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

Fri Apr 30, 2021 3:13 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.


:checkmark: :worried:

At best parity could be reached 4/5 years after EIS and aggressive ramp up of a superior new NB, so in the next decade.
Assuming the other guys sit on their hands, avoiding investment, extracting value.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 3:16 pm

Gremlinzzzz 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.


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.


1. The accounting block for the 777X is not 1,200. It was somewhere around 350-400 but has since been reduced. You are probably thinking of the combined number for 77W/L/F and X.

Please tell us how taking a forward loss impacts cash flow or Debt. It does not. That is what matters when you are evaluating a company as a going concern.

The vast majority of 777X development costs have already been eaten and are relected in the financial statements. It is not a new production system - the ramp up should not be as bad as the 787. The big change on the 777X is the new wing - which is highly automated in its assembly - those costs won't really change. The reduction in labour and the fact that Boeing is doing the work themselves could mean a lower cost than the 77W/L/F wing.

2. Who really cares about the A220 - it has yet to make money and Boeing just sold a whole bunch of MAX-7's to WN in lieu of them taking A220's. I would have to guess Boeing will make way more money on those MAX 7's than Airbus will make on the next 300-400 A220's.

Nothing to compete with the A350-1000 that has 114 frames left to deliver? Who knows what the real number is if ASC 606 would be applied - Boeing is at 191 779 under ASC 606.

Yes - nothing to really compete against the A321 LR or XLR but they will. Plus quite frankly in order to evaluate them as a going concern does it matter if they only have 35 or 40% of the SA market? No - just whether or not each additional delivery puts more cash in the bank. The MAX will spin off a lot of cash going forward.

3. Please detail these additional $10's of Billions of extra cost going forward. Effectively what it will mean is just less realized cash flow on delivery for those frames.
 
morrisond
Posts: 3497
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 3:17 pm

DL220MSP wrote:
morrisond wrote:
DL220MSP wrote:

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.


No I did not say that. I said if Boeing launches NMA Airbus won't sell as many XLR's as expected.
 
Opus99
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 3:19 pm

morrisond wrote:
Gremlinzzzz 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.


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.


1. The accounting block for the 777X is not 1,200. It was somewhere around 350-400 but has since been reduced. You are probably thinking of the combined number for 77W/L/F and X.

Please tell us how taking a forward loss impacts cash flow or Debt. It does not. That is what matters when you are evaluating a company as a going concern.

The vast majority of 777X development costs have already been eaten and are relected in the financial statements. It is not a new production system - the ramp up should not be as bad as the 787. The big change on the 777X is the new wing - which is highly automated in its assembly - those costs won't really change. The reduction in labour and the fact that Boeing is doing the work themselves could mean a lower cost than the 77W/L/F wing.

2. Who really cares about the A220 - it has yet to make money and Boeing just sold a whole bunch of MAX-7's to WN in lieu of them taking A220's. I would have to guess Boeing will make way more money on those MAX 7's than Airbus will make on the next 300-400 A220's.

Nothing to compete with the A350-1000 that has 114 frames left to deliver? Who knows what the real number is if ASC 606 would be applied - Boeing is at 191 779 under ASC 606.

Yes - nothing to really compete against the A321 LR or XLR but they will. Plus quite frankly in order to evaluate them as a going concern does it matter if they only have 35 or 40% of the SA market? No - just whether or not each additional delivery puts more cash in the bank. The MAX will spin off a lot of cash going forward.

3. Please detail these additional $10's of Billions of extra cost going forward. Effectively what it will mean is just less realized cash flow on delivery for those frames.

779 is even now at 220 or so after adjustments over the past few months
 
morrisond
Posts: 3497
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 3:30 pm

Gremlinzzzz wrote:
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.


You still haven't made any relevant points about why you think Boeing won't survive.

If they have never borrowed to buy back stock or pay dividends like Airbus may have done (no idea why there LTD increased) why would you expect them too now?

What else would you have had them do if they did not use there cash flow to buy back stock? They had almost no debt, more than enough cash flow to fund another cleansheet ($15B in 2018 and was supposed to be $17B in 2019).

Increase the dividend? - not a great strategy to pay a very high ongoing dividend in an industry that can be highly cyclical and needs capital from cash flow from time to time for new programs.

Of pay a special dividend? Generally investors don't want special dividends as they don't want to pay tax - they would rather have the company buy back stock.
 
astuteman
Posts: 7454
Joined: Mon Jan 24, 2005 7:50 pm

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 3:37 pm

mjoelnir wrote:
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.


In deference to the 737-10, not only has it been delayed by at least 2 years, but it has been embroiled in the whole MAX fiasco.
I don't think we have seen the full comparison yet, and possibly won't for another 2 years

Rgds
 
astuteman
Posts: 7454
Joined: Mon Jan 24, 2005 7:50 pm

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 4:06 pm

morrisond wrote:
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.


Mr Micawber couldn't come.... :)
It feels like you have an extraordinarily, unreasonably almost, positive outlook on anything Boeing I have to say...

Boeing themselves have said the MAX grounding will cost them about $20Bn

https://edition.cnn.com/2020/11/17/busi ... index.html

$8.6Bn in compensation
$5Bn for "unusual production costs"
$6.3Bn for increased programme costs.

To add to which there is estimated to be:-

$500m compensation
$3Bn + interest

What's clear is that the $20.7 billion in costs that Boeing has detailed is only the starting point. Bank of America puts the costs at more than $25 billion.


They have currently have c. 3,500 in non-ASC606 backlog.
We know the current market price of a new MAX is about $45M. At your estimated 12% margin, that's about $5m per frame - i.e. $17.5Bn profit under normal circumstances.
Those figures would imply that the current orderbook is loss-making just against the grounding, ignoring the initial development costs.

I don't know how long it will take to burn through the 3,500 ish backlog, but it's going to be at least 6 years, isn't it? Possibly 7 as the ramp-up is required this year and next year.

5,000 more to be built would imply $25Bn "normal" profit - break-even maybe
7,000 more to be built would imply $35Bn "normal" profit - i.e. a net gain of $10Bn.

Certainly not the $40Bn - $60Bn you are predicting.

Totally agree they are where they are, and that as a portion of the $25Bn cost of the grounding will have already been spent, there is positive residual cash and profit in the backlog, and predicted sales, and the programme will, and should, continue. What portion of the $25Bn has already gone? We don't know for sure, but it is obviously not all of it, or even close.

However, you are also bullish about the arrival of NMA and NSA, which doesn't leave a lot of time to get another 1,500 planes built (for 5,000 more), and certainly doesn't leave enough time to build another 3,500 (for 7,000 more)

Rgds
 
Gremlinzzzz
Posts: 418
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 4:10 pm

morrisond wrote:
1. The accounting block for the 777X is not 1,200. It was somewhere around 350-400 but has since been reduced. You are probably thinking of the combined number for 77W/L/F and X.

Please tell us how taking a forward loss impacts cash flow or Debt. It does not. That is what matters when you are evaluating a company as a going concern.

The vast majority of 777X development costs have already been eaten and are relected in the financial statements. It is not a new production system - the ramp up should not be as bad as the 787. The big change on the 777X is the new wing - which is highly automated in its assembly - those costs won't really change. The reduction in labour and the fact that Boeing is doing the work themselves could mean a lower cost than the 77W/L/F wing.

2. Who really cares about the A220 - it has yet to make money and Boeing just sold a whole bunch of MAX-7's to WN in lieu of them taking A220's. I would have to guess Boeing will make way more money on those MAX 7's than Airbus will make on the next 300-400 A220's.

Nothing to compete with the A350-1000 that has 114 frames left to deliver? Who knows what the real number is if ASC 606 would be applied - Boeing is at 191 779 under ASC 606.

Yes - nothing to really compete against the A321 LR or XLR but they will. Plus quite frankly in order to evaluate them as a going concern does it matter if they only have 35 or 40% of the SA market? No - just whether or not each additional delivery puts more cash in the bank. The MAX will spin off a lot of cash going forward.

3. Please detail these additional $10's of Billions of extra cost going forward. Effectively what it will mean is just less realized cash flow on delivery for those frames.
1. On the Boeing 777X.

It is no secret that the 777 Classic made an outsized contribution to profits at BCA while the company was sorting out 787 production issues. Boeing was hoping the 777X would continue this.

As outlined in a recent LNA article, demand for the 777X is likely materially less than Boeing envisioned. Boeing launched the program on expectations of 1,200 demand for very large aircraft. GE Aviation used that forecast in its public presentations.

The Boeing Internal Product Development forecast was 700-800. LNA estimates that the number is down to 500.


Development cost is expenditure. Businesses are not in the habit of using money without a means of making it back.

2. On the narrow body, Boeing does not have anything to compete with the A220. That plane will have costs come down and will make a profit, not to mention that Airbus got majority stake for a song. It is going to be a cheaper plane and the most efficient jet for 5 or 6 hour routes. Airlines that are in need of its efficiency and ability to link city pairs will flock to it. It might be a slow burn, but this program will hit critical mass and sell.

