly convinced I am that he is suggesting 50:50 as a whole.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 7:28 pm

morrisond wrote:
If the stock was going to plummet due to an equity issue in the future we would have seen the stock react at least a little on the day the CFO mulled it. I believe it actually went up slightly and has continued to rise with that issue overhanging the market. Clearly the market sees it as a non-event, even if they issue $20-30Billion in shares (14.7-22.1% of the market cap). Personally I doubt they would ever do that.

I can see them doing $15B, getting $10-15B from the Undelivered MAX's and taking their Cash back down to under $10B would put them down to about $25-30B in total debt. That is not a big number given how much cash they could throw off in the future. They were at about $14B in total debt pre-max - it was not a highly leveraged financially engineered company where they were issuing debt to buy back stock - they were using cash flow. That is a big difference.

Currently they have $22B in cash and marketable securities and have a $15B undrawn Revolving credit facility they can draw from. $37B is more than sufficient liquidity.

Pre-MAX they had $15B in operating cash flow in 2018 and bought back $9.0B in stock. They were projecting $17-17.5B for 2019.

In 2022 they should deliver about 360 MAX new builds (presumably they get paid on them as all the Compensation credits would have been used on the already built MAX's) - 60 or so 787's, 24 777's, 30 or 767F/2C - for a total of about 475 Frames - with the reduction in Boeing overhead - that should be cash flow positive - combined with Defense they may be somewhere around $5-7B. Pay a minimal dividend, bump up R&D for NMA and pay back some more debt.

By 2025 they should be throwing off significant cash again and able to retire more debt. It is not inconceivable that by the end of 2025 they are back to $15-20B in debt.

Yes - better quality assurance would be a good thing to invest in but the one thing Boeing has put a lot of money into is more efficient manufacturing which was evidenced by the very nice margin advantage they held before MAX/COVID.

Shutting down the Everett 787 line and 747 lines will help going forward. Having all 737 in one location is a big advantage.


1. No matter how you look at finances, the reality is that Boeing is in shit and it will take quite some time before they get out of this problem.

As a company, they take money and invest in programs and at the end of the day these are supposed to make a return and generate profits. The way normal companies work is that you would build and you would take a percentage of revenues to pay off program costs. For those that want to break even earlier, payments to settlement accounts would come off positive cash flow too. You do not report profits before you pay down development costs on a certain program.
Boeing in their wisdom or lack thereof determined that they will approximate how many jets they are going to build and with the surplus cash that comes in, they can afford to book profits. This is financial engineering that allows you to book profits before you have paid down development costs and those 'profits' are then used to mainly buy back stock and boost stock prices.

What happens when you overestimate the number of aircraft like they have done with the 777X? Forward loss.
What happens when you cannot execute on the 787, and almost 1000 frames in you still have manufacturing issues? Forward loss.
What happens when you are rush a jet to the market, even beating targeted EIS but did shoddy work? Biggest grounding, huge debt, declining order book, forward loss.

Where is the money going to come from to undertake a new program if everything they are doing at BCA is in the red? You can tell me that they can do this, they can do that, they have this revolving credit facility. Bottom line is that it is difficult to see what makes them money going forward and what they do with the outstanding program cost.

2. Boeing is a Wall St. darling because they do everything that is required. All you need is to have short term outlook and 'maximize shareholder value.' The easiest way for people to make money was to speculate and nothing feeds the frenzy like stock buybacks. This is what they did.

They could have easily sold off some of the stock to raise the money needed for liquidity, yet they didn't. They could have taken money from CARES act, yet they chose to not do so in order to remain 'independent.' I have my doubts that people so short sighted will make the right decisions going forward or make long term investments.

For what its worth, I think you pay too much attention to a stock market that stopped making sense a long time ago and draw conclusions that ought not be there. The day Boeing offers $30B worth of shares is the day share prices drop.

3. There is acceptable debt and then there is bad debt. Acceptable debt is money you borrow that allows you to improve or grow the business. Bad debt is the sort of money Boeing just accumulated. The worthless debt that is best avoided.
 
sharles
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 8:04 pm

This is only tangential, but what surprised me most was that there were no writedowns. Meaning the 787 accounting block seems safe, even though production was halved, and the fuselage join damage must not have been that bad. So it does seem that one reason why we should be optimistic about Boeing managing their debt load is that they do not predict significant additional expenses / revenue shortfalls on the 787.
 
smartplane
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 8:09 pm

Boeing will definitely achieve NB delivery parity with Airbus, but not the profit per unit position they enjoyed previously. Tier 2 and 3 MAX compensation credits erode with time, use and deferrals / cancellations.

Every free / heavily discounted MAX delivered utilising Tier 2 and 3 credits adds to Tier 1 volume based credits, so the tail will take a long time to work it's way through.

Markets are so over heated, it's difficult to imagine Boeing will have difficulty funding multiple new projects and acquisitions, even if more issues emerge on any models.
 
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Revelation
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 8:16 pm

iamlucky13 wrote:
I think overall this discussion reads too much significance into the 50:50 statement, and I still think he is talking about as a whole, not just 737. Actually, the more I think about the current position and the relative narrowbody and widebody strengths and weaknesses, the more strongly convinced I am that he is suggesting 50:50 as a whole.

Sure, if you put it into the context of all of BCA and detach yourself from the transcript it's easier to justify a 50:50 statement, but I still can't see how you can get there from the transcript. The question was asked specifically about narrowbodies, he gave the 50:50 response and then the production response which clearly can only pertain to 737. If he was really thinking about all of BCA then he really should have said so in his response. I don't know, it seems best to go with what he actually said rather than convince ourselves that what we may construe his words to mean is what he actually meant.
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DenverTed
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 8:30 pm

It is highly unlikely Boeing could ever get to 50-50 with the MAX versus the NEO and the A220. The only way 50-50 works, is with a new narrowbody and the MAX, or just a new narrowbody, which would be further down the road. If it is 50-50 in the below 150t MTOW, and not strictly single aisle, then it could be the MAX and the NMA-5/6/7.
 
Weatherwatcher1
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 8:37 pm

Revelation wrote:
iamlucky13 wrote:
I think overall this discussion reads too much significance into the 50:50 statement, and I still think he is talking about as a whole, not just 737. Actually, the more I think about the current position and the relative narrowbody and widebody strengths and weaknesses, the more strongly convinced I am that he is suggesting 50:50 as a whole.

Sure, if you put it into the context of all of BCA and detach yourself from the transcript it's easier to justify a 50:50 statement, but I still can't see how you can get there from the transcript. The question was asked specifically about narrowbodies, he gave the 50:50 response and then the production response which clearly can only pertain to 737. If he was really thinking about all of BCA then he really should have said so in his response. I don't know, it seems best to go with what he actually said rather than convince ourselves that what we may construe his words to mean is what he actually meant.


It’s hard to know. From a widebody perspective, the 767 backlog is probably a whole lot more secure than the A330neo backlog is for example.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 9:59 pm

Gremlinzzzz wrote:
morrisond wrote:
If the stock was going to plummet due to an equity issue in the future we would have seen the stock react at least a little on the day the CFO mulled it. I believe it actually went up slightly and has continued to rise with that issue overhanging the market. Clearly the market sees it as a non-event, even if they issue $20-30Billion in shares (14.7-22.1% of the market cap). Personally I doubt they would ever do that.

I can see them doing $15B, getting $10-15B from the Undelivered MAX's and taking their Cash back down to under $10B would put them down to about $25-30B in total debt. That is not a big number given how much cash they could throw off in the future. They were at about $14B in total debt pre-max - it was not a highly leveraged financially engineered company where they were issuing debt to buy back stock - they were using cash flow. That is a big difference.

Currently they have $22B in cash and marketable securities and have a $15B undrawn Revolving credit facility they can draw from. $37B is more than sufficient liquidity.

Pre-MAX they had $15B in operating cash flow in 2018 and bought back $9.0B in stock. They were projecting $17-17.5B for 2019.

In 2022 they should deliver about 360 MAX new builds (presumably they get paid on them as all the Compensation credits would have been used on the already built MAX's) - 60 or so 787's, 24 777's, 30 or 767F/2C - for a total of about 475 Frames - with the reduction in Boeing overhead - that should be cash flow positive - combined with Defense they may be somewhere around $5-7B. Pay a minimal dividend, bump up R&D for NMA and pay back some more debt.

By 2025 they should be throwing off significant cash again and able to retire more debt. It is not inconceivable that by the end of 2025 they are back to $15-20B in debt.

Yes - better quality assurance would be a good thing to invest in but the one thing Boeing has put a lot of money into is more efficient manufacturing which was evidenced by the very nice margin advantage they held before MAX/COVID.

Shutting down the Everett 787 line and 747 lines will help going forward. Having all 737 in one location is a big advantage.


1. No matter how you look at finances, the reality is that Boeing is in shit and it will take quite some time before they get out of this problem.

As a company, they take money and invest in programs and at the end of the day these are supposed to make a return and generate profits. The way normal companies work is that you would build and you would take a percentage of revenues to pay off program costs. For those that want to break even earlier, payments to settlement accounts would come off positive cash flow too. You do not report profits before you pay down development costs on a certain program.
Boeing in their wisdom or lack thereof determined that they will approximate how many jets they are going to build and with the surplus cash that comes in, they can afford to book profits. This is financial engineering that allows you to book profits before you have paid down development costs and those 'profits' are then used to mainly buy back stock and boost stock prices.

What happens when you overestimate the number of aircraft like they have done with the 777X? Forward loss.
What happens when you cannot execute on the 787, and almost 1000 frames in you still have manufacturing issues? Forward loss.
What happens when you are rush a jet to the market, even beating targeted EIS but did shoddy work? Biggest grounding, huge debt, declining order book, forward loss.

Where is the money going to come from to undertake a new program if everything they are doing at BCA is in the red? You can tell me that they can do this, they can do that, they have this revolving credit facility. Bottom line is that it is difficult to see what makes them money going forward and what they do with the outstanding program cost.

2. Boeing is a Wall St. darling because they do everything that is required. All you need is to have short term outlook and 'maximize shareholder value.' The easiest way for people to make money was to speculate and nothing feeds the frenzy like stock buybacks. This is what they did.

They could have easily sold off some of the stock to raise the money needed for liquidity, yet they didn't. They could have taken money from CARES act, yet they chose to not do so in order to remain 'independent.' I have my doubts that people so short sighted will make the right decisions going forward or make long term investments.

For what its worth, I think you pay too much attention to a stock market that stopped making sense a long time ago and draw conclusions that ought not be there. The day Boeing offers $30B worth of shares is the day share prices drop.

3. There is acceptable debt and then there is bad debt. Acceptable debt is money you borrow that allows you to improve or grow the business. Bad debt is the sort of money Boeing just accumulated. The worthless debt that is best avoided.


No wonder you no longer are in financial services and I'm a portfolio manager (formerly capital markets raising money for public companies).

I would agree with you that the stock market is an absolute House of Cards right now and the Boeing stock price (like many others as the multiples are just too high) is as well which is why I think they should issue shares sooner rather than later but based on the markets muted reaction if the share price falls it won't be much - much less than the dilution in share capital as the market would probably see it as a positive.

Boeing has not been financial engineered. They have just not invested as much in new product as Anet would like. If they had caught the MAX engineering screw-up the MAX would probably be much closer to parity in production and sales than it is now. If Boeing had been financial engineered where is all the debt they took on to buy back their own stock and hide the supposed losses/development costs on the 787? At the end of 2011 they had about $10B in Debt, 745 Million Shares outstanding, with debt about the same at the end of 2018 and only 567 Million shares outstanding. On average those shares cost them about $100-120 each for at least an $20Billion expenditure.

