Boeing

[AsleepInYorkshire]

5th August 2019
Boeing and the siren call of share buybacks
https://www.ft.com/content/f3e640ee-b53 ... 9a3a8cf37b
Buybacks are, after all, the very purest form of financial engineering. Unlike special dividends, they don’t simply gear the balance sheet, they supply a further twist by reducing the number of shares in issue. The result is to manipulate upwards the earnings per share number — sometimes quite dramatically. In Boeing’s case its effect was to push EPS last year up 20-25 per cent against what it would have been without the repurchases since 2013.

Suggest to avoid FT paywall you Google - Boeing and the siren call of share buybacks and use the link this provides.

AiY

[AsleepInYorkshire]

5th August 2019
Boeing Shares Hit 7-Month Low Amid Trade Tensions and 737 Software-Fix Reports
https://www.thestreet.com/investing/sto ... s-15044476
Boeing shares shed 2.5% Monday to close at $331.06 each, their lowest finish since Jan. 7. The move trimmed the stock's year-to-date gain to just 2.6% ... Boeing plans to sell bonds later this year in a six-part offering that analysts think will take priority over share repurchases at least until the 737 MAX is brought back into full service

Does the bond sale suggest they need cash?

AiY

[scotia]

5th August 2019
Boeing Shares Hit 7-Month Low Amid Trade Tensions and 737 Software-Fix Reports
https://www.thestreet.com/investing/sto ... s-15044476
Boeing shares shed 2.5% Monday to close at $331.06 each, their lowest finish since Jan. 7. The move trimmed the stock's year-to-date gain to just 2.6% ... Boeing plans to sell bonds later this year in a six-part offering that analysts think will take priority over share repurchases at least until the 737 MAX is brought back into full service

Does the bond sale suggest they need cash?
AiY

Logic does not always apply in financial manipulations, but from a simple point of view buying back shares means that they have money to spare, and selling bonds means that they are borrowing - i.e. that they are currently short of cash. So yes - I agree with your hypothesis. Its probably not surprising, since there must be a substantial cash flow problem with lots of constructed, but undelivered, 737MAX aircraft, not to mention compensation for the two crashes, and compensation to airlines that can't use their delivered aircraft. Presumably Boeing hope that the cash flow will ease when they are allowed to re-introduce the 747MAX into service, but the compensation issues will remain. And in the longer term, I find it difficult to believe that forward sales of the 737MAX will not be affected.
And with Trump slapping further tariffs on China, there are reports that China is re-thinking a possible deal to purchase a large number of Boeing 777 and 787 aircraft.
I rather think that an investment in Boeing shares is currently not suitable for widows and orphans.

[CommissarJones]

And with Trump slapping further tariffs on China, there are reports that China is re-thinking a possible deal to purchase a large number of Boeing 777 and 787 aircraft.

Apparently Erdogan recently said the same sort of thing concerning orders placed with Boeing by Turkish Airlines, after Turkey was booted out of the F-35 programme.

[AsleepInYorkshire]

5th August 2019
Boeing Shares Hit 7-Month Low Amid Trade Tensions and 737 Software-Fix Reports
https://www.thestreet.com/investing/sto ... s-15044476
Boeing shares shed 2.5% Monday to close at $331.06 each, their lowest finish since Jan. 7. The move trimmed the stock's year-to-date gain to just 2.6% ... Boeing plans to sell bonds later this year in a six-part offering that analysts think will take priority over share repurchases at least until the 737 MAX is brought back into full service

Does the bond sale suggest they need cash?
AiY

Logic does not always apply in financial manipulations, but from a simple point of view buying back shares means that they have money to spare, and selling bonds means that they are borrowing - i.e. that they are currently short of cash. So yes - I agree with your hypothesis. Its probably not surprising, since there must be a substantial cash flow problem with lots of constructed, but undelivered, 737MAX aircraft, not to mention compensation for the two crashes, and compensation to airlines that can't use their delivered aircraft. Presumably Boeing hope that the cash flow will ease when they are allowed to re-introduce the 747MAX into service, but the compensation issues will remain. And in the longer term, I find it difficult to believe that forward sales of the 737MAX will not be affected.
And with Trump slapping further tariffs on China, there are reports that China is re-thinking a possible deal to purchase a large number of Boeing 777 and 787 aircraft.
I rather think that an investment in Boeing shares is currently not suitable for widows and orphans.