Who cares about the A220? Boeing does and you notice that they are not stating that they want to get to a 50/50 split against the A320Neo, they desire that split across the narrow body segment. It will not happen without a compelling new product that does something inherently different to what the A321 or A220 do.

3. On VLA's, Airbus has a product family that stands on its own. The A359 will make money and this allows them to manufacture the A350K without having to think whether it is going to be profitable or not. Boeing does not have this luxury because the 777 classic in on its last run and it so happens that if you have a new wing, new cockpit and new systems, you have what is mainly a new plane.

4. I think people that obsess on cash flow do not value businesses correctly. If I am an investor, I am looking at assets, debt, expenditure (program costs and charges), profits, organic growth prospects, cash reserves and how they play into product development and acquisitions, how competitive the business is and what is the long term outlook presented by management and the board. There are a few things I have missed, but you get the gist.

I would not buy into creative accounting because there are a lot of companies that have used it that are no more. There are a lot of companies that have used this model and they are a shadow of what they used to be. The company Boeing bought, and whose horrible culture they have adopted is one such company.

5. Does it matter if Boeing only has 35-40% of the market? Yes it does. The more market share you capture, the more dominant you become. The more market share you lose, the more you are likely to lose going forward.
 
Opus99
Posts: 2670
Joined: Thu May 30, 2019 10:51 pm

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 4:12 pm

Gremlinzzzz wrote:
morrisond wrote:
1. The accounting block for the 777X is not 1,200. It was somewhere around 350-400 but has since been reduced. You are probably thinking of the combined number for 77W/L/F and X.

Please tell us how taking a forward loss impacts cash flow or Debt. It does not. That is what matters when you are evaluating a company as a going concern.

The vast majority of 777X development costs have already been eaten and are relected in the financial statements. It is not a new production system - the ramp up should not be as bad as the 787. The big change on the 777X is the new wing - which is highly automated in its assembly - those costs won't really change. The reduction in labour and the fact that Boeing is doing the work themselves could mean a lower cost than the 77W/L/F wing.

2. Who really cares about the A220 - it has yet to make money and Boeing just sold a whole bunch of MAX-7's to WN in lieu of them taking A220's. I would have to guess Boeing will make way more money on those MAX 7's than Airbus will make on the next 300-400 A220's.

Nothing to compete with the A350-1000 that has 114 frames left to deliver? Who knows what the real number is if ASC 606 would be applied - Boeing is at 191 779 under ASC 606.

Yes - nothing to really compete against the A321 LR or XLR but they will. Plus quite frankly in order to evaluate them as a going concern does it matter if they only have 35 or 40% of the SA market? No - just whether or not each additional delivery puts more cash in the bank. The MAX will spin off a lot of cash going forward.

3. Please detail these additional $10's of Billions of extra cost going forward. Effectively what it will mean is just less realized cash flow on delivery for those frames.
1. On the Boeing 777X.

It is no secret that the 777 Classic made an outsized contribution to profits at BCA while the company was sorting out 787 production issues. Boeing was hoping the 777X would continue this.

As outlined in a recent LNA article, demand for the 777X is likely materially less than Boeing envisioned. Boeing launched the program on expectations of 1,200 demand for very large aircraft. GE Aviation used that forecast in its public presentations.

The Boeing Internal Product Development forecast was 700-800. LNA estimates that the number is down to 500.


Development cost is expenditure. Businesses are not in the habit of using money without a means of making it back.

2. On the narrow body, Boeing does not have anything to compete with the A220. That plane will have costs come down and will make a profit, not to mention that Airbus got majority stake for a song. It is going to be a cheaper plane and the most efficient jet for 5 or 6 hour routes. Airlines that are in need of its efficiency and ability to link city pairs will flock to it. It might be a slow burn, but this program will hit critical mass and sell.

Who cares about the A220? Boeing does and you notice that they are not stating that they want to get to a 50/50 split against the A320Neo, they desire that split across the narrow body segment. It will not happen without a compelling new product that does something inherently different to what the A321 or A220 do.

3. On VLA's, Airbus has a product family that stands on its own. The A359 will make money and this allows them to manufacture the A350K without having to think whether it is going to be profitable or not. Boeing does not have this luxury because the 777 classic in on its last run and it so happens that if you have a new wing, new cockpit and new systems, you have what is mainly a new plane.

4. I think people that obsess on cash flow do not value businesses correctly. If I am an investor, I am looking at assets, debt, expenditure (program costs and charges), profits, organic growth prospects, cash reserves and how they play into product development and acquisitions, how competitive the business is and what is the long term outlook presented by management and the board. There are a few things I have missed, but you get the gist.

I would not buy into creative accounting because there are a lot of companies that have used it that are no more. There are a lot of companies that have used this model and they are a shadow of what they used to be. The company Boeing bought, and whose horrible culture they have adopted is one such company.

5. Does it matter if Boeing only has 35-40% of the market? Yes it does. The more market share you capture, the more dominant you become. The more market share you lose, the more you are likely to lose going forward.

Accounting block is very different to expectations btw
 
astuteman
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 4:20 pm

morrisond wrote:
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.


I'm well impressed that you spin higher debt for Boeing as a positive thing for Boeing :)

Especially given where the debt sits now..... $63Bn according to the Q1 results...

https://www.cnbc.com/2021/04/28/boeing- ... nings.html

Rgds
 
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reidar76
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 4:43 pm

After spending more than $43bn on stock buybacks, handing out enormous dividends, and paying insanely huge bonuses to the large executive crowd, Boeing will tap into the pockets of the US taxpayers once again.

My prediction is that Boeing will launch new clean-sheet families, both a new narrowbody and a new small widebody. It will be similar to the 1970s joint 757/767 program. It will be launched before 2025.

The NSA/NMA will be launched with massiv government subsides. The average Joe earing a few $ per hour flipping burges will pick up the bill. After a few years it will be the same all over again, with insane executive bonuses, stock buybacks and larger dividends than ever before.

The richer will be richer.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:00 pm

Opus99 wrote:
Accounting block is very different to expectations btw
You make a business case on expected sales.

Reality is what makes you adjust that to an accounting block and see where things go.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:00 pm

astuteman wrote:
morrisond wrote:
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.


Mr Micawber couldn't come.... :)
It feels like you have an extraordinarily, unreasonably almost, positive outlook on anything Boeing I have to say...

Boeing themselves have said the MAX grounding will cost them about $20Bn

https://edition.cnn.com/2020/11/17/busi ... index.html

$8.6Bn in compensation
$5Bn for "unusual production costs"
$6.3Bn for increased programme costs.

To add to which there is estimated to be:-

$500m compensation
$3Bn + interest

What's clear is that the $20.7 billion in costs that Boeing has detailed is only the starting point. Bank of America puts the costs at more than $25 billion.


They have currently have c. 3,500 in non-ASC606 backlog.
We know the current market price of a new MAX is about $45M. At your estimated 12% margin, that's about $5m per frame - i.e. $17.5Bn profit under normal circumstances.
Those figures would imply that the current orderbook is loss-making just against the grounding, ignoring the initial development costs.

I don't know how long it will take to burn through the 3,500 ish backlog, but it's going to be at least 6 years, isn't it? Possibly 7 as the ramp-up is required this year and next year.

5,000 more to be built would imply $25Bn "normal" profit - break-even maybe
7,000 more to be built would imply $35Bn "normal" profit - i.e. a net gain of $10Bn.

Certainly not the $40Bn - $60Bn you are predicting.

Totally agree they are where they are, and that as a portion of the $25Bn cost of the grounding will have already been spent, there is positive residual cash and profit in the backlog, and predicted sales, and the programme will, and should, continue. What portion of the $25Bn has already gone? We don't know for sure, but it is obviously not all of it, or even close.

However, you are also bullish about the arrival of NMA and NSA, which doesn't leave a lot of time to get another 1,500 planes built (for 5,000 more), and certainly doesn't leave enough time to build another 3,500 (for 7,000 more)

Rgds


I think $25B isn't a bad number for total MAX costs. However I just found a little snippet from a research analyst(that I am not allowed to share) on 777 and 787 where they show that Cash production margins are about 30% and over 20% on those programs. I have not been able to find anything on MAX yet but I'm looking but it should be a lot higher than 12%.

Personally I think it will take until about 2035 for the NSA to come along so the MAX will be in production for another 13 years or so - even at a low rate 31 where they are trying to get to early next year that is about 4,800 assuming they only stay at rate 31. I suspect by 2025 it's lot closer to Rate 50 before coming back down to somewhere in the 30's after 2030.

You also have to add in profit for parts and services, and include those for the NG as well which will be flying for quite some time. That has to be at least $1 Billion a year for the next 13 years and will go for a good 20 plus years after the last MAX rolls off the lines as well.
 