In that time they incurred $30B in program costs (and paid for from cash flow as debt did not rise) on the 787 (Development plus excess cost of production on the first few hundred frames). Since then they have paid down that $30B accounting entry by about $12-13B and put a lot of additional profit on the bottom line. It is hard to determine how much profit but it is probably not that unreasonable to assume given they have delivered 1,000 frames and there normal margins - they have totally recouped there $30B at this point, and every new delivery puts significant cash on the bottom line in excess of the reported profit. Yes, In the beginning they showed an inflated profit - for the last several years Income has actually been underreported but one of the reasons the cash flow was so good. For Boeing you really just need to focus on cash flow.

The 787 will continue to pump out great cash, and once the MAX gets past the compensation credits will start putting significant cash on the bottom line as well - the 777 program - maybe not so much.

I suspect the MAX will be past the compensation credits by the end of this year for the most part. Unless you believe that Boeing is giving away the 450 frames for free.

A lot of the current $63B in debt is tied up in inventory which jumped by over $20B since the start of the MAX fiasco. It is not debt they took on to financial engineer the stock by buying it back or to fund the 787/MAX or 777X developments - those have been paid for. That was a lot of money. Just in pure development costs that has to be at least $35B that was paid for out fo cash flow in the 2010's as well. It's not like they have spent 0 on development in the past 10 years.

In fact if you really look at it - given the complexity of 777X they probably spent more than Airbus on development - A350=787, MAX=NEO, 777X>A330NEO.
 
CRJockey
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 10:08 pm

Weatherwatcher1 wrote:
Revelation wrote:
iamlucky13 wrote:
I think overall this discussion reads too much significance into the 50:50 statement, and I still think he is talking about as a whole, not just 737. Actually, the more I think about the current position and the relative narrowbody and widebody strengths and weaknesses, the more strongly convinced I am that he is suggesting 50:50 as a whole.

Sure, if you put it into the context of all of BCA and detach yourself from the transcript it's easier to justify a 50:50 statement, but I still can't see how you can get there from the transcript. The question was asked specifically about narrowbodies, he gave the 50:50 response and then the production response which clearly can only pertain to 737. If he was really thinking about all of BCA then he really should have said so in his response. I don't know, it seems best to go with what he actually said rather than convince ourselves that what we may construe his words to mean is what he actually meant.


It’s hard to know. From a widebody perspective, the 767 backlog is probably a whole lot more secure than the A330neo backlog is for example.


Relatively? Yes. In absolute numbers? Not sure.

767 --> 97 open per Boeing orders / deliveries
A330neo, discounting A338 and A339 for AAX --> 186 Airbus orders / deliveries
 
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FiscAutTecGarte
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Thu Apr 29, 2021 11:50 pm

Opus99 wrote:
The thing is, everybody asks about market share all the time, especially now. Before MAX, I didn’t hear much about market share? Or is it just me?


It's just you. LOL. No but seriously, many have observed the 321/321neo outselling the 900/9MAX 4 to 1 for a long time.... a bit more profitable size for the families.

True the 8 outsells the 320, but not by a big margin. If these orders books are healthy, the deliveries are going to swing quickly to favor Airbus in the next 2-7 years ... It will not resemble 50:50
learning never stops...

FischAutoTechGarten is the full handle and it reflects my interest. It's abbreviated to fit A.net short usernames.
 
Gremlinzzzz
Posts: 299
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 12:10 am

morrisond wrote:
No wonder you no longer are in financial services and I'm a portfolio manager (formerly capital markets raising money for public companies).

I would agree with you that the stock market is an absolute House of Cards right now and the Boeing stock price (like many others as the multiples are just too high) is as well which is why I think they should issue shares sooner rather than later but based on the markets muted reaction if the share price falls it won't be much - much less than the dilution in share capital as the market would probably see it as a positive.

Boeing has not been financial engineered. They have just not invested as much in new product as Anet would like. If they had caught the MAX engineering screw-up the MAX would probably be much closer to parity in production and sales than it is now. If Boeing had been financial engineered where is all the debt they took on to buy back their own stock and hide the supposed losses/development costs on the 787? At the end of 2011 they had about $10B in Debt, 745 Million Shares outstanding, with debt about the same at the end of 2018 and only 567 Million shares outstanding. On average those shares cost them about $100-120 each for at least an $20Billion expenditure.

In that time they incurred $30B in program costs (and paid for from cash flow as debt did not rise) on the 787 (Development plus excess cost of production on the first few hundred frames). Since then they have paid down that $30B accounting entry by about $12-13B and put a lot of additional profit on the bottom line. It is hard to determine how much profit but it is probably not that unreasonable to assume given they have delivered 1,000 frames and there normal margins - they have totally recouped there $30B at this point, and every new delivery puts significant cash on the bottom line in excess of the reported profit. Yes, In the beginning they showed an inflated profit - for the last several years Income has actually been underreported but one of the reasons the cash flow was so good. For Boeing you really just need to focus on cash flow.

The 787 will continue to pump out great cash, and once the MAX gets past the compensation credits will start putting significant cash on the bottom line as well - the 777 program - maybe not so much.

I suspect the MAX will be past the compensation credits by the end of this year for the most part. Unless you believe that Boeing is giving away the 450 frames for free.

A lot of the current $63B in debt is tied up in inventory which jumped by over $20B since the start of the MAX fiasco. It is not debt they took on to financial engineer the stock by buying it back or to fund the 787/MAX or 777X developments - those have been paid for. That was a lot of money. Just in pure development costs that has to be at least $35B that was paid for out fo cash flow in the 2010's as well. It's not like they have spent 0 on development in the past 10 years.

In fact if you really look at it - given the complexity of 777X they probably spent more than Airbus on development - A350=787, MAX=NEO, 777X>A330NEO.

1. Business is very simple. The end game is to accumulate funds and assets. If I put in $30billion in a program, I should get $30billion back, after this, any money that comes is profit. With program accounting, Boeing accounts for 'profits' when programs are still in the red. This is the definition of financial engineering and it is what McDonnell Douglas was good at, and it was what GE was great at.
McDonnell Douglas is out of business and GE, one of the cornerstones of American industrialization was gutted to the point that it is today a shadow of what it used to be, what it could be. Boeing which generally made good planes cannot seem to make one that is on time, on budget or without big defects.

The 787 deliveries stopped because, well production issues, and these if I recall correctly apply to the Dreamliner fleet, so repeat work. The MAX is the epitome of cutting corners first time and paying an expensive price second time around.

Business is simple, it is the accountants that complicate everything.

2. Boeing is going to pay close to $2.8B a year in interest payments for at least three years because this is when the first tranche needs redemption. You are looking at slightly over half what it would cost to come up with a new program because you messed up one program and had to get a loan not to make a new product, but for liquidity purposes. As a company, the debt rating is BBB-, this is what ratings agencies think the debt is worth, just above junk.

3. You have made a comment Boeing has not invested in a new program as much as this forum would like. I honestly do not know what that is supposed to mean. The 737 is an antiquated platform at a time when fly by wire technology is the norm. The plane is a relic that Boeing was forced to re-engine once again or lose significant market share.

That they need to replace this jet is not a question worth discussing, and if things continue as they are, that 50/50 split is not going to be there long term.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 12:16 am

CRJockey wrote:
Weatherwatcher1 wrote:
Revelation wrote:
Sure, if you put it into the context of all of BCA and detach yourself from the transcript it's easier to justify a 50:50 statement, but I still can't see how you can get there from the transcript. The question was asked specifically about narrowbodies, he gave the 50:50 response and then the production response which clearly can only pertain to 737. If he was really thinking about all of BCA then he really should have said so in his response. I don't know, it seems best to go with what he actually said rather than convince ourselves that what we may construe his words to mean is what he actually meant.


It’s hard to know. From a widebody perspective, the 767 backlog is probably a whole lot more secure than the A330neo backlog is for example.


Relatively? Yes. In absolute numbers? Not sure.

767 --> 97 open per Boeing orders / deliveries
A330neo, discounting A338 and A339 for AAX --> 186 Airbus orders / deliveries


For the 767 97+ another 81 KC-46 to be ordered to complete the program
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 12:31 am

Gremlinzzzz wrote:
morrisond wrote:
No wonder you no longer are in financial services and I'm a portfolio manager (formerly capital markets raising money for public companies).

I would agree with you that the stock market is an absolute House of Cards right now and the Boeing stock price (like many others as the multiples are just too high) is as well which is why I think they should issue shares sooner rather than later but based on the markets muted reaction if the share price falls it won't be much - much less than the dilution in share capital as the market would probably see it as a positive.

Boeing has not been financial engineered. They have just not invested as much in new product as Anet would like. If they had caught the MAX engineering screw-up the MAX would probably be much closer to parity in production and sales than it is now. If Boeing had been financial engineered where is all the debt they took on to buy back their own stock and hide the supposed losses/development costs on the 787? At the end of 2011 they had about $10B in Debt, 745 Million Shares outstanding, with debt about the same at the end of 2018 and only 567 Million shares outstanding. On average those shares cost them about $100-120 each for at least an $20Billion expenditure.

In that time they incurred $30B in program costs (and paid for from cash flow as debt did not rise) on the 787 (Development plus excess cost of production on the first few hundred frames). Since then they have paid down that $30B accounting entry by about $12-13B and put a lot of additional profit on the bottom line. It is hard to determine how much profit but it is probably not that unreasonable to assume given they have delivered 1,000 frames and there normal margins - they have totally recouped there $30B at this point, and every new delivery puts significant cash on the bottom line in excess of the reported profit. Yes, In the beginning they showed an inflated profit - for the last several years Income has actually been underreported but one of the reasons the cash flow was so good. For Boeing you really just need to focus on cash flow.

The 787 will continue to pump out great cash, and once the MAX gets past the compensation credits will start putting significant cash on the bottom line as well - the 777 program - maybe not so much.

I suspect the MAX will be past the compensation credits by the end of this year for the most part. Unless you believe that Boeing is giving away the 450 frames for free.

A lot of the current $63B in debt is tied up in inventory which jumped by over $20B since the start of the MAX fiasco. It is not debt they took on to financial engineer the stock by buying it back or to fund the 787/MAX or 777X developments - those have been paid for. That was a lot of money. Just in pure development costs that has to be at least $35B that was paid for out fo cash flow in the 2010's as well. It's not like they have spent 0 on development in the past 10 years.

In fact if you really look at it - given the complexity of 777X they probably spent more than Airbus on development - A350=787, MAX=NEO, 777X>A330NEO.

1. Business is very simple. The end game is to accumulate funds and assets. If I put in $30billion in a program, I should get $30billion back, after this, any money that comes is profit. With program accounting, Boeing accounts for 'profits' when programs are still in the red. This is the definition of financial engineering and it is what McDonnell Douglas was good at, and it was what GE was great at.
McDonnell Douglas is out of business and GE, one of the cornerstones of American industrialization was gutted to the point that it is today a shadow of what it used to be, what it could be. Boeing which generally made good planes cannot seem to make one that is on time, on budget or without big defects.

The 787 deliveries stopped because, well production issues, and these if I recall correctly apply to the Dreamliner fleet, so repeat work. The MAX is the epitome of cutting corners first time and paying an expensive price second time around.

Business is simple, it is the accountants that complicate everything.

2. Boeing is going to pay close to $2.8B a year in interest payments for at least three years because this is when the first tranche needs redemption. You are looking at slightly over half what it would cost to come up with a new program because you messed up one program and had to get a loan not to make a new product, but for liquidity purposes. As a company, the debt rating is BBB-, this is what ratings agencies think the debt is worth, just above junk.

3. You have made a comment Boeing has not invested in a new program as much as this forum would like. I honestly do not know what that is supposed to mean. The 737 is an antiquated platform at a time when fly by wire technology is the norm. The plane is a relic that Boeing was forced to re-engine once again or lose significant market share.

That they need to replace this jet is not a question worth discussing, and if things continue as they are, that 50/50 split is not going to be there long term.


Nice rant - but no real numbers why you think Boeing won't survive.

