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I'm surprised that the market hasn't reacted more negatively towards Boeing regarding the Max 8 disaster. Airlines operate on razor-thin margins (~1 to 2%), an

• JumpCrisscross 7y ago
  > lawsuits that are surely incoming are going to pile-drive this company into the ground Legally, everyone is indemnified up the wazoo. Strategically, airlines are in a worse position if Boeing goes under. Not only do they lose the planes on order. They also lose their service and replacement-parts provider. The survivors would, in the medium-term, face an Airbus monopoly and, in the long-term, a Chinese-European duopoly. As emotionally-satisfying as it may be to see Boeing go under for its arrogance, it's neither helpful nor likely. (A well-managed break-up, on the other hand...)
  • nickjj 7y ago
    > Strategically, airlines are in a worse position if Boeing goes under. It is an interesting situation for airlines. Boeing is kind of a leaky abstraction layer on flying. End users deal with the airlines, not so much Boeing directly. For example, if Amazon ships your package and it comes 4 days late because FedEx screwed up, you're going to likely think negatively of Amazon not FedEx. Because from your POV it's "Amazon said it will be here today but it's not". Likewise if a major US airline's plane went down due to Boeing's fault it would probably ruin the entire airline. It gets even more weird when you think about airlines making questionable decisions to push Boeing into making poor decisions or knowingly operate when captains of those airlines are aware of the faults but the airline still flies them anyways and this is where it leaks.
    • sfifs 7y ago
      Airlines know that which is why the PR has been particularly brutal on Boeing. Everyone has tried to shift blame to Boeing overtly or covertly even as Boeing tried to shift blame to pilots, regulators, airlines etc. In this particular case, Boeing's PR machinery got overwhelmed and in this day and age of high social value if authenticity, the bland corporate legalese speak adopted by its spokespeople hasn't helped.
    • ken 7y ago
      > For example, if Amazon ships your package and it comes 4 days late because FedEx screwed up, you're going to likely think negatively of Amazon not FedEx. Because from your POV it's "Amazon said it will be here today but it's not". I don't think that's true. Everyone I know seems to have a favorite of {UPS,FedEx} and thinks the other one is garbage. And people pretty universally hate the USPS. Amazon is trying to get into the delivery business, but people still recognize that there's usually a third-party shipping company that actually puts the box at their door.
  • room271 7y ago
    But the airlines know that Boeing will never go under because the US government would (justifiably) never let that happen for strategic reasons.
    • munk-a 7y ago
      Boeing has burned a lot of political and public capital recently so they may actually be in hot water over this. As a Canadian I'm still pretty outraged over the stupidity that the US carried out at Bombardier - Boeing basically told the US Government "Hey, those Canadians are better than us at everything" and then the US Government said "Oh, poor baby, well we'll just help the free market out with a 300% tariff." Thanks free market economics!
      • GhettoMaestro 7y ago
        Cool story, bro. Except that isn’t really the market reality.
      • chrisseaton 7y ago
        The US needs Boeing for military planes.
      • duckymcduckface 7y ago
        Althought as a Montrealer I am really unhappy that the C-series is now called the A220, I was very happy when Bombardier basically bitch slapped Boeing by getting Airbus to buy it and make it in the US.
        • munk-a 7y ago
          It was hilarious to watch the Airbus licensing, but Bombardier also got the raw end of the deal - with the corner they were backed into they're going to end up seeing a lot less revenue off that model then they had planned.
          • JumpCrisscross 7y ago
  • zaphirplane 7y ago
    > Boeing goes under We are way way far from that and if it does come close I would bet on bailouts and government intervention Boeing isn’t going to go under
  • Despegar 7y ago
    >Strategically, airlines are in a worse position if Boeing goes under. Not only do they lose the planes on order. They also lose their service and replacement-parts provider. The survivors would, in the medium-term, face an Airbus monopoly and, in the long-term, a Chinese-European duopoly. Boeing "going under" just means that shareholders will get wiped out, not that they cease operations.
    • bilbo0s 7y ago
      That may be what the poster meant by "well managed break up".
      • marvin 7y ago
        This always baffles me. It's still the free market even if regulators sometimes step in to ensure that incentives are aligned and outcomes don't become systemically catastrophic. In this case, it would be Boeing going bankrupt, and authorities stepping in to buy the assets to keep operations running if no other entity stepped in to do that. Then selling on the reformed company on the open market afterwards.
        • honestoHeminway 7y ago
          At what price though? This market is as distorted as agrar-markets. Prices only ever go down, before a intervention happens. (§ Forbidden by law to convert food into fuel etc.).. Same happens to management, if you cant loose it all, but can extract huge bonuses at the same time. No free market anywhere, as far as the eye can see.
