Boeing HQ
Today’s key news about Boeing include speculation on divestitures as the company will need to pay down debt, the longer-term impacts of the IAM strike, and Air Canada transferring all of its 737 MAX aircraft from the mainline carrier to its Rouge low-cost subsidiary.
Boeing is facing a cash crisis, and has indicated that its new strategy is to focus on core operations. That leaves several business units currently affiliated with Boeing services as non-core. Those units include Jeppesen, which is known for its publication of aviation charts, ForeFlight, which makes an electronic flight bag, the former Aviall and the former KLX operations in spare parts for aircraft.
Combined, these four business units could bring $20 billion in proceeds if divested, and would not significantly impact the core business which is manufacturing aircraft. $20 billion in debt reduction would certainly shore up the company’s balance sheet.
Of course, the defense operations are the other shoe that could drop, if it could pass anti-trust concerns to be acquired by an existing player. Boeing got into its current mess after the Mc-Donnell-Douglas merger, and a reversal could bring things full circle.
The impacts of the Boeing strike on aerospace manufacturing will be felt longer than initially expected, particularly with scant November production at Boeing. The supply chain was forced to recalibrate their operations because parts were not ordered by Boeing, just now recovering to an FAA-capped production schedule for the 737 MAX. Spirit AeroSystems is an example, with 150 fuselages in inventory rather than about 90 prior to the strike. The recalibration and recovery timeframe will stretch longer than anticipated, as some suppliers have built excess inventories while others are rushing to restart and determine the appropriate rate.
The company still has a significant inventory of completed 737 MAX aircraft, will deliver more aircraft than it actually produces as it liquidates the already completed aircraft. The faster Boeing can sell down that inventory, the faster they will generate cash and eliminate inventory holding costs.
Air Canada is moving all of its 737 MAX aircraft to is low-cost subsidiaries, and will rely on A220 and A321 models for its mainline narrow-body operations. This is a surprise, and shows that while the 737 MAX is an efficient aircraft suitable for low cost operations, it may no longer have the passenger cache necessary to be successful in mainline operations. The transition has begun and will be completed in 2026.
In other news, the company has completed final tests for the T-7A Red Hawk jet trainer that are required before full scale production. Boeing needs to move forward into production on this military program that is over-budget and behind schedule to generate cash flow.
Finally, Boeing laid of additional workers in South Carolina in late November, just before it announced 500 new jobs and a $1 billion investment in the Charleston factory complex. With the company knowing it would be investing, one would think that layoffs would have been deferred to maintain existing trained workers. Perhaps the layoffs reflected positions not being thought of as fully productive, or staff that ranked low in performance reports, but it is unusual to cut and invest within the same time frame.
Links to key news follow:
- The effects of the Boeing strike will be felt for a while – Quartz
- “Back to the Future” – the great M&A journey for Boeing – Forbes
- Wow: Air Canada will transfer all Boeing 737 MAXs to Rouge – OMAAT
- Boeing completes final tests of T-7A Red Hawk jet trainer before full-scale production – Army Recognition
- Boeing laid off dozens more workers after Nov cuts, before expansion announcement: report – ABC 4 News
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