I would guess Boeing has already gotten at least $30B out of the 787.

1. That is not the common definition of Financial Engineering. Please show where they used debt to pump up the stock price. Profits were inflated in the first couple of years of 787 deliveries but were then underreported at peak 787.

2. If they sell shares in the market now, reduce cash on hand back to where it was before Covid and as 737/787 resume deliveries they won't be paying $2.8B a year for the next three years. They could be be back to under $20B in debt by the end of 2022.

3. The forum (and myself) really wish they built the NSA which would have increased their development expense over the past 10 years. However as I said above it's not like they have invested nothing and in fact probably invested more than their main competitor.

Yes the MAX needs to be replaced but there is no huge rush. The MAX will sell sufficiently and produce more than enough excess cash flow to pay for a successor and help pay off the remaining debt. I suspect the last ones won't roll off the lines until the mid 2030's.
 
DenverTed
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Joined: Wed Mar 27, 2019 11:12 pm

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:13 am

With Covid and the MAX grounding, nobody knows what the split is. Holding ground. That is a 2 to 1 Airbus A320/220 advantage over 737, for a 5 to 10 year production time frame. I think Boeing can hold ground and not let that be a 3 to 1 advantage and develop a new aircraft of single or twin aisle in 10 years.
Average production rate of MAX over 5 or 10 years? Can it break 40? Airbus A320/A220 80? MC-21 10? C919 10?
 
randomdude83
Posts: 91
Joined: Fri Feb 01, 2019 5:52 pm

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:27 am

I'm of the opinion and I might be alone on this one, Boeing should risk launching the NSA without a launch customer. Basically spend all borrowed money of sort into an actual fully designed and proved flying concept without investing into production yet, that way Boeing is free to design a plane that simply beats the A320 series without any customer input. Its customer input that got Boeing into this trouble IMHO. I feel that way can lead to something great without customer tampering. Boeing needs to take a hint from Apple...you don't have to invent anything, just take whats selling in the market and just do it better. So take the 757 or A321 and just do a better version. no airline is going to say no to that.

And all this doom and gloom that airlines won't order is false, market will rebound and Boeing better have a product ready to deliver or Airbus is going to eat more market share.
 
Gremlinzzzz
Posts: 299
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 7:02 am

morrisond wrote:

Nice rant - but no real numbers why you think Boeing won't survive.

I would guess Boeing has already gotten at least $30B out of the 787.

1. That is not the common definition of Financial Engineering. Please show where they used debt to pump up the stock price. Profits were inflated in the first couple of years of 787 deliveries but were then underreported at peak 787.

2. If they sell shares in the market now, reduce cash on hand back to where it was before Covid and as 737/787 resume deliveries they won't be paying $2.8B a year for the next three years. They could be be back to under $20B in debt by the end of 2022.

3. The forum (and myself) really wish they built the NSA which would have increased their development expense over the past 10 years. However as I said above it's not like they have invested nothing and in fact probably invested more than their main competitor.

Yes the MAX needs to be replaced but there is no huge rush. The MAX will sell sufficiently and produce more than enough excess cash flow to pay for a successor and help pay off the remaining debt. I suspect the last ones won't roll off the lines until the mid 2030's.
Why would I need numbers when a lot of this is common knowledge?

1. When you look at the 777X, Leeham once reported that Boeing was looking to sell 1,200 of these. That was the expectation. At current moment they would be lucky to get a quarter of that in sales. Forward loss, and if this program is still somehow limping, it will be as dead as a dodo once the Trent Ultrafan arrives. Airlines could today cancel orders and Boeing would have no recourse.

2. The 747-8 had forward losses charged twice and coming to $4.1 billion. Program is dead.

3. The 787 program booked almost $4 billion associated to high production costs of early units to research and development in 2009 and 2016. To add to this, no one knows what the liability cost is when it comes to fixing 787's and they have also moved production to a site that has always struggled with quality issues. I expect a charge on this in the future, plus production rates are going down.

4. KC46 has accrued to date charges of $5 billion, 70% of this being a reach forward loss. They cannot seem to get the quality right. Expect more charges going forward. The defense business as a whole is a struggling venture where things have technical problems everywhere.

5. The 737NG has pickle fork cracks. We will get to know how big of an issue it is as more and more units start to age. These were designed to last 90,000 cycles which is more than the service life of an aircraft but are showing up in sub 30,000 cycle planes. Expect a charge.

6. 737 MAX just saw some huge grounding. Boeing stated that it is compensating customers to the tune of $8.6 billion, $5 billion for unusual costs of production and $6.3 billion in increased costs for the MAX program. $20 billion in charges is only going to grow and we do not know where they will eventually land. This is a money pit, Boeing will never make money off this program.

In addition to this, Calhoun just told shareholders that they would need to borrow more money over the next 6 months i.e. more interest payments are coming aboard and this even at this low interest environment, they have managed to pay a premium.

This is a company that cannot deliver a on time, at cost or without technical issues. It cannot and will not meet all three of these. They need a change in culture and this is not easy. It is not easy when you have a lot of debt to deal and quality issues to clean up as far as the eye can see. Boeing similarly borrowed money and kept producing jets in the belief that they could get in grounded in no time. What has happened is that they are paying interest on inventory that is not going anywhere, and when they need to sell, they are doing that at depressed prices because of the reputation hit incurred.

The 737 is the plane that makes Boeing money, it is the plane that allows it to absorb charges and be somewhat reckless yet it is the one jet that is seeing charges not seen before in aviation. The $20 billion thus far accrued is not the end because you still have cases to settle, they still have re-wiring to do, and then there is the new issue that popped up that they need to fix. It is not hard to imagine that this goes north of $25 billion on what was a simple re-engine.

All of this is money that came from somewhere, and that needs paying back. It is easy when production is high and when there is a lot of travel demand which means airlines want fuel efficient jets to be competitive. When production is down and you have demanded so much in concessions from suppliers pegging those concessions to huge monthly rates, you have a problem.

Had they spent some of the $43 billion that they wasted on share buybacks into better quality control, they would not be in the situation they are today. Instead of selling some of those shares, they are tapping the debt market.

High debt, poor culture, poor production habits, weak product line, future charges inevitable, shrinking order book is critical segments.

Zombie company.
 
CRJockey
Posts: 313
Joined: Mon Feb 10, 2020 11:54 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 7:09 am

morrisond wrote:
CRJockey wrote:
Weatherwatcher1 wrote:

It’s hard to know. From a widebody perspective, the 767 backlog is probably a whole lot more secure than the A330neo backlog is for example.


Relatively? Yes. In absolute numbers? Not sure.

767 --> 97 open per Boeing orders / deliveries
A330neo, discounting A338 and A339 for AAX --> 186 Airbus orders / deliveries


For the 767 97+ another 81 KC-46 to be ordered to complete the program


...which are, of course, not in the official order book yet. You know, the one directly published by the OEM. Or are we adding units to the A330 backlog as well in anticipation?
 
Gremlinzzzz
Posts: 299
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 7:16 am

randomdude83 wrote:
I'm of the opinion and I might be alone on this one, Boeing should risk launching the NSA without a launch customer. Basically spend all borrowed money of sort into an actual fully designed and proved flying concept without investing into production yet, that way Boeing is free to design a plane that simply beats the A320 series without any customer input. Its customer input that got Boeing into this trouble IMHO. I feel that way can lead to something great without customer tampering. Boeing needs to take a hint from Apple...you don't have to invent anything, just take whats selling in the market and just do it better. So take the 757 or A321 and just do a better version. no airline is going to say no to that.

And all this doom and gloom that airlines won't order is false, market will rebound and Boeing better have a product ready to deliver or Airbus is going to eat more market share.
There are times when consumer feedback is real important. Boeing was looking to build the sonic cruiser and it was airlines that told them they should just build something efficient.

Airbus was simply going to insist on a A330Neo, it was customers that told them to get their house in order and actually deliver on a new product.
However, there are scenarios where customers do not help. The A380, the 777X. Boeing should be talking to power plant OEM's and see where tech is going to be towards the end of the decade and simply design a plane around that.

The MAX was something they had to do or else they were going to lose customers. Right now though, you are right. Airlines will buy anything that is quality and has significant efficiency gains even if it means a new type rating.
 
JonesNL
Posts: 350
Joined: Tue Aug 06, 2019 2:40 pm

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 9:01 am

Gremlinzzzz wrote:
morrisond wrote:

Nice rant - but no real numbers why you think Boeing won't survive.

I would guess Boeing has already gotten at least $30B out of the 787.

1. That is not the common definition of Financial Engineering. Please show where they used debt to pump up the stock price. Profits were inflated in the first couple of years of 787 deliveries but were then underreported at peak 787.

2. If they sell shares in the market now, reduce cash on hand back to where it was before Covid and as 737/787 resume deliveries they won't be paying $2.8B a year for the next three years. They could be be back to under $20B in debt by the end of 2022.

3. The forum (and myself) really wish they built the NSA which would have increased their development expense over the past 10 years. However as I said above it's not like they have invested nothing and in fact probably invested more than their main competitor.

Yes the MAX needs to be replaced but there is no huge rush. The MAX will sell sufficiently and produce more than enough excess cash flow to pay for a successor and help pay off the remaining debt. I suspect the last ones won't roll off the lines until the mid 2030's.
Why would I need numbers when a lot of this is common knowledge?

1. When you look at the 777X, Leeham once reported that Boeing was looking to sell 1,200 of these. That was the expectation. At current moment they would be lucky to get a quarter of that in sales. Forward loss, and if this program is still somehow limping, it will be as dead as a dodo once the Trent Ultrafan arrives. Airlines could today cancel orders and Boeing would have no recourse.

2. The 747-8 had forward losses charged twice and coming to $4.1 billion. Program is dead.

3. The 787 program booked almost $4 billion associated to high production costs of early units to research and development in 2009 and 2016. To add to this, no one knows what the liability cost is when it comes to fixing 787's and they have also moved production to a site that has always struggled with quality issues. I expect a charge on this in the future, plus production rates are going down.

4. KC46 has accrued to date charges of $5 billion, 70% of this being a reach forward loss. They cannot seem to get the quality right. Expect more charges going forward. The defense business as a whole is a struggling venture where things have technical problems everywhere.

5. The 737NG has pickle fork cracks. We will get to know how big of an issue it is as more and more units start to age. These were designed to last 90,000 cycles which is more than the service life of an aircraft but are showing up in sub 30,000 cycle planes. Expect a charge.

6. 737 MAX just saw some huge grounding. Boeing stated that it is compensating customers to the tune of $8.6 billion, $5 billion for unusual costs of production and $6.3 billion in increased costs for the MAX program. $20 billion in charges is only going to grow and we do not know where they will eventually land. This is a money pit, Boeing will never make money off this program.

In addition to this, Calhoun just told shareholders that they would need to borrow more money over the next 6 months i.e. more interest payments are coming aboard and this even at this low interest environment, they have managed to pay a premium.

This is a company that cannot deliver a on time, at cost or without technical issues. It cannot and will not meet all three of these. They need a change in culture and this is not easy. It is not easy when you have a lot of debt to deal and quality issues to clean up as far as the eye can see. Boeing similarly borrowed money and kept producing jets in the belief that they could get in grounded in no time. What has happened is that they are paying interest on inventory that is not going anywhere, and when they need to sell, they are doing that at depressed prices because of the reputation hit incurred.

The 737 is the plane that makes Boeing money, it is the plane that allows it to absorb charges and be somewhat reckless yet it is the one jet that is seeing charges not seen before in aviation. The $20 billion thus far accrued is not the end because you still have cases to settle, they still have re-wiring to do, and then there is the new issue that popped up that they need to fix. It is not hard to imagine that this goes north of $25 billion on what was a simple re-engine.