It may be that there are several solid reasons to suggest that it never was suitable as a fund for widows and orphans. I've been scouring over the news today. Sad . And it's timelines that are piquing my interest.

In 2011 Boeing learned that American Airlines, one of its best customers, had struck a tentative deal with Airbus for potentially hundreds of A320neo planes to renew its short-haul fleet. American invited Boeing to make a counter-offer. Boeing realized it needed to act fast, and offered what would become the Max . . . American eventually bought 260 Airbus planes and agreed to take 200 upgraded 737s from Boeing.

I wonder if this is where the events that lead to the two 737 Max aircrafts crashing with the loss of 346 lives began? We can never know. The threat of losing one of their largest customers to their rival Airbus may well have helped to galvanise the Board of Boeings future actions. One possible alternative is that having sold 200 upgraded 737's to American they may have convinced themselves they could copy Airbus and add more fuel efficient engines to an old airframe. Having sat around the table and agreeing that they could "pull it off" and they already had sales to justify such a position, they will have crossed the Rubicon and left safety behind them. With time sales took precedence over safety. With time that mindset reinforced. Made all the more easy because the aircraft was selling. By the time Boeing needed to certify this vehicle with the FAA they were in full flight. Their focus was singular. Share buybacks simply reinforced and underpinned the share price.

A simplistic view I'm sure. Perhaps even a fairy-tale? But nonetheless Boeings demise did not occur when the first Max crashed. It began well before this time and, in my opinion, it started at the top and cascaded down, infiltrating in a uniquely manifest style. Boeing had completed the design of a new vehicle. The Dreamliner. And in 2011 when American made that call to say they were purchasing Airbus, Boeing knew the true cost of designing the Dreamliner had exceeded their budget by a significant number. The cost of adding a new engine to an old airframe was far more attractive than signing off on a new design for the next generation of new single aisle aircraft that Boeing needed to compete with Airbus. In this alternative all of their decisions have revolved around costs.

This is the company that now informs the flying public that they will earn and re-earn trust. I don't think they will convince enough that the aircraft will ever be safe to fly on.

Purely with the benefit of hindsight I'd suggest that this stock was never fit for widows and orphans. Ultimately though it is far more sad than that. Two aircraft have crashed killing all 346 occupants. I can't imagine the widow(er)s and orphans of those who perished will find any comfort in the years ahead.

AiY

[AsleepInYorkshire]

8th August 2019
Boeing Stock Won’t Get Fixed Until the MAX Does
Investors' patience with BA stock has run out. It won't return until the 737 MAX issue is resolved
If even a small minority of passengers won’t fly on MAX planes, the profitability of airlines, and thus the demand for Boeing Co planes, will be negatively impacted. And if regulators anywhere in the world refuse to sign off on the MAX, demand for the planes can be reduced. ... Specifically, debris has been left inside its aerial tankers. As a result the Air Force has withheld some $360 million in payments to Boeing.

The writer goes on to suggest the stok will recover with time. But there's so much hope within such a comment. I don't think we are talking months or years. I think we are talking decades.

AiY

[AsleepInYorkshire]

5th September 2019
Europe will not accept US verdict on 737 Max safety
https://www.bbc.co.uk/news/business-49591363
Europe's tough stance is a blow to Boeing's hopes of a rapid return to service for the 737 Max, and is also a significant break with the established international practice of aviation regulators accepting each other's standards.