AvgWhiteGuy
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:16 pm

I can see them accomplishing 50/50 with three simple steps:
1) Fly thousands of proctologists into Seattle (or is it Chicago?) to remove their heads from their a****.
2) Find ~$35B to develop a two-aircraft, common type, plane(s) seating 150-270 and do it in 3 years.
3) Hope and pray Airbus plays nice with the special kid and doesn't re-wing the A320.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:18 pm

morrisond wrote:
You still haven't made any relevant points about why you think Boeing won't survive.

If they have never borrowed to buy back stock or pay dividends like Airbus may have done (no idea why there LTD increased) why would you expect them too now?

What else would you have had them do if they did not use there cash flow to buy back stock? They had almost no debt, more than enough cash flow to fund another cleansheet ($15B in 2018 and was supposed to be $17B in 2019).

Increase the dividend? - not a great strategy to pay a very high ongoing dividend in an industry that can be highly cyclical and needs capital from cash flow from time to time for new programs.

Of pay a special dividend? Generally investors don't want special dividends as they don't want to pay tax - they would rather have the company buy back stock.
Who is saying that Boeing wont survive? I have stated that should push come to shove, it will be nationalized. This is my expectation.

You also keep painting these rosy pictures and plucking numbers from thin air. No one knows what Boeing is offering planes for, what we do know is that they are currently selling them at minimal profit or at loss and that this will be the case for quite some time. What we also know is that they are losing money on programs because they are not paying down development costs on the same or they are hiving some of those costs and posting them on research and development.

It is the cooking of financials.

Lastly, investors want to make money. The only way they make money in a guaranteed manner is if a company is run well and there are long term thinkers. This is a decade where Boeing above all else released programs that are all in red, all of them. They did shoddy work and could not be bothered to rectify issues because those cost money, and chose to use cash that would have accomplished that to buy back their own stock.

This next decade is going to be a decade of pain. They will spend huge amounts rectifying issues, they will spend money paying interest, and when tranches are due, pay principle on their bonds, and there is no timeline when they can return shareholder value. I will say for free that should they need to put out a new program, they will have to take even more debt on.

This is the walking dead and they expect that the people that got them into this hole will get them out. It wont happen.

Finally, my points have all been relevant and I am not plucking numbers from thin air either.

morrisond wrote:

I think $25B isn't a bad number for total MAX costs. However I just found a little snippet from a research analyst(that I am not allowed to share) on 777 and 787 where they show that Cash production margins are about 30% and over 20% on those programs. I have not been able to find anything on MAX yet but I'm looking but it should be a lot higher than 12%.

Personally I think it will take until about 2035 for the NSA to come along so the MAX will be in production for another 13 years or so - even at a low rate 31 where they are trying to get to early next year that is about 4,800 assuming they only stay at rate 31. I suspect by 2025 it's lot closer to Rate 50 before coming back down to somewhere in the 30's after 2030.

You also have to add in profit for parts and services, and include those for the NG as well which will be flying for quite some time. That has to be at least $1 Billion a year for the next 13 years and will go for a good 20 plus years after the last MAX rolls off the lines as well.
$25 billion is not the total cost if that is where they land at. They will be paying interest and most of the debt they have picked up is tethered to the MAX. The next loans that they are taking will be the same thing.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:25 pm

Gremlinzzzz wrote:
morrisond wrote:
1. The accounting block for the 777X is not 1,200. It was somewhere around 350-400 but has since been reduced. You are probably thinking of the combined number for 77W/L/F and X.

Please tell us how taking a forward loss impacts cash flow or Debt. It does not. That is what matters when you are evaluating a company as a going concern.

The vast majority of 777X development costs have already been eaten and are relected in the financial statements. It is not a new production system - the ramp up should not be as bad as the 787. The big change on the 777X is the new wing - which is highly automated in its assembly - those costs won't really change. The reduction in labour and the fact that Boeing is doing the work themselves could mean a lower cost than the 77W/L/F wing.

2. Who really cares about the A220 - it has yet to make money and Boeing just sold a whole bunch of MAX-7's to WN in lieu of them taking A220's. I would have to guess Boeing will make way more money on those MAX 7's than Airbus will make on the next 300-400 A220's.

Nothing to compete with the A350-1000 that has 114 frames left to deliver? Who knows what the real number is if ASC 606 would be applied - Boeing is at 191 779 under ASC 606.

Yes - nothing to really compete against the A321 LR or XLR but they will. Plus quite frankly in order to evaluate them as a going concern does it matter if they only have 35 or 40% of the SA market? No - just whether or not each additional delivery puts more cash in the bank. The MAX will spin off a lot of cash going forward.

3. Please detail these additional $10's of Billions of extra cost going forward. Effectively what it will mean is just less realized cash flow on delivery for those frames.
1. On the Boeing 777X.

It is no secret that the 777 Classic made an outsized contribution to profits at BCA while the company was sorting out 787 production issues. Boeing was hoping the 777X would continue this.

As outlined in a recent LNA article, demand for the 777X is likely materially less than Boeing envisioned. Boeing launched the program on expectations of 1,200 demand for very large aircraft. GE Aviation used that forecast in its public presentations.

The Boeing Internal Product Development forecast was 700-800. LNA estimates that the number is down to 500.


Development cost is expenditure. Businesses are not in the habit of using money without a means of making it back.

2. On the narrow body, Boeing does not have anything to compete with the A220. That plane will have costs come down and will make a profit, not to mention that Airbus got majority stake for a song. It is going to be a cheaper plane and the most efficient jet for 5 or 6 hour routes. Airlines that are in need of its efficiency and ability to link city pairs will flock to it. It might be a slow burn, but this program will hit critical mass and sell.

Who cares about the A220? Boeing does and you notice that they are not stating that they want to get to a 50/50 split against the A320Neo, they desire that split across the narrow body segment. It will not happen without a compelling new product that does something inherently different to what the A321 or A220 do.

3. On VLA's, Airbus has a product family that stands on its own. The A359 will make money and this allows them to manufacture the A350K without having to think whether it is going to be profitable or not. Boeing does not have this luxury because the 777 classic in on its last run and it so happens that if you have a new wing, new cockpit and new systems, you have what is mainly a new plane.

4. I think people that obsess on cash flow do not value businesses correctly. If I am an investor, I am looking at assets, debt, expenditure (program costs and charges), profits, organic growth prospects, cash reserves and how they play into product development and acquisitions, how competitive the business is and what is the long term outlook presented by management and the board. There are a few things I have missed, but you get the gist.

I would not buy into creative accounting because there are a lot of companies that have used it that are no more. There are a lot of companies that have used this model and they are a shadow of what they used to be. The company Boeing bought, and whose horrible culture they have adopted is one such company.

5. Does it matter if Boeing only has 35-40% of the market? Yes it does. The more market share you capture, the more dominant you become. The more market share you lose, the more you are likely to lose going forward.


1. Yes - A market for 1,200 VLA. Somehow I don't Boeing was crazy enough to think they would get all that market.

You started out by saying they would never make money as they were assuming they would sell 1,200. The accounting block which determines how much profit is realized is much lower than that - and I believe less than 300 now.

2. How does Boeing not having a real competitor in the A220 space not make them a going concern? They actually have said they would like to address it - but that probably will not come for some time and by not addressing it now it will not make them go bankrupt.

3. You aren't really making any point on this. Do I think Boeing will sell 700 777X - no but I won't be surprised by 400-500 eventually. They will make money on it - just less than expected.

4. Start using your own metrics to look at Boeing they aren't going anywhere. They will be able to access the capital or generate it themselves to replace the MAX and enter the NMA space and pay down debt.

In terms of Creative Accounting all Boeing was doing pre-MAX crash/Covid was understating financial results. You kind of have to look at things like debt and future programs when evaluating whether or not cash flow is sufficient. Earnings are the one thing no one should really pay attention to when looking at Boeing.

5. It's 35-40% of the market in one area - others (Widebodies/Frieghters) the numbers are reversed and in general the margins are better. Plus you have all of Boeing Defence.

With the deferred MAX and 777/787 deliveries 2022/2023 could be relatively robust for Boeings sales combined with new builds.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:35 pm

Gremlinzzzz wrote:
morrisond wrote:
You still haven't made any relevant points about why you think Boeing won't survive.

If they have never borrowed to buy back stock or pay dividends like Airbus may have done (no idea why there LTD increased) why would you expect them too now?

What else would you have had them do if they did not use there cash flow to buy back stock? They had almost no debt, more than enough cash flow to fund another cleansheet ($15B in 2018 and was supposed to be $17B in 2019).

Increase the dividend? - not a great strategy to pay a very high ongoing dividend in an industry that can be highly cyclical and needs capital from cash flow from time to time for new programs.

Of pay a special dividend? Generally investors don't want special dividends as they don't want to pay tax - they would rather have the company buy back stock.
Who is saying that Boeing wont survive? I have stated that should push come to shove, it will be nationalized. This is my expectation.