    • hackerbabz 7y ago
      I wonder if Lockheed Martin would get back into passenger jets. Or Bombardier leads a Canadian aerospace resurgence.
      • nogabebop23 7y ago
        >> Bombardier leads a Canadian aerospace resurgence. Do we have enough tax dollars to finance such an event </s>
  • hinkley 7y ago
    Didn't the US government already "manage" us into the McDonnell Douglas merger in the first place? "We're from the Government and we're here to help," indeed.
    • rswail 7y ago
      Considering the military industrial complex is what created all of these firms in the first place, people complaining about the government rearranging them does not make sense. There are a lot of complaints about China's "State Owned Enterprises" taking advantage of their ties to the CCP and government. Boeing/Lockheed/Raytheon etc are the same but with the pretense that they are public companies with shareholders that have a say in how the company is run.
  • starfallg 7y ago
    > Chinese-European duopoly Unlikely. The Chinese is currently competing with Embraer (E-Jet E2) and Bombardier (C-series/A22x) with the Comac C919 which has problems with production. Since its first flight in 2017, there has only been 5 built. Tech transfers has also slowed to trickle since the HSR fiasco with foreign rail technology absorbed and then re-exported. Nobody trusts the Chinese to play fair. What's more likely if Boeing run into difficulties from the MAX damages is that it will restructure under Chapter 11 and re-emerge with the existing shareholders wiped out. This may involve a breakup, with the defence business separating from the commercial airliner business, but that's also unlikely due to how aerospace companies are run these days.
    • inferiorhuman 7y ago
      The Chinese is currently competing with Embraer (E-Jet E2) and Bombardier (C-series/A22x) AKA Boeing and Airbus.
      • 9nGQluzmnq3M 7y ago
        The C919 is a narrowbody jet aimed at the 737/A320. There are no Chinese widebody/twin aisle aircraft, now or anytime in the foreseeable future, that can compete with the 787/A350.
        • djcapelis 7y ago
          In a huge leap of naming they’ve named it the C929 with initial flights in 2025 and EIS planned for 2027. It’s cool to think they probably won’t hit those dates but pretending like a roadmap doesn’t even exist is not. https://en.m.wikipedia.org/wiki/CRAIC_CR929 https://en.m.wikipedia.org/wiki/CRAIC_CR929
          • 9nGQluzmnq3M 7y ago
            The CR929 is vaporware: they're not even planning to begin construction of the first prototype until 2021. Also, it's "CR" for "China/Russia", since this is meant to be a joint venture between COMAC and UAC (Sukhoi). Which sounds like a great recipe to delay everything even further. Also also, even if China does pull off the airframe, they'll still rely on Western jets to power it. China's first modern turbofan, the CJ-1000A, is not scheduled to go into service until 2030 (!) and even that is geared only for the C919: https://en.m.wikipedia.org/wiki/ACAE_CJ-1000A https://en.m.wikipedia.org/wiki/ACAE_CJ-1000A Don't get me wrong, I'm sure China will get there sooner or later, as they've already demonstrated with high-speed trains and many other things. But timeframes for going from concept to a serious competitor in this business are measured in decades.
  • TuringNYC 7y ago
    >> As emotionally-satisfying as it may be to see Boeing go under for its arrogance, it's neither helpful nor likely. (A well-managed break-up, on the other hand...) Not Likely is the key word here. They are large and have a strategic value to the US and hence Too Big To Fail https://en.wikipedia.org/wiki/Too_big_to_fail https://en.wikipedia.org/wiki/Too_big_to_fail I'd bet the US Government steps in to re-structure and backstop as required to save the company. There are numerous ways we've discovered to do so post 2008.
    • oska 7y ago
      > There are numerous ways we've discovered to do so post 2008. All of them bad. Companies should fail and keeping bad companies alive via artificial means is bad. You get zombie companies and eventually a zombie economy (see Japan). (And "Too big to fail" is a phrase meant to identify a problematic ideology, not a bailout excuse). Boeing failing doesn't necessarily mean that the USA loses their technology and production facilities. It does mean some substantial losses to investors in the company, but that should be part of the risk of investment.
      • mehrdadn 7y ago
        I don't think the parent was endorsing this approach. It seemed like the opposite to me.
        • TuringNYC 7y ago
          Correct. I'm the parent. Not endorsing this. Just accepting the reality. Most off our TBTF bailouts were unnecessary in my opinion, or if actually necessary, the bailouts were insufficiently punitive to investors. Most of it comes down to the political power and DC influence of the company management.
      • dirtyid 7y ago
        >Too big to fail Maybe too strategically important to fail is more apt.