All of this is money that came from somewhere, and that needs paying back. It is easy when production is high and when there is a lot of travel demand which means airlines want fuel efficient jets to be competitive. When production is down and you have demanded so much in concessions from suppliers pegging those concessions to huge monthly rates, you have a problem.

Had they spent some of the $43 billion that they wasted on share buybacks into better quality control, they would not be in the situation they are today. Instead of selling some of those shares, they are tapping the debt market.

High debt, poor culture, poor production habits, weak product line, future charges inevitable, shrinking order book is critical segments.

Zombie company.


While I agree with most points, I think it can relatively easily be solved. Revert the focus on stock value, sell 30B of worth of stock and make a profit on stock buybacks, decrease debt to decrease interest payment, Refinance remaining debt with lower interest loan made possible by better balance sheet, invest in QA culture and new programs that can bring in money...
 
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reidar76
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 10:11 am

DenverTed wrote:
It is highly unlikely Boeing could ever get to 50-50 with the MAX versus the NEO and the A220. The only way 50-50 works, is with a new narrowbody and the MAX, or just a new narrowbody, which would be further down the road. If it is 50-50 in the below 150t MTOW, and not strictly single aisle, then it could be the MAX and the NMA-5/6/7.


It is not just highly unlikely, it is pure fantasy. The 737NG didn't achieve a 50/50 split with the A320ceo, but is was close, something like a 48/52 split.

It is pure fantasy to think that the 737 MAX will fare much better against the A32Xneo/XLR/A220 than the 737NG achieved competing with the a320ceo alone.

The transcript doesn't say Boeings goal is an evenly split, it only says the obvious that there will be a split. In other words they definitely will not exit the narrowbody market. The split could be 33/66, which is also more likely.
 
Flying-Tiger
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 10:15 am

JonesNL wrote:
While I agree with most points, I think it can relatively easily be solved. Revert the focus on stock value, sell 30B of worth of stock and make a profit on stock buybacks, decrease debt to decrease interest payment, Refinance remaining debt with lower interest loan made possible by better balance sheet, invest in QA culture and new programs that can bring in money...


And tell you shareholders that their stock value will dip for a prolonged time, no or only minimal dividends to be paid, management salaries being frozen or reduced... Whilst I agree with what you say there are several trip wires in such an approach. I wouldn´t be surprised to learn that Boeing stock has been used as collateral for some debt financing, including the requirement to keep the stock value above a certain threshold to not default on the debt, triggering an immediate repayment.

As usual in business, there are certainly quite a number of interdependences, which will likely only allow course adjustments, but not a full 180°.

We can only hope - for the civil aviation industry as a whole - that over a longer period of time Boeing gets is house in order again and that we´re back at a 40/60 to 60/40 range of market share to allow sufficient innovation and competition forward.
Flown: A319/320/321,A332/3,A343/346, A359, A380,AT4,AT7,B712, B732/3/4/5/7/8/9,B742/4,B752/3, B762/763,B772/77W,CR2/7/9/K,ER3/4,E70/75/90/95, F50/70/100,M11,L15,SF3,S20, AR8/1, 142/143,... 330.860 miles and counting.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 10:24 am

JonesNL wrote:
Gremlinzzzz wrote:
morrisond wrote:

Nice rant - but no real numbers why you think Boeing won't survive.

I would guess Boeing has already gotten at least $30B out of the 787.

1. That is not the common definition of Financial Engineering. Please show where they used debt to pump up the stock price. Profits were inflated in the first couple of years of 787 deliveries but were then underreported at peak 787.

2. If they sell shares in the market now, reduce cash on hand back to where it was before Covid and as 737/787 resume deliveries they won't be paying $2.8B a year for the next three years. They could be be back to under $20B in debt by the end of 2022.

3. The forum (and myself) really wish they built the NSA which would have increased their development expense over the past 10 years. However as I said above it's not like they have invested nothing and in fact probably invested more than their main competitor.

Yes the MAX needs to be replaced but there is no huge rush. The MAX will sell sufficiently and produce more than enough excess cash flow to pay for a successor and help pay off the remaining debt. I suspect the last ones won't roll off the lines until the mid 2030's.
Why would I need numbers when a lot of this is common knowledge?

1. When you look at the 777X, Leeham once reported that Boeing was looking to sell 1,200 of these. That was the expectation. At current moment they would be lucky to get a quarter of that in sales. Forward loss, and if this program is still somehow limping, it will be as dead as a dodo once the Trent Ultrafan arrives. Airlines could today cancel orders and Boeing would have no recourse.

2. The 747-8 had forward losses charged twice and coming to $4.1 billion. Program is dead.

3. The 787 program booked almost $4 billion associated to high production costs of early units to research and development in 2009 and 2016. To add to this, no one knows what the liability cost is when it comes to fixing 787's and they have also moved production to a site that has always struggled with quality issues. I expect a charge on this in the future, plus production rates are going down.

4. KC46 has accrued to date charges of $5 billion, 70% of this being a reach forward loss. They cannot seem to get the quality right. Expect more charges going forward. The defense business as a whole is a struggling venture where things have technical problems everywhere.

5. The 737NG has pickle fork cracks. We will get to know how big of an issue it is as more and more units start to age. These were designed to last 90,000 cycles which is more than the service life of an aircraft but are showing up in sub 30,000 cycle planes. Expect a charge.

6. 737 MAX just saw some huge grounding. Boeing stated that it is compensating customers to the tune of $8.6 billion, $5 billion for unusual costs of production and $6.3 billion in increased costs for the MAX program. $20 billion in charges is only going to grow and we do not know where they will eventually land. This is a money pit, Boeing will never make money off this program.

In addition to this, Calhoun just told shareholders that they would need to borrow more money over the next 6 months i.e. more interest payments are coming aboard and this even at this low interest environment, they have managed to pay a premium.

This is a company that cannot deliver a on time, at cost or without technical issues. It cannot and will not meet all three of these. They need a change in culture and this is not easy. It is not easy when you have a lot of debt to deal and quality issues to clean up as far as the eye can see. Boeing similarly borrowed money and kept producing jets in the belief that they could get in grounded in no time. What has happened is that they are paying interest on inventory that is not going anywhere, and when they need to sell, they are doing that at depressed prices because of the reputation hit incurred.

The 737 is the plane that makes Boeing money, it is the plane that allows it to absorb charges and be somewhat reckless yet it is the one jet that is seeing charges not seen before in aviation. The $20 billion thus far accrued is not the end because you still have cases to settle, they still have re-wiring to do, and then there is the new issue that popped up that they need to fix. It is not hard to imagine that this goes north of $25 billion on what was a simple re-engine.

All of this is money that came from somewhere, and that needs paying back. It is easy when production is high and when there is a lot of travel demand which means airlines want fuel efficient jets to be competitive. When production is down and you have demanded so much in concessions from suppliers pegging those concessions to huge monthly rates, you have a problem.

Had they spent some of the $43 billion that they wasted on share buybacks into better quality control, they would not be in the situation they are today. Instead of selling some of those shares, they are tapping the debt market.

High debt, poor culture, poor production habits, weak product line, future charges inevitable, shrinking order book is critical segments.

Zombie company.


While I agree with most points, I think it can relatively easily be solved. Revert the focus on stock value, sell 30B of worth of stock and make a profit on stock buybacks, decrease debt to decrease interest payment, Refinance remaining debt with lower interest loan made possible by better balance sheet, invest in QA culture and new programs that can bring in money...
Culture is the hardest thing to change in any company, more so when the people that have led the rot are at the top.

If I told you to show me a good board, great management, you would not in a billion years choose Boeing. I would hazard a guess that without the MAX grounding, they would simply hide production issues.

This lot will never sell more shares as long as stock options, stock prices are there to remunerate management. It will not happen when the people that run the company come from the Jack Welch school of thought where you gut a company while chasing stock price growth.
 
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seahawk
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 10:47 am

reidar76 wrote:
DenverTed wrote:
It is highly unlikely Boeing could ever get to 50-50 with the MAX versus the NEO and the A220. The only way 50-50 works, is with a new narrowbody and the MAX, or just a new narrowbody, which would be further down the road. If it is 50-50 in the below 150t MTOW, and not strictly single aisle, then it could be the MAX and the NMA-5/6/7.


It is not just highly unlikely, it is pure fantasy. The 737NG didn't achieve a 50/50 split with the A320ceo, but is was close, something like a 48/52 split.

It is pure fantasy to think that the 737 MAX will fare much better against the A32Xneo/XLR/A220 than the 737NG achieved competing with the a320ceo alone.

The transcript doesn't say Boeings goal is an evenly split, it only says the obvious that there will be a split. In other words they definitely will not exit the narrowbody market. The split could be 33/66, which is also more likely.


Why not? The smaller version remained largely unchanged and the 737-10 adds a new alternative to the A321 that the NG lacked.
 
smartplane
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 10:52 am

morrisond wrote:
I suspect the MAX will be past the compensation credits by the end of this year for the most part. Unless you believe that Boeing is giving away the 450 frames for free.

Far from it.

Tier 2 & 3 credits start reducing on a per aircraft basis, when a firm delivery date is available, or after five years, whichever occurs first.

Every additional order utilising Tier 2 and 3 credits in part of whole, increases Tier 1 volume credits.

Ordering aircraft utilising Tier 1-3 credits this year, for delivery in 3 years, may make the credits disappear, but the financial impact extends over the entire period in the form of zero, or low milestone payments.
 
JonesNL
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 11:33 am

Flying-Tiger wrote:
JonesNL wrote:
While I agree with most points, I think it can relatively easily be solved. Revert the focus on stock value, sell 30B of worth of stock and make a profit on stock buybacks, decrease debt to decrease interest payment, Refinance remaining debt with lower interest loan made possible by better balance sheet, invest in QA culture and new programs that can bring in money...


And tell you shareholders that their stock value will dip for a prolonged time, no or only minimal dividends to be paid, management salaries being frozen or reduced... Whilst I agree with what you say there are several trip wires in such an approach. I wouldn´t be surprised to learn that Boeing stock has been used as collateral for some debt financing, including the requirement to keep the stock value above a certain threshold to not default on the debt, triggering an immediate repayment.

As usual in business, there are certainly quite a number of interdependences, which will likely only allow course adjustments, but not a full 180°.

We can only hope - for the civil aviation industry as a whole - that over a longer period of time Boeing gets is house in order again and that we´re back at a 40/60 to 60/40 range of market share to allow sufficient innovation and competition forward.


Gremlinzzzz wrote:
...


I agree with the trip wires, the board and C-suite needs to shoot itself in the foot with stock dilution to save the ship. Is it an option? Yes. Will they do it? I don't think so. You would need strong leadership to pull it of and refocus on profitability in 10 years. Those leaders are very rare now days, but the current state of affairs is the perfect excuse to pull such an act...
 
FluidFlow
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 12:14 pm

smartplane wrote:
morrisond wrote:
I suspect the MAX will be past the compensation credits by the end of this year for the most part. Unless you believe that Boeing is giving away the 450 frames for free.

Far from it.

Tier 2 & 3 credits start reducing on a per aircraft basis, when a firm delivery date is available, or after five years, whichever occurs first.

Every additional order utilising Tier 2 and 3 credits in part of whole, increases Tier 1 volume credits.

Ordering aircraft utilising Tier 1-3 credits this year, for delivery in 3 years, may make the credits disappear, but the financial impact extends over the entire period in the form of zero, or low milestone payments.


Also on top of that, if Boeing wants to sell right now, even to a new customer without credits, they have to sell cheap as the market is flooded with lease returns (737NG, A320ceo). There was a list somewhere that a current 737MAX goes for 38m$. That does not leave a lot of room to make money in the future.

If past "high" prices were around 45m$ for a MAX with a margin of 15% for Boeing we are at roughly 38m$ production cost. Even with 20% margin the production cost would be around 36m$. So if Boeing sells at the moment for market prices there is not a lot of wiggle room to make a profit in the future.

