Boeing HQ
Talks Resume
Today’s news is focused on a productive meeting between Boeing and the IAM. The two sides spoke for the first time since the last offer was rejected, and are apparently making progress toward yet another proposal to be voted on. Our expectation for a two month strike is looking more likely, although the pension issue remain a sticking point with the rank and file. We expect a new offer in a week or two, with the potential end to the strike around the Thanksgiving holiday. With impacts on the local economy and the supply chain creating difficulties, pressures are mounting on both parties to reach a solution.
October Surprises
The ‘October Surprise” for Boeing is that a new problem has emerged at Boeing defense. A contract audit has raised allegations that Boeing charged the government inappropriately for C-17 components, including an 8,000% soap dispenser overcharge. This sounds a lot like the Lockheed toilet seat scandal several decades ago, as Pentagon contracting remains an area rife with opportunities for excesses. This will likely result in a slap on the wrist for Boeing, and some additional distractions Boeing and its CEO can ill afford as it begins the execution of a turnaround plan.
The issue of a revolving door between regulators and Boeing has also resurfaced, coming at an inappropriate time for both parties. The FAA is evolving a new oversight strategy over the next three to five years, and favorable relationships, much like those in the 737 MAX certification process, will be brought into question. The more relevant question is whether the FAA will be ready to increase 737 MAX production past 38 per month when it is in the midst of redefining its oversight programs. Logic would suggest that the FAA finish that task before removing limits on Boeing, in an abundance of caution. That type of impact on a recovery plan would likely set Boeing back by several years, making the recovery longer and slower.
Space Debris
The fallout from the breakup of a Boeing satellite into more than 500 pieces will be problematic, as those pieces of debris could cause a chain reaction collision in space, with small pieces becoming projectiles that are hazardous to navigation. The satellite was not insured, so Intelsat and Boeing will have additional financial impacts coming, likely in the next few quarters once the costs are fully known.
The outstanding issue is clean-up, which is difficult from high geostationary orbits. Objects in low earth orbit can be slowed and burn-up in the atmosphere, but dropping debris out of higher orbits presents navigation risks, and would require thrust to push them to an appropriate lower orbit to enable re-entry and burn-up. Maybe Boeing needs to invest the space garbage truck vehicle?
A Competitive Loss
From a competitive standpoint, Airbus won a narrow-body contract from Riyadh Air, with 60 A321neos going their way. Boeing’s delays with the 737 MAX 10 and inability to deliver aircraft on a timely basis impacted the decision for the Boeing wide-body customer.
Another Wall Street Downgrade
Bernstein became the latest Wall Street analysts to downgrade Boeing, as they call for a ‘compelling recovery plan.’ Apparently they did not find the plan outlined by Kelly Ortberg at the quarterly earnings call as viable.
Shareholders Aren’t Blameless
A story that Boeing shareholders are complicit in its mess reflects an opinion that we agree with – Boeing wasted $64 billion on share buybacks and shareholders did nothing to change Boeing’s Board after the MAX crashes. Shareholder activism appears to be missing at Boeing, as their Board was consistently re-elected by wide majorities.
Military Cargo Seaplane?
Finally, Boeing’s Aurora Flight Sciences subsidiary was awarded a contract for a cargo seaplane that could operate both at altitude and in ground effect, similar to the Beriev Ekranoplane concepts that were explored by the Russians a decade ago. It will be interesting to see how feasible these designs will be as DARPA examines alternatives to the aging C17, the subject of the aforementioned inappropriate maintenance overcharges.
Links to today’s key stories follow:
- Boeing and union hold ‘productive’ meeting amid ongoing strike – IBT
- Boeing allegedly ripped off the government by overcharging almost 8,000% for soap dispensers – Quartz
- How the revolving door at FAA spins Boeing’s way – Seattle Times
- Boeing satellite breaks apart in space: What went wrong and what’s next? – YourStory
- Riyadh Air orders 60 Airbus 321neos, opts for fleet mix with Boeing widebodies – AeroTime
- Boeing downgraded at Bernstein as analysts call for ‘compelling recovery plan’ – Yahoo
- Boeing’s shareholders are complicit in its mess – Taipei Times
- US future Liberty Lifter seaplane to revolutionize sea logistics with 22m000kg cargo capacity – Army Recognition
Views: 7