You also keep painting these rosy pictures and plucking numbers from thin air. No one knows what Boeing is offering planes for, what we do know is that they are currently selling them at minimal profit or at loss and that this will be the case for quite some time. What we also know is that they are losing money on programs because they are not paying down development costs on the same or they are hiving some of those costs and posting them on research and development.

It is the cooking of financials.

Lastly, investors want to make money. The only way they make money in a guaranteed manner is if a company is run well and there are long term thinkers. This is a decade where Boeing above all else released programs that are all in red, all of them. They did shoddy work and could not be bothered to rectify issues because those cost money, and chose to use cash that would have accomplished that to buy back their own stock.

This next decade is going to be a decade of pain. They will spend huge amounts rectifying issues, they will spend money paying interest, and when tranches are due, pay principle on their bonds, and there is no timeline when they can return shareholder value. I will say for free that should they need to put out a new program, they will have to take even more debt on.

This is the walking dead and they expect that the people that got them into this hole will get them out. It wont happen.

Finally, my points have all been relevant and I am not plucking numbers from thin air either.

morrisond wrote:

I think $25B isn't a bad number for total MAX costs. However I just found a little snippet from a research analyst(that I am not allowed to share) on 777 and 787 where they show that Cash production margins are about 30% and over 20% on those programs. I have not been able to find anything on MAX yet but I'm looking but it should be a lot higher than 12%.

Personally I think it will take until about 2035 for the NSA to come along so the MAX will be in production for another 13 years or so - even at a low rate 31 where they are trying to get to early next year that is about 4,800 assuming they only stay at rate 31. I suspect by 2025 it's lot closer to Rate 50 before coming back down to somewhere in the 30's after 2030.

You also have to add in profit for parts and services, and include those for the NG as well which will be flying for quite some time. That has to be at least $1 Billion a year for the next 13 years and will go for a good 20 plus years after the last MAX rolls off the lines as well.
$25 billion is not the total cost if that is where they land at. They will be paying interest and most of the debt they have picked up is tethered to the MAX. The next loans that they are taking will be the same thing.


You have said multiple times they are done - including just above where you call them the walking dead.

You haven't put up any numbers other than Grandiose sweeping statements and a calculation of interest costs for the next three years that are way too high.

I've showed you how they most likely will be able to substantially reduce the amount of debt (to not much more than they had before) in the next two years and many analysts have them starting to spin cash off from their programs next year as well. 777X will be some time. But everything else will start spinning off cash again and things like 767F/2C and 777F or Boeing defence haven't stopped.
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:36 pm

morrisond wrote:
Forward losses are not actual cash losses they are accounting entries.

"A loss carryforward refers to an accounting technique that applies the current year's net operating loss (NOL) to future years' net income to reduce tax liability. For example, if a company experiences negative net operating income (NOI) in year one, but positive NOI in subsequent years, it can reduce future profits using the NOL carryforward to record some or all of the loss from the first year in the subsequent years. This results in lower taxable income in positive NOI years, reducing the amount the company owes the government in taxes."
https://www.investopedia.com/terms/l/lo ... orward.asp

Sound like a real loss to me.

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.

From the same link:
"NOL carryforwards are recorded as assets on the company's balance sheet. They offer a benefit to the company in the form of future tax liability savings. A deferred tax asset is created for the NOL carryforward, which is offset against net income in future years."

Either they finance this asset through debt or they pay for it from existing cash.
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:42 pm

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

Is this a serious question?

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.

What is LTD?
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:45 pm

astuteman wrote:
morrisond wrote:
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.


I'm well impressed that you spin higher debt for Boeing as a positive thing for Boeing :)

Especially given where the debt sits now..... $63Bn according to the Q1 results...

https://www.cnbc.com/2021/04/28/boeing- ... nings.html

Rgds


I'm quite aware that it is at $63B.

You are partially quoting something and spinning it into something it is not.

Gremlinzz kept insuating they were using financial engineering (borrowing) to buy back stock pre- MAX/Covid - they were not. However it appears as though Airbus was.
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:46 pm

morrisond wrote:
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.

Finally something we can agree on.
Being highly leveraged when central banks print money like there is no tomorrow can be a good bet.

I just don't understand what they are waiting for. I think I wouldn't buy their share for half the price.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:48 pm

Sokes wrote:
morrisond wrote:
Forward losses are not actual cash losses they are accounting entries.

"A loss carryforward refers to an accounting technique that applies the current year's net operating loss (NOL) to future years' net income to reduce tax liability. For example, if a company experiences negative net operating income (NOI) in year one, but positive NOI in subsequent years, it can reduce future profits using the NOL carryforward to record some or all of the loss from the first year in the subsequent years. This results in lower taxable income in positive NOI years, reducing the amount the company owes the government in taxes."
https://www.investopedia.com/terms/l/lo ... orward.asp

Sound like a real loss to me.

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.

From the same link:
"NOL carryforwards are recorded as assets on the company's balance sheet. They offer a benefit to the company in the form of future tax liability savings. A deferred tax asset is created for the NOL carryforward, which is offset against net income in future years."

Either they finance this asset through debt or they pay for it from existing cash.


No and No to both your replies. They are not cash costs. They are used to reduce tax liability or show higher earnings in the future. They do not change cash flow.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:49 pm

Sokes wrote:
morrisond wrote:
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.

Finally something we can agree on.
Being highly leveraged when central banks print money like there is no tomorrow can be a good bet.

I just don't understand what they are waiting for. I think I wouldn't buy their share for half the price.


I probably wouldn't either and just to be clear I don't own any.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:50 pm

morrisond wrote:

1. Yes - A market for 1,200 VLA. Somehow I don't Boeing was crazy enough to think they would get all that market.

You started out by saying they would never make money as they were assuming they would sell 1,200. The accounting block which determines how much profit is realized is much lower than that - and I believe less than 300 now.
I did not assume anything, Boeing already took a forward loss on the 777X. This means that they do not think that they will be in a position to pay off program costs. Their biggest clients just happen to be the gulf airlines, everyone else wants a smaller aircraft that they can fill.

morrisond wrote:
2. How does Boeing not having a real competitor in the A220 space not make them a going concern? They actually have said they would like to address it - but that probably will not come for some time and by not addressing it now it will not make them go bankrupt.
It will not make them go bankrupt. It just means that they are losing more market share because they do not have something that can compete. It is what it is.

morrisond wrote:
3. You aren't really making any point on this. Do I think Boeing will sell 700 777X - no but I won't be surprised by 400-500 eventually. They will make money on it - just less than expected.
Where are they getting more orders for this aircraft? Everyone that needed to replace the 747 did with the 777, but there are airlines that have simply moved from the 777 to the 787. Some airlines that did not have anything by Airbus in the wide body fleet like BA and Japan Airlines have gone to get the A350. Airlines seem to want smaller jets and this is where orders have gone.

morrisond wrote:
4. Start using your own metrics to look at Boeing they aren't going anywhere. They will be able to access the capital or generate it themselves to replace the MAX and enter the NMA space and pay down debt.
They are not going to generate cash for a new program in a long time by themselves, they would have to hit the debt market.

Boeing's job right now is to undo all the mistakes they have made the last two decades. It takes time (which could be used in other constructive work), money (that they don't have and thus have to borrow), discipline (which they have shown they do not have) and long term planning (which myopic management is allergic to).

morrisond wrote:
In terms of Creative Accounting all Boeing was doing pre-MAX crash/Covid was understating financial results. You kind of have to look at things like debt and future programs when evaluating whether or not cash flow is sufficient. Earnings are the one thing no one should really pay attention to when looking at Boeing.
Stop obsessing about cash flow. Boeing has had 'great cash flow' up until the MAX crash yet every program since the Dreamliner is in red.

morrisond wrote:
5. It's 35-40% of the market in one area - others (Widebodies/Frieghters) the numbers are reversed and in general the margins are better. Plus you have all of Boeing Defence.

With the deferred MAX and 777/787 deliveries 2022/2023 could be relatively robust for Boeings sales combined with new builds.
It is not how many aircraft you sell, it is what margins you make. Boeing makes huge profits without fully paying down program costs. If you were a bank and you dont provision for bad debt, you would go out of business. If you are an enterprise that gets inventory but does not realize what you put in, you would shrink, eventually go out of business.

If you put out shoddy product, and Boeing does this everywhere, it costs money to clean up. Airbus is OK in wide body aircraft, and they are poor on freighters and there is nothing wrong in this because they are not shoddy. Boeing's best designed products are the 767 and classic 777 and we see nothing wrong in this?
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 5:51 pm

Sokes wrote:
morrisond wrote:
Where is the debt they took on to bid up the share price?

Is this a serious question?

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.

What is LTD?