AiY

[ReformedCharacter]

Good explanation of the state of play with the MCAS system from a pilot here:

https://www.youtube.com/watch?v=S6dMlbCPmX0

RC

[dspp]

EASA view as given to EU Parliament

(nice to see democracy in action )

https://www.europarl.europa.eu/cmsdata/ ... iginal.pdf (slides)
https://www.europarl.europa.eu/ep-live/ ... ITTEE-TRAN (video)

key message:

Return to Service - EASA conditions
EASA PROPRIETARY – Do not disclose without EASA consent
Letter sent to the FAA on April 01, 2019.
4 conditions:
1. Design changes proposed by Boeing are EASA approved (no delegation to FAA)
2. Additional and broader independent design review has been satisfactorily completed by EASA
3. Accidents of JT610 and ET302 are deemed sufficiently understood
4. B737 MAX flight crews have been adequately trained

and

"Significant technical issues:
- Lack of exhaustive monitoring of the system failures resulting in a stabiliser runaway
- Too high forces needed to move the manual trim wheel in case of a stabiliser runaway
- Too late disconnection of autopilot near stall speed (in specific conditions)
- Too high crew workload and risk of crew confusion in some failure cases, especially Angle of Attack single failure at take-off
Findings communicated to Boeing and FAA in July 2019"

My bolds. Will we be seeing pilots marching into the cockpit armed with fresh batteries for the battery-drill-actuators ! That of course affects all NG models as well as all MAX models.

- dspp

[AsleepInYorkshire]

EASA view as given to EU Parliament

(nice to see democracy in action )

https://www.europarl.europa.eu/cmsdata/ ... iginal.pdf (slides)
https://www.europarl.europa.eu/ep-live/ ... ITTEE-TRAN (video)

key message:

Return to Service - EASA conditions
EASA PROPRIETARY – Do not disclose without EASA consent
Letter sent to the FAA on April 01, 2019.
4 conditions:
1. Design changes proposed by Boeing are EASA approved (no delegation to FAA)
2. Additional and broader independent design review has been satisfactorily completed by EASA
3. Accidents of JT610 and ET302 are deemed sufficiently understood
4. B737 MAX flight crews have been adequately trained

and

"Significant technical issues:
- Lack of exhaustive monitoring of the system failures resulting in a stabiliser runaway
- Too high forces needed to move the manual trim wheel in case of a stabiliser runaway
- Too late disconnection of autopilot near stall speed (in specific conditions)
- Too high crew workload and risk of crew confusion in some failure cases, especially Angle of Attack single failure at take-off
Findings communicated to Boeing and FAA in July 2019"

My bolds. Will we be seeing pilots marching into the cockpit armed with fresh batteries for the battery-drill-actuators ! That of course affects all NG models as well as all MAX models.

- dspp

Clearly EASA have some grave concerns about

1. The vehicle
2. The FAA/Boeing relationship
3. The accidents

I'd like to touch on the third point. Boeing may be able, in my opinion, to defend the first accident. Albeit that's not a walkthrough. However, after the first crash Boeing didn't really respond correctly. They continued to insist their vehicle was safe. And that is being exploited by the legal representatives of those who have lost family. They have requested to see all of Boeings internal documents relating to their response to the first crash and their subsequent actions. The question they are looking to answer is did Boeing have a culture that put profit before safety. Did Boeing roll the dice with the lives of others. If proven no amount of insurance will cover that bill.

AiY

[dspp]

EASA view as given to EU Parliament

(nice to see democracy in action )

https://www.europarl.europa.eu/cmsdata/ ... iginal.pdf (slides)
https://www.europarl.europa.eu/ep-live/ ... ITTEE-TRAN (video)

key message:

Return to Service - EASA conditions
EASA PROPRIETARY – Do not disclose without EASA consent
Letter sent to the FAA on April 01, 2019.
4 conditions:
1. Design changes proposed by Boeing are EASA approved (no delegation to FAA)
2. Additional and broader independent design review has been satisfactorily completed by EASA
3. Accidents of JT610 and ET302 are deemed sufficiently understood
4. B737 MAX flight crews have been adequately trained

and

"Significant technical issues:
- Lack of exhaustive monitoring of the system failures resulting in a stabiliser runaway
- Too high forces needed to move the manual trim wheel in case of a stabiliser runaway
- Too late disconnection of autopilot near stall speed (in specific conditions)
- Too high crew workload and risk of crew confusion in some failure cases, especially Angle of Attack single failure at take-off
Findings communicated to Boeing and FAA in July 2019"

My bolds. Will we be seeing pilots marching into the cockpit armed with fresh batteries for the battery-drill-actuators ! That of course affects all NG models as well as all MAX models.

- dspp

Clearly EASA have some grave concerns about

1. The vehicle
2. The FAA/Boeing relationship
3. The accidents

I'd like to touch on the third point. Boeing may be able, in my opinion, to defend the first accident. Albeit that's not a walkthrough. However, after the first crash Boeing didn't really respond correctly. They continued to insist their vehicle was safe. And that is being exploited by the legal representatives of those who have lost family. They have requested to see all of Boeings internal documents relating to their response to the first crash and their subsequent actions. The question they are looking to answer is did Boeing have a culture that put profit before safety. Did Boeing roll the dice with the lives of others. If proven no amount of insurance will cover that bill.

AiY

The manual trim force issue extends to all the NG as well as the MAX. From memory there are several thousand of the NG in daily service now, plus of course a few hundred MAX parked up.

That manual force issue is non trivial .

I agree on the cultural issues you are making.

Regards, dspp

[AsleepInYorkshire]

The manual trim force issue extends to all the NG as well as the MAX. From memory there are several thousand of the NG in daily service now, plus of course a few hundred MAX parked up.

That manual force issue is non trivial .

I agree on the cultural issues you are making.

Regards, dspp

Yes. Overall there remain significant headwinds not just for the return of the vehicle but also Boeing.

Boeing 737 MAX scandal: A retired BA pilot analyses the probable causes and future implications
https://www.pilotweb.aero/features/737- ... -1-6127413
I have been told that many overseas pilots weren't required even to watch that. Certainly 737 pilots in general were critical of the lack of information originally available to them, and it seems very likely that neither those 29 October 2018 Lion Air pilots nor their 10 March 2019 Ethiopian brethren even knew of the MCAS's existence, let alone details of its operation.
...
What they don't say (remember Boeing always understates a problem) is that aerodynamic loads on the stabilizer will just not allow it to be moved manually, even if you apply all the force you can muster, until you relax that up elevator input. Try doing that with the ground rushing up at you!

AiY

[AsleepInYorkshire]

30th Spetember 2019
Boeing’s Safety Revamp Is Overdue But Welcome
https://www.washingtonpost.com/business ... story.html
"One of my biggest concerns from the Boeing Max crisis was that the relative duopoly the company enjoys with Airbus SE might shield it from the kind of economic pain that can force a company to make real cultural changes."

AiY

[dspp]

From RichardAboulafia who is always worth reading, even if I don't always agree with him, like I disagree with this bit,

" the MAX is not the most important aircraft of 2019. Its problems will be fixed, hopefully lessons will be learned, and I doubt it will be a problem for our industry in twelve months."

but this bit is worth noting

"an incredibly grim orders environment – the worst year in 25+ years, with just ten net orders recorded at Airbus and Boeing through August (95 at Airbus, -85 at Boeing)."

for sure Boeing are hurting. At this rate the A321 refreshes will have stolen too much of the market for Boeing's NMA to ever be successful. hence,

"The A321neo’s triumph as a 757 replacement [i.e. the NMA] might have been inevitable since it’s hard for a twin aisle like the NMA to compete with a single aisle, in terms of production costs and operating economics. That reality, coupled with the $8+ billion MAX-related hole in Boeing’s balance sheet (and Boeing’s ongoing shareholder giveaway addiction), now makes NMA a lot less likely than it was a year ago. It’s still in our forecast, but with a 51% likelihood."

http://www.richardaboulafia.com/shownote.asp?id=623

- dspp

[AsleepInYorkshire]

14th October 2019
Boeing CEO, removed as chairman, near last chance on 737 Max
https://www.chicagobusiness.com/manufac ... ce-737-max

The clock is ticking ever more loudly for Boeing Co. Chief Executive Officer Dennis Muilenburg as the grounding of the 737 Max hits the seven-month mark.
The board removed him as chairman Oct. 11 after the close of the workweek, saying the change would enable Muilenburg to focus on returning Boeing’s best-selling jet to service.