So with credits and the current market environment Boeing will not make a lot of money with the 737 for a long time and if Boeing has to spend money for the vendors to increase production (they were also bleeding heavily through the grounding) because they have no money, the little money Boeing will make on the 737 will flow back into the supply chain to increase the production rate. Only this will make the product long term profitable again.

This journey will more be like introducing a new product with all the ramp up problems and discounted launch customers and we will not see the line turning a profit for a while.
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 12:17 pm

Gremlinzzzz wrote:
Boeing is not going to make money on the MAX, 787, or 777X. This is their product lineup. They are highly financialized company that used program accounting, thus they pocketed 'profits' early on.

I'm still waiting to read that deferred production costs are just an accounting exercise and that all bills are already paid.
Why can't the world be a little bit more autistic?
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 12:52 pm

Sokes wrote:
Gremlinzzzz wrote:
Boeing is not going to make money on the MAX, 787, or 777X. This is their product lineup. They are highly financialized company that used program accounting, thus they pocketed 'profits' early on.

I'm still waiting to read that deferred production costs are just an accounting exercise and that all bills are already paid.

Program development is expenditure.

How do you go on without zeroing this across multiple programs? You eventually collapse in red ink.

Boeing's last four programs in commercial aviation are all deep in red.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 12:54 pm

JonesNL wrote:
Flying-Tiger wrote:
JonesNL wrote:
While I agree with most points, I think it can relatively easily be solved. Revert the focus on stock value, sell 30B of worth of stock and make a profit on stock buybacks, decrease debt to decrease interest payment, Refinance remaining debt with lower interest loan made possible by better balance sheet, invest in QA culture and new programs that can bring in money...


And tell you shareholders that their stock value will dip for a prolonged time, no or only minimal dividends to be paid, management salaries being frozen or reduced... Whilst I agree with what you say there are several trip wires in such an approach. I wouldn´t be surprised to learn that Boeing stock has been used as collateral for some debt financing, including the requirement to keep the stock value above a certain threshold to not default on the debt, triggering an immediate repayment.

As usual in business, there are certainly quite a number of interdependences, which will likely only allow course adjustments, but not a full 180°.

We can only hope - for the civil aviation industry as a whole - that over a longer period of time Boeing gets is house in order again and that we´re back at a 40/60 to 60/40 range of market share to allow sufficient innovation and competition forward.


Gremlinzzzz wrote:
...


I agree with the trip wires, the board and C-suite needs to shoot itself in the foot with stock dilution to save the ship. Is it an option? Yes. Will they do it? I don't think so. You would need strong leadership to pull it of and refocus on profitability in 10 years. Those leaders are very rare now days, but the current state of affairs is the perfect excuse to pull such an act...

In addition to this, any new share sale has to be discounted because this is how all rights issues are done.

Boeing has been about share price above anything else, including quality. That is not changing any time soon.

How do you explain paying premium for shares and selling them at discount?
Last edited by Gremlinzzzz on Fri Apr 30, 2021 12:55 pm, edited 1 time in total.
 
mjoelnir
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 12:55 pm

seahawk wrote:
reidar76 wrote:
DenverTed wrote:
It is highly unlikely Boeing could ever get to 50-50 with the MAX versus the NEO and the A220. The only way 50-50 works, is with a new narrowbody and the MAX, or just a new narrowbody, which would be further down the road. If it is 50-50 in the below 150t MTOW, and not strictly single aisle, then it could be the MAX and the NMA-5/6/7.


It is not just highly unlikely, it is pure fantasy. The 737NG didn't achieve a 50/50 split with the A320ceo, but is was close, something like a 48/52 split.

It is pure fantasy to think that the 737 MAX will fare much better against the A32Xneo/XLR/A220 than the 737NG achieved competing with the a320ceo alone.

The transcript doesn't say Boeings goal is an evenly split, it only says the obvious that there will be a split. In other words they definitely will not exit the narrowbody market. The split could be 33/66, which is also more likely.


Why not? The smaller version remained largely unchanged and the 737-10 adds a new alternative to the A321 that the NG lacked.


The whole 737MAX sales match the A320neo sales. The A321neo sales are extra.

In regards to the 737-10 changing the game compared to the 737NG against the A320ceo family, I point to the numbers. A321neo sales is already double the A321ceo sales. 1791 against 3448. You could look at the 737MAX/A320neo size range sold, roughly 1/3 737MAXall versions, 1/3 A320neo and 1/3 A321neo.
The 737-9 and 737-10 combined seem to do worse against the A321neo, than the 737-900 against the A321ceo.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:22 pm

Gremlinzzzz wrote:
morrisond wrote:

Nice rant - but no real numbers why you think Boeing won't survive.

I would guess Boeing has already gotten at least $30B out of the 787.

1. That is not the common definition of Financial Engineering. Please show where they used debt to pump up the stock price. Profits were inflated in the first couple of years of 787 deliveries but were then underreported at peak 787.

2. If they sell shares in the market now, reduce cash on hand back to where it was before Covid and as 737/787 resume deliveries they won't be paying $2.8B a year for the next three years. They could be be back to under $20B in debt by the end of 2022.

3. The forum (and myself) really wish they built the NSA which would have increased their development expense over the past 10 years. However as I said above it's not like they have invested nothing and in fact probably invested more than their main competitor.

Yes the MAX needs to be replaced but there is no huge rush. The MAX will sell sufficiently and produce more than enough excess cash flow to pay for a successor and help pay off the remaining debt. I suspect the last ones won't roll off the lines until the mid 2030's.
Why would I need numbers when a lot of this is common knowledge?

1. When you look at the 777X, Leeham once reported that Boeing was looking to sell 1,200 of these. That was the expectation. At current moment they would be lucky to get a quarter of that in sales. Forward loss, and if this program is still somehow limping, it will be as dead as a dodo once the Trent Ultrafan arrives. Airlines could today cancel orders and Boeing would have no recourse.

2. The 747-8 had forward losses charged twice and coming to $4.1 billion. Program is dead.

3. The 787 program booked almost $4 billion associated to high production costs of early units to research and development in 2009 and 2016. To add to this, no one knows what the liability cost is when it comes to fixing 787's and they have also moved production to a site that has always struggled with quality issues. I expect a charge on this in the future, plus production rates are going down.

4. KC46 has accrued to date charges of $5 billion, 70% of this being a reach forward loss. They cannot seem to get the quality right. Expect more charges going forward. The defense business as a whole is a struggling venture where things have technical problems everywhere.

5. The 737NG has pickle fork cracks. We will get to know how big of an issue it is as more and more units start to age. These were designed to last 90,000 cycles which is more than the service life of an aircraft but are showing up in sub 30,000 cycle planes. Expect a charge.

6. 737 MAX just saw some huge grounding. Boeing stated that it is compensating customers to the tune of $8.6 billion, $5 billion for unusual costs of production and $6.3 billion in increased costs for the MAX program. $20 billion in charges is only going to grow and we do not know where they will eventually land. This is a money pit, Boeing will never make money off this program.

In addition to this, Calhoun just told shareholders that they would need to borrow more money over the next 6 months i.e. more interest payments are coming aboard and this even at this low interest environment, they have managed to pay a premium.

This is a company that cannot deliver a on time, at cost or without technical issues. It cannot and will not meet all three of these. They need a change in culture and this is not easy. It is not easy when you have a lot of debt to deal and quality issues to clean up as far as the eye can see. Boeing similarly borrowed money and kept producing jets in the belief that they could get in grounded in no time. What has happened is that they are paying interest on inventory that is not going anywhere, and when they need to sell, they are doing that at depressed prices because of the reputation hit incurred.

The 737 is the plane that makes Boeing money, it is the plane that allows it to absorb charges and be somewhat reckless yet it is the one jet that is seeing charges not seen before in aviation. The $20 billion thus far accrued is not the end because you still have cases to settle, they still have re-wiring to do, and then there is the new issue that popped up that they need to fix. It is not hard to imagine that this goes north of $25 billion on what was a simple re-engine.

All of this is money that came from somewhere, and that needs paying back. It is easy when production is high and when there is a lot of travel demand which means airlines want fuel efficient jets to be competitive. When production is down and you have demanded so much in concessions from suppliers pegging those concessions to huge monthly rates, you have a problem.

Had they spent some of the $43 billion that they wasted on share buybacks into better quality control, they would not be in the situation they are today. Instead of selling some of those shares, they are tapping the debt market.

High debt, poor culture, poor production habits, weak product line, future charges inevitable, shrinking order book is critical segments.

Zombie company.


Almost everything you quoted has already taken place and been accounted for. Forward losses are not actual cash losses they are accounting entries. For instance the 777X forward loss recorded in 4Q 2020 was an accounting entry they took against the cost of the program so in the future the program can look profitable at lower projected volumes. They did not have to pay for it out of cashflow or incur more debt. However yes the increased cost of certification will come out of the R&D budget and may or may not be added to the program cost.

It looks like they will be cash flow positive sometime in 2022 and they have more than sufficient liquidity to get them through ($37 Billion of Liquidity).

A lot of the costs you are assuming on the MAX have already been incurred or will be reflected in less cash for Boeing on delivery of the parked MAX's that we have already taken into account.

Again - how does anything you site affect the future? How are they going bankrupt like you keep inferring but are offering up no evidence?

Weak Product line? Other than the Longer ranged SA segment their product lineup is quite competitive. The MAX 8 will do fine against A320 and MAX 9,10 will do okay against A321 NEO. Will they get to 50:50 on SA - No I highly doubt it - but before MAX ends they will probably make 5-7,000 more and that will add significantly to the bottom line - plus parts and service. MAX is probably close to an $400-500Billion program over its life. At a normal margin of say 10-12% that is $40-60B of profit. The MAX disasters will have hurt but they won't wipe out all the profit on the program over its life and with most of the positive cash flow/profit in the future which can be used to pay down debt and fund its replacement. Yes they don't have an answer for the XLR but I believe that is less than 600 sales and NMA will come sooner rather than later.

787 and 777X will be/are great competitors against 330 and 350. Boeing just reduced its production overhead on 787 so that should help that program going forward.

Yes - could they have spent some of the $43B on share buybacks on better QC - Sure - but that is in the past. What do you think they will be focusing on going forward? I'm sure better QC won't cost $43B. Hire 100 skilled engineers at $250,000 for a total annual cost of $25Million or 250 lower skilled positions at $100,000. Plus maybe another $50 Million in QC testing equipment? That should be more than enough for the various production sites. It is not a big number and a rounding error for Boeing.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:26 pm

CRJockey wrote:
morrisond wrote:
CRJockey wrote:

Relatively? Yes. In absolute numbers? Not sure.

767 --> 97 open per Boeing orders / deliveries
A330neo, discounting A338 and A339 for AAX --> 186 Airbus orders / deliveries


For the 767 97+ another 81 KC-46 to be ordered to complete the program


...which are, of course, not in the official order book yet. You know, the one directly published by the OEM. Or are we adding units to the A330 backlog as well in anticipation?


I'm sorry - does the A330 NEO have an official Government Program of Record calling out for another 81 frames (and potentially a lot more) to be ordered?

Yes not in the order books yet - but I doubt many will bet that the A330 will outlast the 767 in terms of how much longer each will remain in production. Kind of like how the 747 outlasted the A380.

The 350 is a great plane they should really focus on getting its cost of production down and dominating the 787/777.
 
morrisond
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Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:30 pm

JonesNL wrote:
Gremlinzzzz wrote:
morrisond wrote:

Nice rant - but no real numbers why you think Boeing won't survive.

I would guess Boeing has already gotten at least $30B out of the 787.

1. That is not the common definition of Financial Engineering. Please show where they used debt to pump up the stock price. Profits were inflated in the first couple of years of 787 deliveries but were then underreported at peak 787.

2. If they sell shares in the market now, reduce cash on hand back to where it was before Covid and as 737/787 resume deliveries they won't be paying $2.8B a year for the next three years. They could be be back to under $20B in debt by the end of 2022.

