Boeing HQ
The key stories for April 5th, 2024, include the DOJ meeting with crash victim lawyers, Airbus, and Boeing in talks to divide Spirit Aerosystems, Boeing’s compensation to Alaska Airlines, more analysis of the company’s downfall, and stories about the impact of Boeing’s problems on the industry.
Links to today’s stories follow:
- Alaska Air says Boeing paid $160 million in compensation after MAX 9 grounding – Reuters
- Turkish Airlines likely to place a new order for Boeing jets – Aviation A2Z
- Exclusive: US Justice Department to meet Boeing fatal crash victims’ lawyers – Reuters
- There was some shady stuff going on with that door plug that blew out of the Boeing 737 – The Byte
- Ryanair among global airlines ‘with largest number of unfilled orders with Boeing’ – Irish Examiner
- Boeing faces production slowdown amid scrutiny, prompts industry ripples and investor concerns – Benzinga
- Boeing: Anatomy of a Blue Chip’s Downfall – Investing Daily
- Exclusive: Boeing, Airbus exploring framework to divvy up Spirit Aero’s operations – Reuters
Perhaps the most important story is the meeting between the US Department of Justice and 737 MAX crash victims, as the deferred prosecution agreement was, apparently, violated by the door plug blowout incident just two days before it was scheduled to expire. This will allow the DOJ to seek criminal charges against Boeing, something that the victims and their attorneys had been seeking since the crashes. Additional financial exposure is something Boeing doesn’t need after a downgrade to BBB-, just above junk by Moody’s. While the outcome could be years away, it will likely come when Boeing needs more free cash to invest in a new narrow-body program.
A story also revealed that Airbus and Boeing were nearing an agreement on the break-apart of Spirit Aerosystems into Boeing and Airbus-related entities, with the Belfast unit that makes wings for the A220 being the large piece going to Airbus. This has, of course, been expected, and Airbus needs a strong Boeing to maintain the duopoly until COMAC can develop into a third competitor and increase production of the C919.
The good news for Boeing is that orders are still coming in, with an order from Turkish Airlines expected soon. The problem is with delays holding up several customers, notably Ryanair from an Irish story, those orders won’t be quickly fulfilled. Balancing new order intake with an uncertain production future makes selling aircraft with firm delivery dates risky for Boeing, which is at the mercy of the FAA in determining production rate for both the 737 MAX and 787 lines.
The Bottom Line:
Boeing remains a company in trouble, and the articles outlining its downfall are also negative about its future outlook. Until a path to increased production and quality is found and demonstrated, there will be doubters that Boeing can pull off its recovery with the current management team.
Boeing wants to resolve its issues quickly, while the FAA wants them resolved correctly before increasing rates. While both have the same goal, their approaches were initially not fully aligned. Boeing needs a longer-term solution to ensure that production rates can be increased and are sustainable. With a lack of credibility with both the FAA and customers, the management changes forced by customers may be the impetus to making progress.
