Lootman wrote:AsleepInYorkshire wrote: it’s only fair that we paint a picture of the potential demise of a formerly great U.S. company. Such a fall, except for paradigm shifts in technology, is nearly always caused by bad leadership, faulty products and employees who finally give up fighting their knuckleheaded leadership and just do what they’re told.
Demise? Fall? Paradigm shift?
The market doesn't think so. Boeing shares are at $365, which is an 18% drop from their all-time high earlier this year of $446. At the market bottom in 2009 they were briefly below $32.
Fair point. Clearly the market doesn't think the company is going to fail. This puts me in a very vulnerable position when I say that I feel it's not quite as rosy as the current price belies. I wonder if the price has detached from the underlying value of the business? Has the market got it wrong? I would be barking mad to ignore the current price and argue that Boeing is in serious trouble. Ultimately I could end up sucking a very bitter lemon and looking rather foolish.
That’s a risk I am prepared to take. You may of course, reserve the right, to come back and say “I told you so”
I dare say it won't be the first or last time I have been foolish 
Lootman wrote:Boeing shares went up fourteen-fold in a decade and have now had a correction of less than one fifth. So the market clearly does not think Boeing will fail. Other than the 737-MAX, things look good
Another fair comment. Again it puts me out on a fools limb as I have not deferred to these statistics.
Lootman wrote:The 787 Dreamliner problems are with the engines - specifically the Rolls Royce Trent engines, so that is our fault rather than theirs. And no 787 has ever crashed.
Yes. The Rolls Royce engines have been the cause of some issues.
All the points you refer to are solid fact. And in there own right, alongside the current share price, it could be argued that they underpin a robust business that isn’t in any trouble. It would be reasonable to assume the market has got it right.
Yet I am currently not convinced.
I believe that Boeing can only continue in its current configuration if certain events unfold. And let me clarify that please. If any one of these don’t occur then at the very least Boeing will need to re-organise its structure.
- The Max returns to service
- The take up by global passengers is significant. In other words they forget the crashes
- The FAA take back those controls handed to Boeing of certifying the safety of aircraft
- Boeing commence design and development of a new single aisle aircraft
- There’s no real downturn in growth of air travel
Return to Service
No matter how small there’s a chance the Max will not be certified to return to service. I think it will return. In the interim the time it takes to achieve certification only serves to amplify the damage being done to its future viability. Many airlines, currently unable to fly the Max are beginning to lose a share of the market they fought hard to secure. This may influence their choice when they purchase replacements for their future fleets.
Passenger Take Up
Information is available globally almost instantaneously. For the most the audience is more educated than it was 50 years ago. It’s more likely to refuse to fly on the Max when it returns to service.
53% American adults say they don't want to fly on a Boeing 737 Max
https://www.businessinsider.com/america ... ?r=US&IR=T
We asked more than 1,100 respondents "If you had a flight on a Boeing 737 Max next week, and the FAA decided to clear the aircraft for flight, given the issues the plane has experienced, what would you do?" In total, 53% of respondents said they would attempt to reschedule while 32% said they wouldn't change their travel plans.
I have to admit that I find the number who would get on the Max alarmingly high. However, it wouldn't be significantly enough to make the vehicle commercially viable, would it?
The FAA & Aircraft Safety – In Particular the Boeing 737 Max
Let me be absolutely blunt. Boeing have attempted to modernise an old out of date aircraft. It almost worked. But almost isn’t good enough. Boeings attempt to polish a turd has failed. Management at Boeing convinced themselves that they could get one more “iteration” from an old, tired and beleaguered vehicle. To ensure the success of their idea they have lobbied to take control of safety certification. The latter was clearly done not for the benefit of the flying public but Boeing itself. How anyone other than the board at Boeing can argue that self-certification improves the safety of an aircraft really beggars belief. And indeed it’s entirely possible that when the results of the investigation come out this will be proven. I’d suggest that after the first aircraft crashed Boeing continued down their blinkered and self-fulfilling path and denied any wrong with their vehicle. I’ve said in previous posts that I felt management were asleep at the wheel. Maybe they weren’t. Maybe they knew they had a serious issue? And God forbid that they did.