3. The forum (and myself) really wish they built the NSA which would have increased their development expense over the past 10 years. However as I said above it's not like they have invested nothing and in fact probably invested more than their main competitor.

Yes the MAX needs to be replaced but there is no huge rush. The MAX will sell sufficiently and produce more than enough excess cash flow to pay for a successor and help pay off the remaining debt. I suspect the last ones won't roll off the lines until the mid 2030's.
Why would I need numbers when a lot of this is common knowledge?

1. When you look at the 777X, Leeham once reported that Boeing was looking to sell 1,200 of these. That was the expectation. At current moment they would be lucky to get a quarter of that in sales. Forward loss, and if this program is still somehow limping, it will be as dead as a dodo once the Trent Ultrafan arrives. Airlines could today cancel orders and Boeing would have no recourse.

2. The 747-8 had forward losses charged twice and coming to $4.1 billion. Program is dead.

3. The 787 program booked almost $4 billion associated to high production costs of early units to research and development in 2009 and 2016. To add to this, no one knows what the liability cost is when it comes to fixing 787's and they have also moved production to a site that has always struggled with quality issues. I expect a charge on this in the future, plus production rates are going down.

4. KC46 has accrued to date charges of $5 billion, 70% of this being a reach forward loss. They cannot seem to get the quality right. Expect more charges going forward. The defense business as a whole is a struggling venture where things have technical problems everywhere.

5. The 737NG has pickle fork cracks. We will get to know how big of an issue it is as more and more units start to age. These were designed to last 90,000 cycles which is more than the service life of an aircraft but are showing up in sub 30,000 cycle planes. Expect a charge.

6. 737 MAX just saw some huge grounding. Boeing stated that it is compensating customers to the tune of $8.6 billion, $5 billion for unusual costs of production and $6.3 billion in increased costs for the MAX program. $20 billion in charges is only going to grow and we do not know where they will eventually land. This is a money pit, Boeing will never make money off this program.

In addition to this, Calhoun just told shareholders that they would need to borrow more money over the next 6 months i.e. more interest payments are coming aboard and this even at this low interest environment, they have managed to pay a premium.

This is a company that cannot deliver a on time, at cost or without technical issues. It cannot and will not meet all three of these. They need a change in culture and this is not easy. It is not easy when you have a lot of debt to deal and quality issues to clean up as far as the eye can see. Boeing similarly borrowed money and kept producing jets in the belief that they could get in grounded in no time. What has happened is that they are paying interest on inventory that is not going anywhere, and when they need to sell, they are doing that at depressed prices because of the reputation hit incurred.

The 737 is the plane that makes Boeing money, it is the plane that allows it to absorb charges and be somewhat reckless yet it is the one jet that is seeing charges not seen before in aviation. The $20 billion thus far accrued is not the end because you still have cases to settle, they still have re-wiring to do, and then there is the new issue that popped up that they need to fix. It is not hard to imagine that this goes north of $25 billion on what was a simple re-engine.

All of this is money that came from somewhere, and that needs paying back. It is easy when production is high and when there is a lot of travel demand which means airlines want fuel efficient jets to be competitive. When production is down and you have demanded so much in concessions from suppliers pegging those concessions to huge monthly rates, you have a problem.

Had they spent some of the $43 billion that they wasted on share buybacks into better quality control, they would not be in the situation they are today. Instead of selling some of those shares, they are tapping the debt market.

High debt, poor culture, poor production habits, weak product line, future charges inevitable, shrinking order book is critical segments.

Zombie company.


While I agree with most points, I think it can relatively easily be solved. Revert the focus on stock value, sell 30B of worth of stock and make a profit on stock buybacks, decrease debt to decrease interest payment, Refinance remaining debt with lower interest loan made possible by better balance sheet, invest in QA culture and new programs that can bring in money...


Agreed - that is what I have been saying. Boeing has a relatively easy path forward - they are not a Zombie company and all things being equal they are in no real danger of not continuing as a going concern.

Unless of course Covid does mutate and this does morph into a real Zombie apocalypse. :D
 
mjoelnir
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:39 pm

Gremlinzzzz wrote:
Sokes wrote:
Gremlinzzzz wrote:
Boeing is not going to make money on the MAX, 787, or 777X. This is their product lineup. They are highly financialized company that used program accounting, thus they pocketed 'profits' early on.

I'm still waiting to read that deferred production costs are just an accounting exercise and that all bills are already paid.

Program development is expenditure.

How do you go on without zeroing this across multiple programs? You eventually collapse in red ink.

Boeing's last four programs in commercial aviation are all deep in red.

If all commercial aircraft programs would be in the red, no aircraft producer would make a profit.

No other company in the civil aircraft business accounts similar than Boeing. You will find that no new company is allowed to start to account similar to Boeing even in the USA. The rules that Boeing uses have been grandfathered for Boeing. Boeing is the one odd out.

Airbus books the real cost of aircraft development. That is a big reason that they do not show similar profits as Boeing.

The Cost for Program Accounting system, Boeing uses, hides huge cost in the books. It books early production cost as inventories. It inflates profits and inflates inventories. It shows profits as current, that the company expects to make in the future and it shows inventories that do not exist. We talk about billions both in regards to declared profits that have not been made and billions of inventories that do not exist.

The argument here on A.net has always been that the above does not matter, cash flow matters. Now cashflow is in hugly negative at Boeing and just pushing booking the real cost to the future, does not hide the sorry state.
 
morrisond
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Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:40 pm

Gremlinzzzz wrote:
JonesNL wrote:
Gremlinzzzz wrote:
Why would I need numbers when a lot of this is common knowledge?

1. When you look at the 777X, Leeham once reported that Boeing was looking to sell 1,200 of these. That was the expectation. At current moment they would be lucky to get a quarter of that in sales. Forward loss, and if this program is still somehow limping, it will be as dead as a dodo once the Trent Ultrafan arrives. Airlines could today cancel orders and Boeing would have no recourse.

2. The 747-8 had forward losses charged twice and coming to $4.1 billion. Program is dead.

3. The 787 program booked almost $4 billion associated to high production costs of early units to research and development in 2009 and 2016. To add to this, no one knows what the liability cost is when it comes to fixing 787's and they have also moved production to a site that has always struggled with quality issues. I expect a charge on this in the future, plus production rates are going down.

4. KC46 has accrued to date charges of $5 billion, 70% of this being a reach forward loss. They cannot seem to get the quality right. Expect more charges going forward. The defense business as a whole is a struggling venture where things have technical problems everywhere.

5. The 737NG has pickle fork cracks. We will get to know how big of an issue it is as more and more units start to age. These were designed to last 90,000 cycles which is more than the service life of an aircraft but are showing up in sub 30,000 cycle planes. Expect a charge.

6. 737 MAX just saw some huge grounding. Boeing stated that it is compensating customers to the tune of $8.6 billion, $5 billion for unusual costs of production and $6.3 billion in increased costs for the MAX program. $20 billion in charges is only going to grow and we do not know where they will eventually land. This is a money pit, Boeing will never make money off this program.

In addition to this, Calhoun just told shareholders that they would need to borrow more money over the next 6 months i.e. more interest payments are coming aboard and this even at this low interest environment, they have managed to pay a premium.

This is a company that cannot deliver a on time, at cost or without technical issues. It cannot and will not meet all three of these. They need a change in culture and this is not easy. It is not easy when you have a lot of debt to deal and quality issues to clean up as far as the eye can see. Boeing similarly borrowed money and kept producing jets in the belief that they could get in grounded in no time. What has happened is that they are paying interest on inventory that is not going anywhere, and when they need to sell, they are doing that at depressed prices because of the reputation hit incurred.

The 737 is the plane that makes Boeing money, it is the plane that allows it to absorb charges and be somewhat reckless yet it is the one jet that is seeing charges not seen before in aviation. The $20 billion thus far accrued is not the end because you still have cases to settle, they still have re-wiring to do, and then there is the new issue that popped up that they need to fix. It is not hard to imagine that this goes north of $25 billion on what was a simple re-engine.

All of this is money that came from somewhere, and that needs paying back. It is easy when production is high and when there is a lot of travel demand which means airlines want fuel efficient jets to be competitive. When production is down and you have demanded so much in concessions from suppliers pegging those concessions to huge monthly rates, you have a problem.

Had they spent some of the $43 billion that they wasted on share buybacks into better quality control, they would not be in the situation they are today. Instead of selling some of those shares, they are tapping the debt market.

High debt, poor culture, poor production habits, weak product line, future charges inevitable, shrinking order book is critical segments.

Zombie company.


While I agree with most points, I think it can relatively easily be solved. Revert the focus on stock value, sell 30B of worth of stock and make a profit on stock buybacks, decrease debt to decrease interest payment, Refinance remaining debt with lower interest loan made possible by better balance sheet, invest in QA culture and new programs that can bring in money...
Culture is the hardest thing to change in any company, more so when the people that have led the rot are at the top.

If I told you to show me a good board, great management, you would not in a billion years choose Boeing. I would hazard a guess that without the MAX grounding, they would simply hide production issues.

This lot will never sell more shares as long as stock options, stock prices are there to remunerate management. It will not happen when the people that run the company come from the Jack Welch school of thought where you gut a company while chasing stock price growth.


So spending more on development and improving production efficiencies in the last 10 years than your closest competitor is considered gutting your company?

Where is the debt they took on to bid up the share price?

What do you consider Airbus has been up to then? Then are buying back shares as well and invested less in new product. Whereas Boeing's LTD remained flat from 2011 to 2018 at about $10B, Airbus almost tripled its debt from $2.8B to $7.5B.
 
Noshow
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:41 pm

I agree that they will survive this and come back. But delayed investments and some bumpy program execution combined with specialist staff having left and cash cows not earning money is not a good setup.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:45 pm

Gremlinzzzz wrote:
JonesNL wrote:
Flying-Tiger wrote:

And tell you shareholders that their stock value will dip for a prolonged time, no or only minimal dividends to be paid, management salaries being frozen or reduced... Whilst I agree with what you say there are several trip wires in such an approach. I wouldn´t be surprised to learn that Boeing stock has been used as collateral for some debt financing, including the requirement to keep the stock value above a certain threshold to not default on the debt, triggering an immediate repayment.

As usual in business, there are certainly quite a number of interdependences, which will likely only allow course adjustments, but not a full 180°.

We can only hope - for the civil aviation industry as a whole - that over a longer period of time Boeing gets is house in order again and that we´re back at a 40/60 to 60/40 range of market share to allow sufficient innovation and competition forward.


Gremlinzzzz wrote:
...


I agree with the trip wires, the board and C-suite needs to shoot itself in the foot with stock dilution to save the ship. Is it an option? Yes. Will they do it? I don't think so. You would need strong leadership to pull it of and refocus on profitability in 10 years. Those leaders are very rare now days, but the current state of affairs is the perfect excuse to pull such an act...

In addition to this, any new share sale has to be discounted because this is how all rights issues are done.

Boeing has been about share price above anything else, including quality. That is not changing any time soon.

How do you explain paying premium for shares and selling them at discount?


Sure a new share sale might be discounted a bit - but probably not much more than a few days of normal market volatility.

If they issue shares at these levels (about $230 per share) it's well above the average price they bought back stock over the previous 10 years which looks to be average of about $100-120 each.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:48 pm

Noshow wrote:
I agree that they will survive this and come back. But delayed investments and some bumpy program execution combined with specialist staff having left and cash cows not earning money is not a good setup.


Agreed, the specialist staff leaving is the biggest issue in my book. Luckily it should not be that hard to hire then back if they launch a brand new program to work on. Engineers like being involved in new projects.

The cash cows will come back (probably not to the same degree but Boeing has shrunk substantially in overhead so it can throw off a lot of cash at lower volumes) and defence will help see them through.
 