      • honestoHeminway 7y ago
  • briandear 7y ago
    Having Airbus “fly by wire” as the only alternative? No thank you. AF 447 shows what happens when you let computers make all the decisions. Boeing gets the scrutiny, but Airbus is extremely corrupt.
  • yskchu 7y ago
    There's no way Boeing will be going "under" just because 1 model of their planes is impacted 737 MAX is impacted but there's still 737 NG which doesn't have these issues And then there's 747, 767, 777, 787 which are still under production This is just the commercial plane side of the business, there's the huge defence side as well Finally, Boeing has been playing this game a long time, very well connected in gov and congress, and its business impact many states and employees. Boeing is basically too big (and too well connected) to fail; even in the worst possible case, they'll probably get a bailout.
    • stevehawk 7y ago
      While I agree with you, I just want to point out that the 747 as an airliner is no longer made and airlines would not likely go back to it. Many are still flying them but they are being phased out for financial reasons. Their manufacturing continues as a cargo plane though. Passenger wise, the last one was made in 2017. https://money.cnn.com/2017/07/19/news/companies/the-last-747-jumbo-jetliner/index.html https://money.cnn.com/2017/07/19/news/companies/the-last-747...
  • tempguy9999 7y ago
    > indemnified up the wazoo Really? Are you sure boeing is, given the cost-savings that not being insured would make (I mean the mgmt is clearly penny-pinchingly stupid enough). But even if boeing is insured, you can bet your butt the insurers will have an explicit or implicit clause that voids the insurance on 'reasonable grounds', and they will argue (correctly) that knowingly producing flawed products (when it became evident at least) matches that getout perfectly. Even if they lose the insurers will basically move into a courtroom, sleeping bags and all, to tie things up forever. It's cheaper than paying out. My opinion anyway.
• notatoad 7y ago
  >The lawsuits that are surely incoming are going to pile-drive this company into the ground I'm sure the lawsuits are coming, but we're talking about Boeing here. "pile drive them into the ground" might be a bit of an overstatement. Worst-case scenario, they have to be bailed out by the government.
• markus_zhang 7y ago
  Boeing is one of the pillars of the American economy and the market as well. Dumping the stock will hurt pretty much every fund that invested on it, plus Dow will plunge just because of this one stock if it's getting dumped. Boeing, as well as many other firms, are just too big to fail suddenly.
  • olefoo 7y ago
    > too big to fail suddenly Also known as "a systemic risk". This is the downside of allowing the concentration of economic power in too few hands. It's like other large scale systems. Yes there's a lot of redundancy; but that redundancy serves a purpose.
    • rodgerd 7y ago
      All the central planning of the old Soviet Union, with none of the pretense to public good.
  • hinkley 7y ago
    There was a really weird moment for me about ten years ago when I realized Apple could pay cash to buy Boeing. I mean, obviously they wouldn't, but something is off about the scale of it all. Are we sure it's a pillar? Perhaps if you take all of the suppliers and partners it represents, sure. But by itself, I don't think it really look all that impressive. After The War, the US government was careful to keep domestic manufacturing 'healthy' which turned into 'fat and happy' which has now turned into I-don't-know-what, but I wonder if subsidies-as-defense-policy should be putting more energy into other industries.
    • markus_zhang 7y ago
      Yeah including all those peripheral dmg if it falls suddenly. I'm mean might be able to afford I'd it declines overtime, but a shock is going be very scary.
    • gniv 7y ago
      Interesting comparison. I guess the difference is that the supply chain of Boeing is mostly in the US, whereas for Apple it's mostly overseas.
• wayoutthere 7y ago
  > The lawsuits that are surely incoming are going to pile-drive this company into the ground. Boeing is one of the most heavily subsidized companies in the world -- right alongside Airbus. They are a strategic asset to the United States far beyond their market value. The market knows this, hence why their stock is not being hammered.
  • allovernow 7y ago
    Indeed. Though personally I feel perhaps Boeing should be left to fail, I'm considering going long if the stock slides further in the short term because I anticipate some form of bailout/buyout.
    • CharlesColeman 7y ago
      > Indeed. Though personally I feel perhaps Boeing should be left to fail, I'm considering going long if the stock slides further in the short term because I anticipate some form of bailout/buyout. I don't want to see it wind down as a going concern, but I wouldn't mind a bankruptcy and seeing the executives and board of directors fired with their compensation clawed back.
      • CydeWeys 7y ago
        It's unbelievable that the CEO still has his job.
        • kn0where 7y ago
          The shitstorm is far from over; who would want this on their plate? Better to let the current guy ride it out and then replace him once things can’t get any worse.
        • RomanBob 7y ago
          Instead of being fired with $50 mil severance package?