LTD = Long term Debt

From 2011 to 2018 pre-MAX/Covid LTD barely budged. They financed the share buybacks from excess cash flow they didn't need.
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:00 pm

morrisond wrote:
The vast majority of 777X development costs have already been eaten and are relected in the financial statements. It is not a new production system - the ramp up should not be as bad as the 787. The big change on the 777X is the new wing - which is highly automated in its assembly - those costs won't really change. The reduction in labour and the fact that Boeing is doing the work themselves could mean a lower cost than the 77W/L/F wing.

2. Who really cares about the A220 - it has yet to make money and Boeing just sold a whole bunch of MAX-7's to WN in lieu of them taking A220's. I would have to guess Boeing will make way more money on those MAX 7's than Airbus will make on the next 300-400 A220's.

Nothing to compete with the A350-1000 that has 114 frames left to deliver? Who knows what the real number is if ASC 606 would be applied - Boeing is at 191 779 under ASC 606.

Agreed.
I assume both A350-900 and B777-9X will be successful.
I expect the -1000 won't be able to compete with the -9X and the -8X won't be able to compete with the -900.

If I see that new B767 still sell I consider it possible that the A220 may never be very profitable.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:01 pm

Gremlinzzzz wrote:
morrisond wrote:

1. Yes - A market for 1,200 VLA. Somehow I don't Boeing was crazy enough to think they would get all that market.

You started out by saying they would never make money as they were assuming they would sell 1,200. The accounting block which determines how much profit is realized is much lower than that - and I believe less than 300 now.
I did not assume anything, Boeing already took a forward loss on the 777X. This means that they do not think that they will be in a position to pay off program costs. Their biggest clients just happen to be the gulf airlines, everyone else wants a smaller aircraft that they can fill.

morrisond wrote:
2. How does Boeing not having a real competitor in the A220 space not make them a going concern? They actually have said they would like to address it - but that probably will not come for some time and by not addressing it now it will not make them go bankrupt.
It will not make them go bankrupt. It just means that they are losing more market share because they do not have something that can compete. It is what it is.

morrisond wrote:
3. You aren't really making any point on this. Do I think Boeing will sell 700 777X - no but I won't be surprised by 400-500 eventually. They will make money on it - just less than expected.
Where are they getting more orders for this aircraft? Everyone that needed to replace the 747 did with the 777, but there are airlines that have simply moved from the 777 to the 787. Some airlines that did not have anything by Airbus in the wide body fleet like BA and Japan Airlines have gone to get the A350. Airlines seem to want smaller jets and this is where orders have gone.

morrisond wrote:
4. Start using your own metrics to look at Boeing they aren't going anywhere. They will be able to access the capital or generate it themselves to replace the MAX and enter the NMA space and pay down debt.
They are not going to generate cash for a new program in a long time by themselves, they would have to hit the debt market.

Boeing's job right now is to undo all the mistakes they have made the last two decades. It takes time (which could be used in other constructive work), money (that they don't have and thus have to borrow), discipline (which they have shown they do not have) and long term planning (which myopic management is allergic to).

morrisond wrote:
In terms of Creative Accounting all Boeing was doing pre-MAX crash/Covid was understating financial results. You kind of have to look at things like debt and future programs when evaluating whether or not cash flow is sufficient. Earnings are the one thing no one should really pay attention to when looking at Boeing.
Stop obsessing about cash flow. Boeing has had 'great cash flow' up until the MAX crash yet every program since the Dreamliner is in red.

morrisond wrote:
5. It's 35-40% of the market in one area - others (Widebodies/Frieghters) the numbers are reversed and in general the margins are better. Plus you have all of Boeing Defence.

With the deferred MAX and 777/787 deliveries 2022/2023 could be relatively robust for Boeings sales combined with new builds.
It is not how many aircraft you sell, it is what margins you make. Boeing makes huge profits without fully paying down program costs. If you were a bank and you dont provision for bad debt, you would go out of business. If you are an enterprise that gets inventory but does not realize what you put in, you would shrink, eventually go out of business.

If you put out shoddy product, and Boeing does this everywhere, it costs money to clean up. Airbus is OK in wide body aircraft, and they are poor on freighters and there is nothing wrong in this because they are not shoddy. Boeing's best designed products are the 767 and classic 777 and we see nothing wrong in this?


You really need to read up on program accounting - you clearly don't understand it. Those costs are already paid for - going forward it's just a question of how much of the excess sales price over production price Boeing puts in one bucket or another mainly for taxation purposes.

For example on an 787 if the Margin is 20% on an $100 Million frame - $10 million might go to deferred production cost and $10 million to profit as accounting entries but at the end of the month the bank balance still goes up by $20 Million.

Boeing doesn't owe the remaining $15B in deferred production cost on the 787 to anyone - it is not borrowed money - it was already paid out of cash flow years ago when those costs were incurred.

They will generate $10 of billions of extra cash between now and 2030 on existing programs and Boeing defence. There is a reason their shares are still trading at $233 each and they have a Market cap welling excess of $100 Billion.

The Dreamliner has pumped out out billions of cash in excess of production cost and will continue to do so even at the lower rates - of course once deliveries ramp up again - just like the MAX.
Last edited by morrisond on Fri Apr 30, 2021 6:03 pm, edited 1 time in total.
 
astuteman
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:02 pm

morrisond wrote:
astuteman wrote:
morrisond wrote:
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.


I'm well impressed that you spin higher debt for Boeing as a positive thing for Boeing :)

Especially given where the debt sits now..... $63Bn according to the Q1 results...

https://www.cnbc.com/2021/04/28/boeing- ... nings.html

Rgds


I'm quite aware that it is at $63B.

You are partially quoting something and spinning it into something it is not.

Gremlinzz kept insuating they were using financial engineering (borrowing) to buy back stock pre- MAX/Covid - they were not. However it appears as though Airbus was.


Apologies if that was the case.
For what it's worth I don't have any particular skin in the financial engineering argument
But I'm not sure you should be diverting the accusation away from Boeing and onto Airbus without evidence
Smacks of Boeing=good, Airbus=bad TBH

Rgds
 
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Polot
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:03 pm

reidar76 wrote:
After spending more than $43bn on stock buybacks, handing out enormous dividends, and paying insanely huge bonuses to the large executive crowd, Boeing will tap into the pockets of the US taxpayers once again.

My prediction is that Boeing will launch new clean-sheet families, both a new narrowbody and a new small widebody. It will be similar to the 1970s joint 757/767 program. It will be launched before 2025.

The NSA/NMA will be launched with massiv government subsides. The average Joe earing a few $ per hour flipping burges will pick up the bill. After a few years it will be the same all over again, with insane executive bonuses, stock buybacks and larger dividends than ever before.

The richer will be richer.

Worked out great for the European tax payers and the A320. Maybe the American ones will be just as lucky.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:08 pm

astuteman wrote:
morrisond wrote:
astuteman wrote:

I'm well impressed that you spin higher debt for Boeing as a positive thing for Boeing :)

Especially given where the debt sits now..... $63Bn according to the Q1 results...

https://www.cnbc.com/2021/04/28/boeing- ... nings.html

Rgds


I'm quite aware that it is at $63B.

You are partially quoting something and spinning it into something it is not.

Gremlinzz kept insuating they were using financial engineering (borrowing) to buy back stock pre- MAX/Covid - they were not. However it appears as though Airbus was.


Apologies if that was the case.
For what it's worth I don't have any particular skin in the financial engineering argument
But I'm not sure you should be diverting the accusation away from Boeing and onto Airbus without evidence
Smacks of Boeing=good, Airbus=bad TBH

Rgds


You are right - I was just trying to prove a point. However Airbus did spend less on development/ so what was the debt incurred for? Boeing debt was stable with $43B in share buybacks and probably over $35B in development costs (787/MAX/777X).

It might have been new production facilities for Airbus - but Boeing was able to fund all it's development plus new factories (787 South Carolina, 777X wing factory) without borrowing.

Buying back shares would have been the only non-business activity Airbus did - but I have no idea how many shares they bought back.
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:11 pm

morrisond wrote:
LTD = Long term Debt

From 2011 to 2018 pre-MAX/Covid LTD barely budged. They financed the share buybacks from excess cash flow they didn't need.

...didn't need, because they booked their B787 losses as an asset.

So if debt is short term it's better?
 
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Polot
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:14 pm

Sokes wrote:
morrisond wrote:
LTD = Long term Debt

From 2011 to 2018 pre-MAX/Covid LTD barely budged. They financed the share buybacks from excess cash flow they didn't need.

...didn't need, because they booked their B787 losses as an asset.

So if debt is short term it's better?

Not using program accounting doesn’t mean 787 losses would be debt. It just means Boeing would have reported lower profits/higher losses during the 787 development years. The 787 costs were being paid. Just not fully accounted for on the balance sheet.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:17 pm

morrisond wrote:

You really need to read up on program accounting - you clearly don't understand it. Those costs are already paid for - going forward it's just a question of how much of the excess sales price over production price Boeing puts in one bucket or another mainly for taxation purposes.

