Boeing’s bad day. Will it ever be the same again?

The end of the 748F was announced yesterday

Boeing yesterday briefed the world on what can only be described as a disastrous set of results and onward projections…

While couched in rosy language and psycho-linguistic phraseology to basically, and I apologise for the synonym, polish a turd, it left basic truths exposed if you strip the cotton wool from around them.

It all came on a day when AerCap leasing cancelled another 15 737MAX’s. Singapore Airlines also said it was in the final days of working out extensive delays to its aircraft orders with Boeing.

Key points

Boeing lost $2.4 billion in the second quarter.

The 747-8F will cease production when the last aircraft is delivered in 2022 to UPS. Production will remain at 1 every two months until then.

The 777-9 will be delayed until mid 2022 at the earliest.

Remaining 773ER/777F and eventually 777-9 production will not exceed 2.5 per month in 2022 and only 1 a month during 2021.

Some think the 777-9 is just another A380 in the making

Plans are being reviewed to end 787 production at one site – probably Everett, because the 787-10 can’t be produced there. Everett’s line will probably be mothballed.

787 production will be cut from 10 per month to 7 by 2022, considered the minimum viable long term. That will almost certainly coincide with the closing of one of the production sites. However during the first half of 2021 it will be temporarily cut to just 6 per month.

Not months ago 787 production was at 14 a month

737 MAX production will be pinned at a maximum of 31 per month but not until late 2021 to 2022 at the very earliest.

The speed of production ramp up will depend on how fast the 450 MAX’s already built but not delivered, are handed over. At present, demand for them is minimal.

MAX10 Reveal – November 22, 2019

The 767 will stay at 3 per month, largely to satisfy the US Air Force KC46 tanker programme.

19,000 staff are already being permanently let go, 6,000 have already left. A review to examine how many more will have to go is underway.

Boeing has also drawn down all of its $13.8 billion credit facility and issued another $25 billion in debt bonds.

The company decided not to take any bailout money, and won’t. Not out of any high minded altruism but because it would have to give the government shares in the company.

Conclusions:

What does it all mean? It means Boeing with all the knowledge it has from airlines that are telling it what they want – or more accurately what they don’t want, sees a deep and dark recession like little other in its history.

It also means that thousands of small suppliers and niche component companies in the US and beyond, face a harsh future with little or no idea as to when it might end.

Boeing has been a military manufacturer that made commercial aircraft, then became a commercial aircraft manufacturer that made military aircraft too. Now it’s back to being almost an entirely government funded contractor with most of its profits in defence contracts. Without its defence and space operations it would probably have gone under.

It’s future isn’t really in doubt, but it’s size certainly is. If defence budgets are cut in coming years to pay for the trillions spent by the current administration in tax rebates for rich people and then in Covid relief bills, Boeing may find itself a lot smaller than the all-encompassing mega-corp it once was.

Much will depend on a Covid vaccine, and the willingness of people to travel. Solving Covid is the only real way forward. Until that happens and the travel market returns, airlines won’t need what they already have never mind what they have on order.

The nightmare for Boeing is that if the market doesn’t return to even half what it was by 2023-25, then the basic industrial base that supports it will wither and die, making a return difficult if not impossible.

There’s no painting a rosy picture here. Boeing tried to a point, but it’s bad. Worse than many really wanted to hear. The medium term future is dire. The aviation cycle has been reset. In reality it’s going to be 2028-30 before all this shakes out in a rebirth. Hopefully new tech and new, greener, sounder future ideas will lead the way.