      • rswail 7y ago
• themagician 7y ago
  Boeing will be fine. By the end of next year everyone will have forgotten. Even if Boeing wasn't fine, it would be fine, because the government would just bail them out. Investors know this and ignore the drama.
  • alasdair_ 7y ago
    The US government will ensure Boeing as an entity continues to exist, but that doesn't mean existing shareholders will keep their equity at the current valuation.
  • 8bitsrule 7y ago
    > the government would just bail them out. Good thing for the proponents of the supposed 'wisdom of the market'. Nice of US to help keep that 'wisdom' alive.
• cft 7y ago
  The market assumes that Boeing is too big to fail and largely ignores this news. I made quite a lot on the short term BA calls after the Ethiopian disaster. Long term, the crony consolidation of Boeing, Lockheed and Douglas commercial airplanes will probably greatly diminish the US market share in lieu of the new East Asian competition. But unfortunately no effective long-term short instruments exist (with a time horizon of 5-10 years). I think if they existed, they would have dampened the stock market bubbles.
• Aloha 7y ago
  Boeing is sitting on a big giant huge bucket of assets. In the long term, this is a blip.
• pcurve 7y ago
  They are down 25% from the high. That's a lot. But if you look at their 50 year chart, it had recent run up of 3-4x in just past 4-5 years. It's quite possible there's some serious downside, but only through series of bad news like this.
• selimthegrim 7y ago
  SWA and AA are morally responsible for some of these design choices. I’m sure they would come up in any suit vs Boeing
  • bumby 7y ago
    Is this regarding the airline delivery pressure that influenced schedule or some other mechanism?
    • selimthegrim 7y ago
      Not just schedule but design, training (SWA incentives)
  • briandear 7y ago
    Except none of their pilots crashed the plane despite flying an order of magnitude more flights than Ethiopian or Lion Air. The difference is that US pilots are far better trained and maintenance doesn’t skimp like Lion Air had a long history of doing. The Lion Air plane should have been grounded when the the AOA sensor was reported bad on the flight the day before the crash. The executive in charge of Lion Air maintenance should be in jail: they let the plane fly knowing the AOA sensor was faulty. The MEL for that airplane required the AOA sensor. For some reason we let Lion Air off the hook, but look at their history: one of the most dangerous airlines in existence and that isn’t Boeing’s fault.
• rwc 7y ago
  Boeing already cleared their obligation to Southwest for 2019 with a $125 million payment. Nothing to sneeze at, but far from anything nearing a "pile-drive".
  • zaroth 7y ago
    No, the $125 million was just the portion set aside for Southwest employees.
• JohnJamesRambo 7y ago
  Isn’t the problem that all of our mutual funds just keep buying Boeing stock no matter what bad things happen?
  • kyrieeschaton 7y ago
    Most index funds are in some matter market weighted. So when the price crashes, they buy less, and vice versa. You can see how this could have some odd effects, but the thesis is that heavily leveraged smart money washes it out.
• megablast 7y ago
  Index funds are so big now, the market rarely moves down.
• nogabebop23 7y ago
  I'd like some of these raxor thin margins! They are up in every category with the exception of a small drop in utilization for both the 3rd quarter and YoY, with essentially no more employees and better fuel efficiency: "Our 2019 third quarter financial results reflect net earnings of $119.4 million and diluted earnings per share of $1.02, representing our second most profitable third quarter and our overall third best quarterly performance in our 23-year history." Also according to their own report their fleet numbers 180 airplanes. FInally: "We continue to adjust our flight schedule through the end of 2019 as a result of the ongoing closure of Canadian airspace forthe Boeing MAX series aircraft impacting our fleet. Our contingency planning and proactive schedule adjustments enable us to reduce last minute flight cancellations and unexpected travel disruptions, however, certain routes have been temporarily suspended as a result of aircraft inventory shortages." Wanna bet they suspended certain routes that were not very profitable like interior, non-hub routes? https://www.westjet.com/assets/wj-web/documents/en/investorMedia/WestJet-2019-Q3-Financial-Report.pdf https://www.westjet.com/assets/wj-web/documents/en/investorM...
  • hudibras 7y ago
    A good rule of thumb is to never believe it when a company or industry says they have razor-thin margins.
    • seanmcdirmid 7y ago
      That works at least until their cash flow seizes up and they need a huge bail out. The car industry is a good example of a margin thin one.
• o-__-o 7y ago
  Assume there are 75 planes that will not be delivered. At an average of $125m per plane, that’s $9B or 7% of their assets. They can simply payback that money with all cash on hand and everyone is whole. Boeing stock is down about 3% today which lines up with the numbers above. Boeing is not going anywhere. Maybe shave another 10% for them to remake the MAX (new 7x7) and fix their image problem and by mid decade no one will remember how to spell MCAS