For example on an 787 if the Margin is 20% on an $100 Million frame - $10 million might go to deferred production cost and $10 million to profit as accounting entries but at the end of the month the bank balance still goes up by $20 Million.

Boeing doesn't owe the remaining $15B in deferred production cost on the 787 to anyone - it is not borrowed money - it was already paid out of cash flow years ago when those costs were incurred.

They will generate $10 of billions of extra cash between now and 2030 on existing programs and Boeing defence. There is a reason their shares are still trading at $233 each and they have a Market cap welling excess of $100 Billion.
Talking to you is like arguing with rocks.

Yes, the costs are already paid, but guess what, you are not paying those costs and closing your eyes. The objective is to pay down those costs eventually and this is why Boeing has accounting blocks.
We know that they are not making money spent on the 747-8 because they told us they were taking a charge, $4 billion in total.

We know that they are unlikely to ever make money on the 787 because they booked production costs on early units as research and development and despite delivering almost 1000 787's, which is more than half what the accounting block was, they still have 60% in deferred costs not paid. If they want, they can also book the costs of repairing the 787 fleet as research and development. Where you book it does not matter, it is money out. They are not going to make money off this program.

We know that they will spend a program's worth of money, and some trying to fix the MAX. We know that they are going make minimal money on this product if all goes well. This assumes that they will command premiums, that they will not have any new issues popping up.......more assumptions. They will have to re-work the wiring as had been requested, they are going to need to find a fix to the new electrical issue that has been found and they would then have to look at the precursor to this program to fix pickle fork issues. I personally dont expect them to make any money, expect charges and forward losses. If not, more creative accounting

Businesses use money to make money. I have asked you what other business in any manufacturing sector or inventory based service do you know that states that 'we have spent this, and thus we don't owe anyone money?'

No business works like this, and Boeing is not set out to work like that either. You cannot be arguing program accounting, accounting blocks and what they mean while peddling sunk cost fallacy. Choose what you want to debate and let us debate.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:25 pm

Sokes wrote:
...didn't need, because they booked their B787 losses as an asset.

Can they sell these assets like the property they are selling in Puget Sound?
 
astuteman
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:30 pm

morrisond wrote:
astuteman wrote:
morrisond wrote:

I'm quite aware that it is at $63B.

You are partially quoting something and spinning it into something it is not.

Gremlinzz kept insuating they were using financial engineering (borrowing) to buy back stock pre- MAX/Covid - they were not. However it appears as though Airbus was.


Apologies if that was the case.
For what it's worth I don't have any particular skin in the financial engineering argument
But I'm not sure you should be diverting the accusation away from Boeing and onto Airbus without evidence
Smacks of Boeing=good, Airbus=bad TBH

Rgds


You are right - I was just trying to prove a point. However Airbus did spend less on development/ so what was the debt incurred for? Boeing debt was stable with $43B in share buybacks and probably over $35B in development costs (787/MAX/777X).

It might have been new production facilities for Airbus - but Boeing was able to fund all it's development plus new factories (787 South Carolina, 777X wing factory) without borrowing.

Buying back shares would have been the only non-business activity Airbus did - but I have no idea how many shares they bought back.


If I was pushed, I would have said inventory growth, but wouldn't be able to prove it

Rgds
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:39 pm

morrisond wrote:
For example on an 787 if the Margin is 20% on an $100 Million frame - $10 million might go to deferred production cost and $10 million to profit as accounting entries but at the end of the month the bank balance still goes up by $20 Million.

Boeing doesn't owe the remaining $15B in deferred production cost on the 787 to anyone - it is not borrowed money - it was already paid out of cash flow years ago when those costs were incurred.

Assets = equity + debt
At the moment the deferred production costs are an asset.
The 10 million $/ frame deferred costs get cut from the assets.
Boeing can use the 10 million $ to pay back debt.
Assets shrink 10 million $, debt shrinks 10 million $, equity remains the same, balance sheet shrinks 10 million $.
Or Boeing can keep the 10 million $ as cash. Assets remain same, balance sheet remains the same, but debt doesn't sink.

Of course Boeing owes money. Equity even before the crises was close to zero. That means funny assets are financed by debt.

The Dreamliner has pumped out out billions of cash in excess of production cost and will continue to do so even at the lower rates - of course once deliveries ramp up again - just like the MAX.

You have a source?
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:41 pm

Polot wrote:
Sokes wrote:
morrisond wrote:
LTD = Long term Debt

From 2011 to 2018 pre-MAX/Covid LTD barely budged. They financed the share buybacks from excess cash flow they didn't need.

...didn't need, because they booked their B787 losses as an asset.

So if debt is short term it's better?

Not using program accounting doesn’t mean 787 losses would be debt. It just means Boeing would have reported lower profits/higher losses during the 787 development years. The 787 costs were being paid. Just not fully accounted for on the balance sheet.

As long as you don't start arguing with excess cash flow I agree.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:42 pm

Gremlinzzzz wrote:
morrisond wrote:

You really need to read up on program accounting - you clearly don't understand it. Those costs are already paid for - going forward it's just a question of how much of the excess sales price over production price Boeing puts in one bucket or another mainly for taxation purposes.

For example on an 787 if the Margin is 20% on an $100 Million frame - $10 million might go to deferred production cost and $10 million to profit as accounting entries but at the end of the month the bank balance still goes up by $20 Million.

Boeing doesn't owe the remaining $15B in deferred production cost on the 787 to anyone - it is not borrowed money - it was already paid out of cash flow years ago when those costs were incurred.

They will generate $10 of billions of extra cash between now and 2030 on existing programs and Boeing defence. There is a reason their shares are still trading at $233 each and they have a Market cap welling excess of $100 Billion.
Talking to you is like arguing with rocks.

Yes, the costs are already paid, but guess what, you are not paying those costs and closing your eyes. The objective is to pay down those costs eventually and this is why Boeing has accounting blocks.
We know that they are not making money spent on the 747-8 because they told us they were taking a charge, $4 billion in total.

We know that they are unlikely to ever make money on the 787 because they booked production costs on early units as research and development and despite delivering almost 1000 787's, which is more than half what the accounting block was, they still have 60% in deferred costs not paid. If they want, they can also book the costs of repairing the 787 fleet as research and development. Where you book it does not matter, it is money out. They are not going to make money off this program.

We know that they will spend a program's worth of money, and some trying to fix the MAX. We know that they are going make minimal money on this product if all goes well. This assumes that they will command premiums, that they will not have any new issues popping up.......more assumptions. They will have to re-work the wiring as had been requested, they are going to need to find a fix to the new electrical issue that has been found and they would then have to look at the precursor to this program to fix pickle fork issues. I personally dont expect them to make any money, expect charges and forward losses. If not, more creative accounting

Businesses use money to make money. I have asked you what other business in any manufacturing sector or inventory based service do you know that states that 'we have spent this, and thus we don't owe anyone money?'

No business works like this, and Boeing is not set out to work like that either. You cannot be arguing program accounting, accounting blocks and what they mean while peddling sunk cost fallacy. Choose what you want to debate and let us debate.


No you still aren't getting it.

On the 787 they booked repayment of about half the $30B development plus they booked Net Profit (no one really knows how much) of another maybe $10-20million per frame.

Combined they have more than paid off the $30B. Or look it another way - if they had borrowed every cent of that $30b that account and every bit of excess revenue they received over cash production costs went to that account it would now be paid down to 0 or somewhere thereabouts, but at this point it is most likely in a positive balance.

However they didn't borrow that $30B it came from cash flow from other Boeing operations. They don't owe it to anyone else and it has now paid for itself.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:44 pm

Sokes wrote:
morrisond wrote:
For example on an 787 if the Margin is 20% on an $100 Million frame - $10 million might go to deferred production cost and $10 million to profit as accounting entries but at the end of the month the bank balance still goes up by $20 Million.

Boeing doesn't owe the remaining $15B in deferred production cost on the 787 to anyone - it is not borrowed money - it was already paid out of cash flow years ago when those costs were incurred.

Assets = equity + debt
At the moment the deferred production costs are an asset.
The 10 million $/ frame deferred costs get cut from the assets.
Boeing can use the 10 million $ to pay back debt.
Assets shrink 10 million $, debt shrinks 10 million $, equity remains the same, balance sheet shrinks 10 million $.
Or Boeing can keep the 10 million $ as cash. Assets remain same, balance sheet remains the same, but debt doesn't sink.

Of course Boeing owes money. Equity even before the crises was close to zero. That means funny assets are financed by debt.

The Dreamliner has pumped out out billions of cash in excess of production cost and will continue to do so even at the lower rates - of course once deliveries ramp up again - just like the MAX.

You have a source?


Go read the annual reports or anyones analysis by anyone on Wall Street.
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:45 pm

Gremlinzzzz wrote:
Sokes wrote:
...didn't need, because they booked their B787 losses as an asset.

Can they sell these assets like the property they are selling in Puget Sound?