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par13del
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 1:48 pm

So how many 737NG's can Boeing attempt to "swap out" with MAX's to avoid long term financial penalties related to the pickle fork issue?
If we are looking at long term financial hardship and they have a couple hundred MAX frames whose take up may be shaky, is it a viable financial strategy to pursue? Especially if the potential pickle fork NG's are scrapped?
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 2:19 pm

mjoelnir wrote:
Gremlinzzzz wrote:
Sokes wrote:
I'm still waiting to read that deferred production costs are just an accounting exercise and that all bills are already paid.

Program development is expenditure.

How do you go on without zeroing this across multiple programs? You eventually collapse in red ink.

Boeing's last four programs in commercial aviation are all deep in red.

If all commercial aircraft programs would be in the red, no aircraft producer would make a profit.

No other company in the civil aircraft business accounts similar than Boeing. You will find that no new company is allowed to start to account similar to Boeing even in the USA. The rules that Boeing uses have been grandfathered for Boeing. Boeing is the one odd out.

Airbus books the real cost of aircraft development. That is a big reason that they do not show similar profits as Boeing.

The Cost for Program Accounting system, Boeing uses, hides huge cost in the books. It books early production cost as inventories. It inflates profits and inflates inventories. It shows profits as current, that the company expects to make in the future and it shows inventories that do not exist. We talk about billions both in regards to declared profits that have not been made and billions of inventories that do not exist.

The argument here on A.net has always been that the above does not matter, cash flow matters. Now cashflow is in hugly negative at Boeing and just pushing booking the real cost to the future, does not hide the sorry state.


That was a great summary of program accounting, except for the last sentence. BTW - I hate it as it does really obscure the real true profit. But how true are any public companies bottom lines these days with all the adjustments?

In the last sentence - yes pushing booking the cost to the future is an issue but in reality it results in reported earnings less than they actually are. It is not a cash cost. Those costs of development have already been paid for.

For Boeing you really just have to look at cash flow. However as we have not seem a clean quarter yet of normal deliveries and recognition of revenue who knows?

How many 777X (and a few 77W) were built in the first quarter but never delivered? How many 787?

Cash flow should be positive in 2022 and they have $37B in liquidity.
 
DL220MSP
Posts: 22
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 2:26 pm

morrisond wrote:
Gremlinzzzz wrote:
morrisond wrote:

Nice rant - but no real numbers why you think Boeing won't survive.

I would guess Boeing has already gotten at least $30B out of the 787.

1. That is not the common definition of Financial Engineering. Please show where they used debt to pump up the stock price. Profits were inflated in the first couple of years of 787 deliveries but were then underreported at peak 787.

2. If they sell shares in the market now, reduce cash on hand back to where it was before Covid and as 737/787 resume deliveries they won't be paying $2.8B a year for the next three years. They could be be back to under $20B in debt by the end of 2022.

3. The forum (and myself) really wish they built the NSA which would have increased their development expense over the past 10 years. However as I said above it's not like they have invested nothing and in fact probably invested more than their main competitor.

Yes the MAX needs to be replaced but there is no huge rush. The MAX will sell sufficiently and produce more than enough excess cash flow to pay for a successor and help pay off the remaining debt. I suspect the last ones won't roll off the lines until the mid 2030's.
Why would I need numbers when a lot of this is common knowledge?

1. When you look at the 777X, Leeham once reported that Boeing was looking to sell 1,200 of these. That was the expectation. At current moment they would be lucky to get a quarter of that in sales. Forward loss, and if this program is still somehow limping, it will be as dead as a dodo once the Trent Ultrafan arrives. Airlines could today cancel orders and Boeing would have no recourse.

2. The 747-8 had forward losses charged twice and coming to $4.1 billion. Program is dead.

3. The 787 program booked almost $4 billion associated to high production costs of early units to research and development in 2009 and 2016. To add to this, no one knows what the liability cost is when it comes to fixing 787's and they have also moved production to a site that has always struggled with quality issues. I expect a charge on this in the future, plus production rates are going down.

4. KC46 has accrued to date charges of $5 billion, 70% of this being a reach forward loss. They cannot seem to get the quality right. Expect more charges going forward. The defense business as a whole is a struggling venture where things have technical problems everywhere.

5. The 737NG has pickle fork cracks. We will get to know how big of an issue it is as more and more units start to age. These were designed to last 90,000 cycles which is more than the service life of an aircraft but are showing up in sub 30,000 cycle planes. Expect a charge.

6. 737 MAX just saw some huge grounding. Boeing stated that it is compensating customers to the tune of $8.6 billion, $5 billion for unusual costs of production and $6.3 billion in increased costs for the MAX program. $20 billion in charges is only going to grow and we do not know where they will eventually land. This is a money pit, Boeing will never make money off this program.

In addition to this, Calhoun just told shareholders that they would need to borrow more money over the next 6 months i.e. more interest payments are coming aboard and this even at this low interest environment, they have managed to pay a premium.

This is a company that cannot deliver a on time, at cost or without technical issues. It cannot and will not meet all three of these. They need a change in culture and this is not easy. It is not easy when you have a lot of debt to deal and quality issues to clean up as far as the eye can see. Boeing similarly borrowed money and kept producing jets in the belief that they could get in grounded in no time. What has happened is that they are paying interest on inventory that is not going anywhere, and when they need to sell, they are doing that at depressed prices because of the reputation hit incurred.

The 737 is the plane that makes Boeing money, it is the plane that allows it to absorb charges and be somewhat reckless yet it is the one jet that is seeing charges not seen before in aviation. The $20 billion thus far accrued is not the end because you still have cases to settle, they still have re-wiring to do, and then there is the new issue that popped up that they need to fix. It is not hard to imagine that this goes north of $25 billion on what was a simple re-engine.

All of this is money that came from somewhere, and that needs paying back. It is easy when production is high and when there is a lot of travel demand which means airlines want fuel efficient jets to be competitive. When production is down and you have demanded so much in concessions from suppliers pegging those concessions to huge monthly rates, you have a problem.

Had they spent some of the $43 billion that they wasted on share buybacks into better quality control, they would not be in the situation they are today. Instead of selling some of those shares, they are tapping the debt market.

High debt, poor culture, poor production habits, weak product line, future charges inevitable, shrinking order book is critical segments.

Zombie company.


Almost everything you quoted has already taken place and been accounted for. Forward losses are not actual cash losses they are accounting entries. For instance the 777X forward loss recorded in 4Q 2020 was an accounting entry they took against the cost of the program so in the future the program can look profitable at lower projected volumes. They did not have to pay for it out of cashflow or incur more debt. However yes the increased cost of certification will come out of the R&D budget and may or may not be added to the program cost.

It looks like they will be cash flow positive sometime in 2022 and they have more than sufficient liquidity to get them through ($37 Billion of Liquidity).

A lot of the costs you are assuming on the MAX have already been incurred or will be reflected in less cash for Boeing on delivery of the parked MAX's that we have already taken into account.

Again - how does anything you site affect the future? How are they going bankrupt like you keep inferring but are offering up no evidence?

Weak Product line? Other than the Longer ranged SA segment their product lineup is quite competitive. The MAX 8 will do fine against A320 and MAX 9,10 will do okay against A321 NEO. Will they get to 50:50 on SA - No I highly doubt it - but before MAX ends they will probably make 5-7,000 more and that will add significantly to the bottom line - plus parts and service. MAX is probably close to an $400-500Billion program over its life. At a normal margin of say 10-12% that is $40-60B of profit. The MAX disasters will have hurt but they won't wipe out all the profit on the program over its life and with most of the positive cash flow/profit in the future which can be used to pay down debt and fund its replacement. Yes they don't have an answer for the XLR but I believe that is less than 600 sales and NMA will come sooner rather than later.

787 and 777X will be/are great competitors against 330 and 350. Boeing just reduced its production overhead on 787 so that should help that program going forward.

Yes - could they have spent some of the $43B on share buybacks on better QC - Sure - but that is in the past. What do you think they will be focusing on going forward? I'm sure better QC won't cost $43B. Hire 100 skilled engineers at $250,000 for a total annual cost of $25Million or 250 lower skilled positions at $100,000. Plus maybe another $50 Million in QC testing equipment? That should be more than enough for the various production sites. It is not a big number and a rounding error for Boeing.


So you believe less than 600 sales for the 321XLR when Airbus has already sold about 500 of them before EIS? That is quite an unreal outlook.
 
Gremlinzzzz
Posts: 299
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 2:34 pm

morrisond wrote:
Almost everything you quoted has already taken place and been accounted for. Forward losses are not actual cash losses they are accounting entries. For instance the 777X forward loss recorded in 4Q 2020 was an accounting entry they took against the cost of the program so in the future the program can look profitable at lower projected volumes. They did not have to pay for it out of cashflow or incur more debt. However yes the increased cost of certification will come out of the R&D budget and may or may not be added to the program cost.

It looks like they will be cash flow positive sometime in 2022 and they have more than sufficient liquidity to get them through ($37 Billion of Liquidity).

A lot of the costs you are assuming on the MAX have already been incurred or will be reflected in less cash for Boeing on delivery of the parked MAX's that we have already taken into account.

Again - how does anything you site affect the future? How are they going bankrupt like you keep inferring but are offering up no evidence?

Weak Product line? Other than the Longer ranged SA segment their product lineup is quite competitive. The MAX 8 will do fine against A320 and MAX 9,10 will do okay against A321 NEO. Will they get to 50:50 on SA - No I highly doubt it - but before MAX ends they will probably make 5-7,000 more and that will add significantly to the bottom line - plus parts and service. MAX is probably close to an $400-500Billion program over its life. At a normal margin of say 10-12% that is $40-60B of profit. The MAX disasters will have hurt but they won't wipe out all the profit on the program over its life and with most of the positive cash flow/profit in the future which can be used to pay down debt and fund its replacement. Yes they don't have an answer for the XLR but I believe that is less than 600 sales and NMA will come sooner rather than later.

787 and 777X will be/are great competitors against 330 and 350. Boeing just reduced its production overhead on 787 so that should help that program going forward.

Yes - could they have spent some of the $43B on share buybacks on better QC - Sure - but that is in the past. What do you think they will be focusing on going forward? I'm sure better QC won't cost $43B. Hire 100 skilled engineers at $250,000 for a total annual cost of $25Million or 250 lower skilled positions at $100,000. Plus maybe another $50 Million in QC testing equipment? That should be more than enough for the various production sites. It is not a big number and a rounding error for Boeing.


My goodness.

1. There is nothing like an accounting entry. Any cost that you do not pay is money lost and people in this forum need to start looking at it as just that. When the investment bank I worked for made bad bets, they provisioned for bad loans or losses. This meant that they took money off profits to zero the loan/loss so that there was no weakening of the balance sheet. It was paying twice and it was painful, yet it was what was needed to have a healthy company going forward.

I have a friend that operates a grocery store and he will always tell me that he needs his operating capital to always be there. He wins most days, but dealing with perishable goods is tricky and this means that there are days that he takes a loss on inventory. When that happens, he has to generate profits and bring back up the operating capital, then grow it just because every once in a while supply issues lead to price gains.

You gave an example of the 777X. Program cost is going to go up because new certification standards are coming in, and Boeing is going to have to compensate the remaining airlines because the plane is late. Now, it is normally expensive to manufacture the first planes and it takes several hundred units to break even in manufacturing. The expectation was to amortize the cost to 1,200 planes. The current order book according to Boeing stands at 191 and the problem is that these are early units tend to be extremely expensive while launch customers are given financial incentive to take the risk on a new product.

This is a money pit. Let me remind you that the expectation when coming out with new programs is not to make forward losses or give charges. The objective is to recover development cost and make a profit off the program through sales of aircraft.

