Boeing HQ
Today’s key news about Boeing centers about the potential for bankruptcy protection for the company after additional delays and staff cuts. Many of Boeing’s customers, including Tim Clark at Emirates, the largest customer for the 777X, which alone accounts for 205 of the 481 passenger versions on order. Boeing can’t afford to lose 43% of its 777X order book with Emirates, who are now likely to consider the A350-1000 as a potential option. Having your single largest customer upset with you is typically not a route to long-term success.
This will also effect new passenger service designs for Singapore Airlines, who will now likely not receive their first 777-9 until 2027. Air India, ANA British Airways, Cathay Pacific, Ethiopian, Etihad, Lufthansa, and Qatar join Emirates as having ordered passenger versions. It is notable that no US carrier has yet ordered the 777X.
Tim Clark also raised the specter of bankruptcy with the Air Current, which we also believe is a possibility if the company cannot get its act together. Boeing is in a deep downward spiral from which recovery is difficult, and begins with leadership and cultural change. So far, we haven’t seen that from Kelly Ortberg.
Boeing’s release of its financial statements included a few additional write-offs for the 777X, 767F, and the Starliner space program. With mounting debt and a hardening of strike positions, the company faces a credit rating downgrade, which would materially increase interest expense for the highly leveraged company. An equity raise is expected by year end to provide additional working capital as the company faces continued problems with multiple programs. Some of those announcements may be clearing the decks before that equity raise, likely to be a convertible product that doesn’t count as debt for credit rating purposes.
In an effort to end the IAM strike impasse, the acting Secretary of Labor will meet with Boeing and the union to try an re-kindle negotiations, which had been halted. The impact on suppliers and the local economy in the pacific northwest has been quite significant already, apart from the impacts on Boeing and its employees.
Finally, in an analysis of operating cost data, AirInsight illustrates how the MAX 8 and MAX 9 can work in markets that don’t require the longer range of the A321neo family. While the safety reputation of the MAX remains troubled, for an airline, the aircraft could make sense.
Links to today’s key stories follow:
- Emirates’ Clark raises ‘looming’ specter of Boeing bankruptcy protection – Air Current
- Emirates blasts Boeing for delays, plans “serious conversations” – BNN Bloomberg
- Singapore Airlines faces delay for new first class, business class – Executive Traveler
- Boeing’s woes mount, as debt, and a hardening strike risk bankrupting the company – Inc.
- Acting US Labor Secretary to meet with Boeing and union to end impasse – Al Jazzera
- Boeing’s strike is ‘a metaphor’ for a decade of issues – Yahoo
- Boeing clears decks ahead of possible US$15bn stock sale – IFR
- The case for range – using the Boeing MAX as an example – AirInsight
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