Maybe morissond wants to buy some of it?
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 6:57 pm

morrisond wrote:
Sokes wrote:
morrisond wrote:
The Dreamliner has pumped out out billions of cash in excess of production cost and will continue to do so even at the lower rates - of course once deliveries ramp up again - just like the MAX.

You have a source?


Go read the annual reports or anyones analysis by anyone on Wall Street.

You yourself said that nobody knows how much profit each B787 sold so far made. So which annual report to choose?
I anyway have my doubts that the program so far is cash flow positive. 15 billion $ deferred production costs are left. You think they had an average profit of 15 million $/ frame so far?
 
mjoelnir
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 7:01 pm

morrisond wrote:
Sokes wrote:
morrisond wrote:
For example on an 787 if the Margin is 20% on an $100 Million frame - $10 million might go to deferred production cost and $10 million to profit as accounting entries but at the end of the month the bank balance still goes up by $20 Million.

Boeing doesn't owe the remaining $15B in deferred production cost on the 787 to anyone - it is not borrowed money - it was already paid out of cash flow years ago when those costs were incurred.

Assets = equity + debt
At the moment the deferred production costs are an asset.
The 10 million $/ frame deferred costs get cut from the assets.
Boeing can use the 10 million $ to pay back debt.
Assets shrink 10 million $, debt shrinks 10 million $, equity remains the same, balance sheet shrinks 10 million $.
Or Boeing can keep the 10 million $ as cash. Assets remain same, balance sheet remains the same, but debt doesn't sink.

Of course Boeing owes money. Equity even before the crises was close to zero. That means funny assets are financed by debt.

The Dreamliner has pumped out out billions of cash in excess of production cost and will continue to do so even at the lower rates - of course once deliveries ramp up again - just like the MAX.

You have a source?


Go read the annual reports or anyones analysis by anyone on Wall Street.


I think you should read the annual reports. Negative equity means that Borings assets do not cover Boeing debts. Than add on that, that part of the assets, the deferred cost written to inventories, do not exist. Than start thinking about the hole Boeing is in.
 
Sokes
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 7:05 pm

Enough discussion for today. You got the last word.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 7:23 pm

morrisond wrote:

No you still aren't getting it.

On the 787 they booked repayment of about half the $30B development plus they booked Net Profit (no one really knows how much) of another maybe $10-20million per frame.

Combined they have more than paid off the $30B. Or look it another way - if they had borrowed every cent of that $30b that account and every bit of excess revenue they received over cash production costs went to that account it would now be paid down to 0 or somewhere thereabouts, but at this point it is most likely in a positive balance.

However they didn't borrow that $30B it came from cash flow from other Boeing operations. They don't owe it to anyone else and it has now paid for itself.


This was Boeing mid last year:

During the second quarter of 2020, we experienced significant reductions in deliveries due to the impacts of COVID-19 on our customers as well as travel restrictions and the temporary suspension of production operations in the Puget Sound area and South Carolina. Pre-COVID-19, we were producing at a rate of 14 per month and had planned to adjust the 787 production rate to 12 per month in late 2020 and to 10 per month in early 2021. Due to the impacts of COVID-19 on customer demand, we are currently producing at a rate of 10 per month and plan to reduce to 6 per month in 2021. As a result of the planned production rate changes, we reduced the accounting quantity for the 787 program by 100 units during the first quarter of 2020. The 787 program has near breakeven gross margins due to the reductions in the production rates and the reduction in the program accounting quantity. If we are required to further reduce production rates or experience other factors that could result in lower margins, the program could record a reach-forward loss in future periods.


This was Boeing at the start of the year

“If we are required to further reduce the accounting quantity and-or production rates, or experience other factors that could result in lower margin, the programme could reach forward loss in future periods,”

Dreamliner development cost? $32 billion.
Dreamliner inventory expense as research and development? $4 billion.

This is money out. Expenditure.

The accounting block went from 1,600 planes down to 1,500 planes. Even if you were to ignore the $4 billion, how is Boeing going to pay $15 billion in outstanding program cost from 500 frames when they did this in 1000 frames previously and at a time when there are reduced deliveries? Did they become twice as good? This is why I keep telling you to stop plucking numbers from thin air and actually pay attention to what Boeing is saying,

The 787 will not make money and what ensures that they wont make money is the shoddy workmanship that they need to fix. As I have stated, they can book corrective measures in R&D if they so desire, still money out.

Also get this, it does not matter that Boeing owes this money to itself, something I have told you time and again. If they do not pay down this cost, they erode their balance sheet i.e. money went out and not much of it came back. The dividends and stock buybacks were great for investors, but now it is more debt and repeat work that wins the day. And Calhoun states that they need to borrow more. Boeing is slave to the banks.

If Boeing themselves think that there is a possibility of a forward loss on the 787, and the 777X is what it is, where is the money making plane at BCA? It isn't the MAX because that is not going to make money, not when you consider the debt they have taken to try and clean up that mess, the rate drop or what they are currently selling planes at.
 
Gremlinzzzz
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 7:29 pm

mjoelnir wrote:
morrisond wrote:
Sokes wrote:
Assets = equity + debt
At the moment the deferred production costs are an asset.
The 10 million $/ frame deferred costs get cut from the assets.
Boeing can use the 10 million $ to pay back debt.
Assets shrink 10 million $, debt shrinks 10 million $, equity remains the same, balance sheet shrinks 10 million $.
Or Boeing can keep the 10 million $ as cash. Assets remain same, balance sheet remains the same, but debt doesn't sink.

Of course Boeing owes money. Equity even before the crises was close to zero. That means funny assets are financed by debt.


You have a source?


Go read the annual reports or anyones analysis by anyone on Wall Street.


I think you should read the annual reports. Negative equity means that Borings assets do not cover Boeing debts. Than add on that, that part of the assets, the deferred cost written to inventories, do not exist. Than start thinking about the hole Boeing is in.
I honestly don't know why he does not get this. I have tried explaining to him the need to pay off development cost, especially to a company that weirdly counts them as assets instead of liabilities.

Zombie company if I ever saw one.
 
morrisond
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Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 8:07 pm

Gremlinzzzz wrote:
morrisond wrote:

No you still aren't getting it.

On the 787 they booked repayment of about half the $30B development plus they booked Net Profit (no one really knows how much) of another maybe $10-20million per frame.

Combined they have more than paid off the $30B. Or look it another way - if they had borrowed every cent of that $30b that account and every bit of excess revenue they received over cash production costs went to that account it would now be paid down to 0 or somewhere thereabouts, but at this point it is most likely in a positive balance.

However they didn't borrow that $30B it came from cash flow from other Boeing operations. They don't owe it to anyone else and it has now paid for itself.


This was Boeing mid last year:

During the second quarter of 2020, we experienced significant reductions in deliveries due to the impacts of COVID-19 on our customers as well as travel restrictions and the temporary suspension of production operations in the Puget Sound area and South Carolina. Pre-COVID-19, we were producing at a rate of 14 per month and had planned to adjust the 787 production rate to 12 per month in late 2020 and to 10 per month in early 2021. Due to the impacts of COVID-19 on customer demand, we are currently producing at a rate of 10 per month and plan to reduce to 6 per month in 2021. As a result of the planned production rate changes, we reduced the accounting quantity for the 787 program by 100 units during the first quarter of 2020. The 787 program has near breakeven gross margins due to the reductions in the production rates and the reduction in the program accounting quantity. If we are required to further reduce production rates or experience other factors that could result in lower margins, the program could record a reach-forward loss in future periods.


This was Boeing at the start of the year

“If we are required to further reduce the accounting quantity and-or production rates, or experience other factors that could result in lower margin, the programme could reach forward loss in future periods,”

Dreamliner development cost? $32 billion.
Dreamliner inventory expense as research and development? $4 billion.

This is money out. Expenditure.

The accounting block went from 1,600 planes down to 1,500 planes. Even if you were to ignore the $4 billion, how is Boeing going to pay $15 billion in outstanding program cost from 500 frames when they did this in 1000 frames previously and at a time when there are reduced deliveries? Did they become twice as good? This is why I keep telling you to stop plucking numbers from thin air and actually pay attention to what Boeing is saying,

The 787 will not make money and what ensures that they wont make money is the shoddy workmanship that they need to fix. As I have stated, they can book corrective measures in R&D if they so desire, still money out.

Also get this, it does not matter that Boeing owes this money to itself, something I have told you time and again. If they do not pay down this cost, they erode their balance sheet i.e. money went out and not much of it came back. The dividends and stock buybacks were great for investors, but now it is more debt and repeat work that wins the day. And Calhoun states that they need to borrow more. Boeing is slave to the banks.

If Boeing themselves think that there is a possibility of a forward loss on the 787, and the 777X is what it is, where is the money making plane at BCA? It isn't the MAX because that is not going to make money, not when you consider the debt they have taken to try and clean up that mess, the rate drop or what they are currently selling planes at.