Single Aisle Aircraft Sales
Lootman wrote:There are large backorders for 777s and 787s. Then there is the whole military and aerospace side, plus Embraer's successful E175/E190 and new E2 regional jets, which Boeing has a 80% interest in.
Airbus have slowly but surely stolen market share from Boeing who have not invested in the development of a new single aisle aircraft. Boeing have left themselves with no other option than to roll the dice and “hope” that the Max would tied them over the ensuing gap in development. And with all their eggs in one basket they could not afford to allow any bump in the road to get in the way.
The reality is that Boeing have invested in new aircraft that do not represent the largest market. Single aisle vehicles dominate market share. Literally the survival of Boeings Aircraft Division relies upon the Max.
Five Basic Facts About Boeing Missing From Coverage Of the 737 MAX Story
https://www.forbes.com/sites/lorenthomp ... c2e5b4521b
737 MAX isn’t just one of the jetliners in Boeing’s commercial product mix, it is the pivotal offering of the entire enterprise. Over 80% of the company’s order backlog is commercial airplanes, and four out of five of those commercial planes are 737s. The company’s latest 20-year forecast of demand for jetliners projects that 74% of the 44,000 commercial transports ordered worldwide over the next 20 years will be single-aisle aircraft, and 737 is the only single-aisle jetliner Boeing makes.
Boeing makes widebody jets too—747,767,777,787—but without 737 the company could not remain competitive in any market segment with European rival Airbus. A basic rule of thumb in the global duopoly that Airbus and Boeing currently share is that if a company falls below 40% of total worldwide backlog, its ability to price successfully against the other player begins eroding. Boeing’s strategy in other segments of the aerospace and defense market assumes continued strong cashflow from the commercial side, which would be unlikely in the absence of 737 MAX.
April 2018 Letter
http://www.richardaboulafia.com/shownote.asp?id=564
The 737’s first problem, above, shows that the market is up gauging, and Boeing’s next single aisle will simply need to be a larger clean-sheet design (if only to accommodate ever-growing engines under its wings). Since 797 will be a twin aisle, it won’t have much in common with the new single aisle.
Boeings Dreamliner Design & Build Costs
The 787 (Dreamliner) project ran past its deadline resulting in significant cost over-runs. This was due to Boeing’s supply chain which was complex and difficult to manage. They decided to outsource the design and manufacture of the majority of parts to decrease costs. Previously, these tasks were conducted in-house.
This decision cost billions. However, the most disturbing part of this failure were events that preceded it. The advice from its technical experts was to keep with traditional methods of design and manufacture. Ironically, they ignored this advice in an attempt to cut costs.
Boeing seem quite capable of making damaging management decisions. Which doesn't sit well given the external headwinds building against them currently. The Dreamliner events may evidence that Boeing lack the necessary skills to deliver a new single aisle aircraft on time and within budget. They have clearly been misguided about their abilities to deliver a safe and viable Max iteration.
Global Air Travel Growth
Boeing Stock Has Much Bigger Things to Worry About Than the 737 MAX
https://www.barrons.com/articles/boeing ... 1561995357
Boeing—and its suppliers—have been relatively impervious to the MAX woes because growth in air travel has been strong for a decade. Air traffic growth, however, is slowing as the global economy decelerates. And that may be what hurts Boeing stock more in the future than any of the more dramatic issues facing the company.
History Share Price Detachment
History is littered with the demise and fall of large companies. The Royal Bank of Scotland fell from grace just over a decade ago.
http://tools.morningstar.co.uk/uk/stock ... 0P000090MW]3]0]E0WWE$$ALL
It’s interesting to note that the share price of RBoS rose just over 14 times from September 1992 to March 2007. It may also be worth noting that the current share price is below that of 1988 and 1992.
Boeing Can't Fail its too Important
RBoS was not allowed to fail. The shareholders haven't been protected though.
AiY
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