This mindset that a forward loss, a charge is just an accounting entry is astounding. It is saying we spent this and we are not going to make that back. It is a loss, and it does not matter that you are expending that money in research and development because in the giant scheme of things it is money lost. This might sound strange to you, but this is how most businesses work.

2. Boeing's product lineup is weak. They have nothing to compete with the A220, and Embraer was supposed to help with this. They have nothing to compete with the A321LR or XLR and it will not happen unless they get something new out. They have nothing competent that can compete with the A350-1000, and the 777X is also not anchored to another program that is selling well.

3. Boeing is going to be selling planes. However, we also know that they are going to be eating cost when it comes to doing repeat work because they are incapable of getting it right the first time. Programs affected are the NG, MAX, and 787. They also seem to like that in military and space programs. They need to do this while paying down debt. Boeing did its best to get rid of skilled workers, and the ones that remained they made sure to not pay attention to. The cost of hiring skilled workers may be negligible as is the cost of equipment. What is not negligible as they are finding out is the cost of undoing those mistakes because they run into tens of billions between the MAX and 787.

You seem to be missing the forest from the trees.
 
morrisond
Posts: 3414
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 2:46 pm

DL220MSP wrote:
morrisond wrote:
Gremlinzzzz wrote:
Why would I need numbers when a lot of this is common knowledge?

1. When you look at the 777X, Leeham once reported that Boeing was looking to sell 1,200 of these. That was the expectation. At current moment they would be lucky to get a quarter of that in sales. Forward loss, and if this program is still somehow limping, it will be as dead as a dodo once the Trent Ultrafan arrives. Airlines could today cancel orders and Boeing would have no recourse.

2. The 747-8 had forward losses charged twice and coming to $4.1 billion. Program is dead.

3. The 787 program booked almost $4 billion associated to high production costs of early units to research and development in 2009 and 2016. To add to this, no one knows what the liability cost is when it comes to fixing 787's and they have also moved production to a site that has always struggled with quality issues. I expect a charge on this in the future, plus production rates are going down.

4. KC46 has accrued to date charges of $5 billion, 70% of this being a reach forward loss. They cannot seem to get the quality right. Expect more charges going forward. The defense business as a whole is a struggling venture where things have technical problems everywhere.

5. The 737NG has pickle fork cracks. We will get to know how big of an issue it is as more and more units start to age. These were designed to last 90,000 cycles which is more than the service life of an aircraft but are showing up in sub 30,000 cycle planes. Expect a charge.

6. 737 MAX just saw some huge grounding. Boeing stated that it is compensating customers to the tune of $8.6 billion, $5 billion for unusual costs of production and $6.3 billion in increased costs for the MAX program. $20 billion in charges is only going to grow and we do not know where they will eventually land. This is a money pit, Boeing will never make money off this program.

In addition to this, Calhoun just told shareholders that they would need to borrow more money over the next 6 months i.e. more interest payments are coming aboard and this even at this low interest environment, they have managed to pay a premium.

This is a company that cannot deliver a on time, at cost or without technical issues. It cannot and will not meet all three of these. They need a change in culture and this is not easy. It is not easy when you have a lot of debt to deal and quality issues to clean up as far as the eye can see. Boeing similarly borrowed money and kept producing jets in the belief that they could get in grounded in no time. What has happened is that they are paying interest on inventory that is not going anywhere, and when they need to sell, they are doing that at depressed prices because of the reputation hit incurred.

The 737 is the plane that makes Boeing money, it is the plane that allows it to absorb charges and be somewhat reckless yet it is the one jet that is seeing charges not seen before in aviation. The $20 billion thus far accrued is not the end because you still have cases to settle, they still have re-wiring to do, and then there is the new issue that popped up that they need to fix. It is not hard to imagine that this goes north of $25 billion on what was a simple re-engine.

All of this is money that came from somewhere, and that needs paying back. It is easy when production is high and when there is a lot of travel demand which means airlines want fuel efficient jets to be competitive. When production is down and you have demanded so much in concessions from suppliers pegging those concessions to huge monthly rates, you have a problem.

Had they spent some of the $43 billion that they wasted on share buybacks into better quality control, they would not be in the situation they are today. Instead of selling some of those shares, they are tapping the debt market.

High debt, poor culture, poor production habits, weak product line, future charges inevitable, shrinking order book is critical segments.

Zombie company.


Almost everything you quoted has already taken place and been accounted for. Forward losses are not actual cash losses they are accounting entries. For instance the 777X forward loss recorded in 4Q 2020 was an accounting entry they took against the cost of the program so in the future the program can look profitable at lower projected volumes. They did not have to pay for it out of cashflow or incur more debt. However yes the increased cost of certification will come out of the R&D budget and may or may not be added to the program cost.

It looks like they will be cash flow positive sometime in 2022 and they have more than sufficient liquidity to get them through ($37 Billion of Liquidity).

A lot of the costs you are assuming on the MAX have already been incurred or will be reflected in less cash for Boeing on delivery of the parked MAX's that we have already taken into account.

Again - how does anything you site affect the future? How are they going bankrupt like you keep inferring but are offering up no evidence?

Weak Product line? Other than the Longer ranged SA segment their product lineup is quite competitive. The MAX 8 will do fine against A320 and MAX 9,10 will do okay against A321 NEO. Will they get to 50:50 on SA - No I highly doubt it - but before MAX ends they will probably make 5-7,000 more and that will add significantly to the bottom line - plus parts and service. MAX is probably close to an $400-500Billion program over its life. At a normal margin of say 10-12% that is $40-60B of profit. The MAX disasters will have hurt but they won't wipe out all the profit on the program over its life and with most of the positive cash flow/profit in the future which can be used to pay down debt and fund its replacement. Yes they don't have an answer for the XLR but I believe that is less than 600 sales and NMA will come sooner rather than later.

787 and 777X will be/are great competitors against 330 and 350. Boeing just reduced its production overhead on 787 so that should help that program going forward.

Yes - could they have spent some of the $43B on share buybacks on better QC - Sure - but that is in the past. What do you think they will be focusing on going forward? I'm sure better QC won't cost $43B. Hire 100 skilled engineers at $250,000 for a total annual cost of $25Million or 250 lower skilled positions at $100,000. Plus maybe another $50 Million in QC testing equipment? That should be more than enough for the various production sites. It is not a big number and a rounding error for Boeing.


So you believe less than 600 sales for the 321XLR when Airbus has already sold about 500 of them before EIS? That is quite an unreal outlook.


No - I expect them to sell more - probably just not as much if Boeing launches NMA.

And since it has yet to EIS my statement is correct - they have sold less than 600, you confirmed it with the number of 500. What is wrong with that?
 
Gremlinzzzz
Posts: 299
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 3:10 pm

morrisond wrote:
So spending more on development and improving production efficiencies in the last 10 years than your closest competitor is considered gutting your company?

Where is the debt they took on to bid up the share price?

What do you consider Airbus has been up to then? Then are buying back shares as well and invested less in new product. Whereas Boeing's LTD remained flat from 2011 to 2018 at about $10B, Airbus almost tripled its debt from $2.8B to $7.5B.
They are pumping out planes alright. What they are not pumping out is good product.

Airbus debt tripled, yet they had a clean sheet program with no issues and two derivatives that entered the market smooth. The A320Neo family will be making bank and the A330Neo because it is in a mature line and only cost $2 billion will be profitable on few units delivered.

mjoelnir wrote:
If all commercial aircraft programs would be in the red, no aircraft producer would make a profit.

No other company in the civil aircraft business accounts similar than Boeing. You will find that no new company is allowed to start to account similar to Boeing even in the USA. The rules that Boeing uses have been grandfathered for Boeing. Boeing is the one odd out.

Airbus books the real cost of aircraft development. That is a big reason that they do not show similar profits as Boeing.

The Cost for Program Accounting system, Boeing uses, hides huge cost in the books. It books early production cost as inventories. It inflates profits and inflates inventories. It shows profits as current, that the company expects to make in the future and it shows inventories that do not exist. We talk about billions both in regards to declared profits that have not been made and billions of inventories that do not exist.

The argument here on A.net has always been that the above does not matter, cash flow matters. Now cashflow is in hugly negative at Boeing and just pushing booking the real cost to the future, does not hide the sorry state.
As I told one member, business is simple. The people that complicate it are the accountants, management and boards that are more interested in earning 'profits' not made while manipulating stock price.

All of this financial engineering and number manipulation catches up eventually. It brought Enron down, it has brought GE to its knees, it sank the likes of Lehman Brothers. To think that some on here have the opinion that Boeing will be different is staggering.

morrisond wrote:

Sure a new share sale might be discounted a bit - but probably not much more than a few days of normal market volatility.

If they issue shares at these levels (about $230 per share) it's well above the average price they bought back stock over the previous 10 years which looks to be average of about $100-120 each.
What they bought the shares for is irrelevant because there is no profit to be made off this exercise.

The objective of the share buy backs was to goose stock prices so that Wall St. and Boeing executives could benefit from that uptick. They would be selling stock this time to gain cash to pay off mounting debt, something that would push stock prices down. Those earnings per share that Wall St. likes so much would also see dilution going forward because there are that many more shares to spread earnings over.

There is no dividend for years, but guess what, another thing they could do is borrow to buy back stock or pay dividends. Another silly venture that has occurred to companies like American Airlines.
 
DL220MSP
Posts: 22
Joined: Thu Mar 25, 2021 4:10 pm

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 3:12 pm

morrisond wrote:
DL220MSP wrote:
morrisond wrote:

Almost everything you quoted has already taken place and been accounted for. Forward losses are not actual cash losses they are accounting entries. For instance the 777X forward loss recorded in 4Q 2020 was an accounting entry they took against the cost of the program so in the future the program can look profitable at lower projected volumes. They did not have to pay for it out of cashflow or incur more debt. However yes the increased cost of certification will come out of the R&D budget and may or may not be added to the program cost.

It looks like they will be cash flow positive sometime in 2022 and they have more than sufficient liquidity to get them through ($37 Billion of Liquidity).

A lot of the costs you are assuming on the MAX have already been incurred or will be reflected in less cash for Boeing on delivery of the parked MAX's that we have already taken into account.

Again - how does anything you site affect the future? How are they going bankrupt like you keep inferring but are offering up no evidence?

Weak Product line? Other than the Longer ranged SA segment their product lineup is quite competitive. The MAX 8 will do fine against A320 and MAX 9,10 will do okay against A321 NEO. Will they get to 50:50 on SA - No I highly doubt it - but before MAX ends they will probably make 5-7,000 more and that will add significantly to the bottom line - plus parts and service. MAX is probably close to an $400-500Billion program over its life. At a normal margin of say 10-12% that is $40-60B of profit. The MAX disasters will have hurt but they won't wipe out all the profit on the program over its life and with most of the positive cash flow/profit in the future which can be used to pay down debt and fund its replacement. Yes they don't have an answer for the XLR but I believe that is less than 600 sales and NMA will come sooner rather than later.

787 and 777X will be/are great competitors against 330 and 350. Boeing just reduced its production overhead on 787 so that should help that program going forward.

Yes - could they have spent some of the $43B on share buybacks on better QC - Sure - but that is in the past. What do you think they will be focusing on going forward? I'm sure better QC won't cost $43B. Hire 100 skilled engineers at $250,000 for a total annual cost of $25Million or 250 lower skilled positions at $100,000. Plus maybe another $50 Million in QC testing equipment? That should be more than enough for the various production sites. It is not a big number and a rounding error for Boeing.


So you believe less than 600 sales for the 321XLR when Airbus has already sold about 500 of them before EIS? That is quite an unreal outlook.


No - I expect them to sell more - probably just not as much if Boeing launches NMA.

And since it has yet to EIS my statement is correct - they have sold less than 600, you confirmed it with the number of 500. What is wrong with that?


So now you turn around and say that you expect a paper plane of B will sell more than an actual plane which is already built as we speak? Why such a positive outlook for one side and a negative for the other? Just saying.

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