You are still missing the fact that they book a reduction in the program cost and a profit. Of course if they have too reduce the accounting block further they will have to book a loss.

Yes they have become twice as good (or at least they were before Covid hit) at the margin on 787 - each one was paying back about $37 million plus recording a very nice profit on the bottom line. The $30 Billion has been paid back (probably). From the earnings transcript "However, on a cash basis, the 787 unit margin has held up relatively well even at lower production rates as many underlying profitability drivers remain intact."

They fixed the gross margin by taking the 787 to one production location - that has helped a lot.

From the transcript of the earnings call https://s2.q4cdn.com/661678649/files/do ... script.pdf

Greg Smith On the MAX "Cumulatively, we've accrued a $9.3 billion liability for the estimated potential concessions and other considerations. To date, we've reduced the liability by $4.9 billion through cash payments to customers and other forms of compensation, including $1.2 billion we paid this quarter. We have settlement agreements covering approximately $2.5 billion of the remaining liability balance of $4.4 billion." so only $4.4B to go on deliveries of 400 frames.

"Moving now to 777X; as Dave mentioned, we still expect first delivery of the 777X to occur in late 2023, and we are making good progress on our flight test efforts. We still expect that peak use of cash for 777X program was in 2020, and that cash flow will improve as we get closer to EIS and begin deliveries in late 2023. We anticipate the program to turn cash-flow-positive approximately one to two years after the first delivery."

"Our debt balance remains stable at $63.6 billion at the end of the quarter. As part of our ongoing prudent liquidity actions, we refinanced $9.8 billion of our delayed draw term loan that was due in early 2022 and expanded our revolving credit facility by $5.3 billion. These liquidity enhancing activities are in addition to the many actions we have discussed before, including suspending our dividend, reducing discretionary spending, matching 401(k) contributions in stock, prefunding pension with stock, and awarding most of our employees a one-time stock grant that will vest in three years in lieu of a merit increase. These actions reflect our continued de-risking strategy and are part of our balanced approach to ensure we're proactively meet future obligations.
We worked hard in the past to maintain disciplined cash management while seeking opportunities to strengthen our balance sheet, and we will continue these efforts. Once cash flow generation returns to more normal levels, reducing our debt level will be our top priority. We believe we currently have sufficient liquidity and are not planning to increase our debt levels. However, we will continue to actively manage our balance sheet. Our investment-grade credit rating is important to us, and we will continue to consider all aspects of our capital structure to strengthen our balance sheet."

Notice they increased the size of a revolver just in case but did not increase debt and don't plan on doing that.

"We expect the first quarter was the most challenging quarter from a cash perspective, and we expect the trend to improve for the remainder of the year as we ramp up 787 and 737 deliveries in subsequent periods. However, there could be some timing variation quarter-over-quarter, so quarterly trajectory could be uneven. As discussed, our cash flow profile is heavily dependent upon obtaining the remaining 737 MAX regulatory approvals, the commercial market recovery, and ongoing discussions with our customers on their fleet planning needs.
In aggregate, we continue to expect 2021 to be a use of cash. We expect that continued improvement on the 737 MAX program due to lower customer considerations and higher delivery payments as well as recovery in Commercial Services will enable us to turn positive cash flow in 2022. The key watch items that I highlighted earlier will be the differentiator in our outlook trajectory. Given the dynamic environment, we continue to monitor the risks and opportunities to ensure we're well-positioned for the future."

Calhoun on the future "Yeah. There's probably not much I can add there. But I'll just add my confidence that as production rates begin to return to what we would consider ultimately normal and then above, we should get more leverage than we've ever gotten simply because of all the actions that we've taken with respect to the fixed and readiness-to-serve costs that are out there. But maybe even a bigger part is the stability we will bring back to the production lines themselves. So that as we move the rates up, we can do so in a stable fashion. There is enormous productivity attached to that track."

Smith on 787 Deferred Production Cost "No, absolutely. Yeah. And actually, Carter, you got it right. I mean, it's all those other moving pieces that are
obviously unusual and didn't exist in the prior quarters. So once we kind of get through that and get kind of to a
normalized pace, you'll see deferred continue on the trajectory that we've outlined before. But near term, to your
point, there's a lot of moving pieces in there that are weighing into that number that are not, I would say, sitting on
a normalized level. But it will once we start continuing delivery. And long term, like I said, we will be on the same
path as we've talked about before. Now, I like I said on the past..."

On 787 Cash Flow "Outside of that, like I said, unit cash basis, program is really doing a great job and really holding up well at a very low rate. And again, that's a testament to all the hard work that's gone on over the years on stabilizing the factory and the operations and the productivity initiatives. So you're seeing the benefit of that.
So as the rate kind of stabilizes and goes up, and we certainly deliver those inventoried aircraft, that's going to be a big driver as I mentioned on cash flow between the balance of this year and then going into 2022."

On investing in the Company "We've invested over $60 billion over the last 10 years, and that has all been in key technologies and programs and all efforts within our factory, within our space. So we've not been short on investment by any means. And you saw even last year in the middle of the pandemic we're – continued to make the appropriate investments in the right area of the business."

Finally one for the future "Secondly, we've invested, as you know, in composites in our platforms for a very, very long time. The learning
curves associated with getting efficient at composite development are significant. I believe Boeing has a huge
advantage on that front. And so how we bridge that engineering modeling, that composite development work that
we've done over the years and then quick, simple assembly like we've demonstrated with the trainer airplane and
other defense programs, we have to do it at scale, and we have to prove to ourselves we can do it at scale. But in
my view those are going to be the advantages to that next airplane that gets developed. And I just love where
Boeing is positioned on that front when the time comes."

Read the full transcript - you will learn a lot.
 
morrisond
Posts: 3497
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 8:08 pm

Gremlinzzzz wrote:
mjoelnir wrote:
morrisond wrote:

Go read the annual reports or anyones analysis by anyone on Wall Street.


I think you should read the annual reports. Negative equity means that Borings assets do not cover Boeing debts. Than add on that, that part of the assets, the deferred cost written to inventories, do not exist. Than start thinking about the hole Boeing is in.
I honestly don't know why he does not get this. I have tried explaining to him the need to pay off development cost, especially to a company that weirdly counts them as assets instead of liabilities.

Zombie company if I ever saw one.


They are already paid. They are just using program accounting to smooth profits over time.
 
mjoelnir
Posts: 9652
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 8:25 pm

morrisond wrote:
Gremlinzzzz wrote:
mjoelnir wrote:

I think you should read the annual reports. Negative equity means that Borings assets do not cover Boeing debts. Than add on that, that part of the assets, the deferred cost written to inventories, do not exist. Than start thinking about the hole Boeing is in.
I honestly don't know why he does not get this. I have tried explaining to him the need to pay off development cost, especially to a company that weirdly counts them as assets instead of liabilities.

Zombie company if I ever saw one.


They are already paid. They are just using program accounting to smooth profits over time.


They use using program for cost accounting to inflate profits. As long as there are deferred cost on the books, the accumulated profits are shown higher than in reality.
 
morrisond
Posts: 3497
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Fri Apr 30, 2021 10:53 pm

mjoelnir wrote:
morrisond wrote:
Gremlinzzzz wrote:
I honestly don't know why he does not get this. I have tried explaining to him the need to pay off development cost, especially to a company that weirdly counts them as assets instead of liabilities.

Zombie company if I ever saw one.


They are already paid. They are just using program accounting to smooth profits over time.


They use using program for cost accounting to inflate profits. As long as there are deferred cost on the books, the accumulated profits are shown higher than in reality.


I see where some of the confusion is coming. I am referring to Profits on an annual basis. On an annual basis in the early years - yes Program accounting does inflate profits but later on it understates profit.

Would you be happier if they just accounted for a program much like they would a piece of equipment that was depreciated over time? I probably would as well as it's a lot simpler - but if they did that Boeing would have been reporting much higher profits at peak 787 production than they did.

In opposition to piece of equipment that might have straight line or declining balance depreciation Boeing basically has depreciation that is low in the first couple of years then ramps up as time goes on.

It's a different way to do it and for Boeing not illegal.
 
Gremlinzzzz
Posts: 418
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing aims to evenly spilt narrowbody aircraft market share

Sat May 01, 2021 1:37 am

morrisond wrote:

They are already paid. They are just using program accounting to smooth profits over time.
Do you see anyone arguing different?

No one is. What we know however is that the deferred costs are not assets. You cannot sell them, you cannot trade them to someone else, yet these costs, and they are called costs, show up as assets on the balance sheet and the great thing is that when you pay them, the price of the 'asset' reduces.

Similarly, you are not engaging anything others are saying. If Boeing does not pay these deferred costs, their balance sheet is weaker. This is not an argument, it is statement of fact. Thus, Boeing is in the red concerning the 777X even before they release a plane, they will be in the red on the 747-8 even when they have delivered the last plane, they will continue to be in the red on the 787 for years to come.

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