AiY

[dspp]

14th October 2019
Boeing CEO, removed as chairman, near last chance on 737 Max
https://www.chicagobusiness.com/manufac ... ce-737-max

The clock is ticking ever more loudly for Boeing Co. Chief Executive Officer Dennis Muilenburg as the grounding of the 737 Max hits the seven-month mark.
The board removed him as chairman Oct. 11 after the close of the workweek, saying the change would enable Muilenburg to focus on returning Boeing’s best-selling jet to service.

AiY

A lot of airlines, all over the world, are relocating (ferrying) their aircraft to drier/cheaper/less humid locations for longer term storage until the issue is resolved somehow. They are doing this using flaps partially out to inhibit MCAS. Some jurisdictions are refusing access to even these non-revenue-earning flights (er, France).

....... mmmmmm

regards, dspp

(e.g. https://www.pprune.org/rumours-news/626 ... s-1-a.html)

[scotia]

https://uk.reuters.com/article/us-ethiopia-airplane-boeing-exclusive/boeing-pilots-messages-on-737-max-safety-raise-new-questions-idUKKBN1WX25G

More bad news about the 737Max. It appears that problems occurred in 2016 with a 737Max simulator which were not communicated to the regulators.
This may simply have been a bug in the simulator, but its the non-disclosure that seems to be causing concern.

[AsleepInYorkshire]

21st October 2019
Boeing may face billions more in losses as MAX crisis deepens: analysts
https://uk.reuters.com/article/us-boein ... KKBN1X01CB

(Reuters) - Boeing Co (BA.N) may have to book billions of dollars in additional charges related to its grounded 737 MAX jets, brokerages said on Monday, following reports that call into question the timing of the aircraft’s return to service.

I've said it before and am happy to say it again. The first hurdle the Max faces is it needs to obtain approval by the FAA. Other countries have said that is not sufficient for them and will do their own checks. Then the travelling public has to get back on this vehicle to allow it to be viable. And on that subject I remain a sceptic. I don't think the modern informed traveller will queue in sufficient volume to allow the Max to remain commercially viable.

AiY

[scotia]

October 23/24 news concerning Boeing
Kevin McAllister, head of Boeing Commercial Airplanes will leave the firm - effective immediately
Boeing 3rd quarter sales fell by 21%. Number of commercial planes delivered dropped by 67%. Revenues fell by 41%
American Airlines has raised its estimate of the bill relating to the 737MAX grounding to $540, 37% more than it previously estimated.
https://www.bbc.co.uk/news/topics/c2g0x3qg9q1t/boeing-737-max-8
Boeing continues to say that it expects the 737MAX to be re-certified to fly by the end of 2019
Boeing also cited that the trade war with China was the reason behind its pending production cut of the 787 Dreamliner
https://www.bizjournals.com/seattle/news/2019/10/23/boeing-to-cut-787-dreamliner-production-in-2020.html

[AsleepInYorkshire]

29th October 2019
Boeing accused of putting profit before safety by Senators
https://www.bbc.co.uk/news/business-50225025
US lawmakers have accused Boeing of engaging in a "pattern of deliberate concealment" as it sought approval for its 737 Max 8 plane to fly.
...
Senator Richard Blumenthal said Boeing had rushed the approval process and engaged in a "pattern of deliberate concealment".
He suggested that pilots had been misled and Boeing had, in effect, designed a 'flying coffin'.

AiY