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So, realistically, what will happen? Not what _should_ happen, but what will actually happen? 1) the current board will continue 2) European (and other) regula

So, realistically, what will happen? Not what _should_ happen, but what will actually happen? 1) the current board will continue 2) European (and other) regulators will not be impressed 3) Boeing sales vs. Airbus will not return to their previous levels for years, if ever; a goodly percentage of international travel will be locked up for Airbus 4) Boeing will also face more competition from SpaceX (and perhaps others) in the space industry 5) Boeing will start the long, slow path that General Motors took from the late 70's to 2008. It takes a long time for a company as big as Boeing to crater. But I feel like in the last year, we've seen the start of the process.

olefoo 7y ago
Given that they are sitting on close to $10 Billion in unsold and possibly undeliverable inventory. I would not be surprised to see them re-org.
btilly 7y ago
The big wild card here is SpaceX. As with all things Elon, SpaceX is built on a financial pyramid. It either wins big, or loses big. And Boeing is a clear loser if SpaceX succeeds. A rule of thumb is that the rare big projects that will do well starts announcing that they are ahead of deadlines early, and that continues. Big projects that won't do not declare slipping deadlines until they can't hide it, and there is never any sense of what the real schedule is. Right now SpaceX is announcing that they are ahead of deadlines. Boeing is consistently slipping. What would the losses be? Well consider: Boeing is counting on billions of dollars for deliveries to the ISS. They are being heavily subsidized and do not have a proven technology for doing so. SpaceX is running routine missions and if their Super Heavy works out will see a dramatic cost drop. Boeing has billions more at stake with the SLS system for deep space launches and a return to the Moon. But the project is in peril and missing deadlines. Political connections favor Boeing. But if Super Heavy is anything close to what is promised, Elon can as a publicity stunt afford to (unpaid) do missions for a few million dollars that Boeing failed to deliver for 10s of billions. How long will the gravy train continue? And the giant wildcard is SpaceX suborbital flights. Suppose that SpaceX delivers in the next 5 years on a point to point flight time from anywhere on Earth to anywhere else in a maximum of 1 hour. It will take time for people to conclude that it is safe. But consider, a first class transatlantic flight costs $10,000 and takes ~14 hours. If the SpaceX launch costs their estimated $2 million and carries an average of 250 people, they can charge first class prices for a 30 minute flight, and take home a $500k profit per trip. Anyone who has done a long plane trip will see the appeal of not spending 14 hours in the plane. So your first class passengers switch to SpaceX. The economics of airline travel are that first class tickets pay a very large chunk of the fixed costs of the flight, while economy tickets pay the marginal costs of adding a person to the flight. Take away the first class tickets and average tickets have to go up in price. The result? Higher ticket prices, more passengers per plane, and a consolidation in the airline industry. SpaceX does not have to take that large a fraction of the volume to trigger that consolidation. The phrase "consolidation in the airline industry" should be extremely worrying to airplane manufacturers. Fewer and fuller long-range flights means that nobody needs to buy new airplanes for a while. Which means that Boeing's core business craters. The long and short of it is that if SpaceX delivers, Boeing dies. We will know one way or the other in 5-10 years.
- TimTheTinker 7y ago
  What percentage of Boeing's revenue and profits comes from NASA contracts and ULA?
  - btilly 7y ago
    Glancing at 4th quarter 2018 from https://investors.boeing.com/investors/investor-news/press-release-details/2019/Boeing-Reports-Record-2018-Results-and-Provides-2019-Guidance/default.aspx https://investors.boeing.com/investors/investor-news/press-r... commercial aircraft are about 60% of Boeing's revenue and 65% of its profit. They do not separate NASA from defense department spending, but government was about 35% of revenue and only 16% of profit. The rest is consulting. The upshot is that if SpaceX embarrasses Boeing in space, it is a black eye and a sizable chunk of Boeing's business but not critical. But if suborbital flights replace even a modest chunk of long-haul commercial flights, Boeing will be in a world of hurt. Consider, aircraft tend to operate for about 30 years. If SpaceX causes a 20% reduction in long-haul flights, it would result in a period of 6 years where nobody wants to buy new aircraft, followed by a resumption in sales at about 80% of the previous volume. There is no way that Boeing is prepared for that kind of business shift. And SpaceX does NOT have to replace 20% of passenger trips to do it. If only the most profitable few percent of passenger trips disappear, then between more expensive seats and fuller flights, the number of flights will drop by a lot more than what SpaceX does. The impact on Boeing will be outsized.
emodendroket 7y ago
I think they're going to become more dependent on defense business, which is unlikely to go anywhere.
- lainga 7y ago
  That's even less reassuring to me. I don't want North America's defence to rest on some American version of the Reichsfeuerzeug [], designed by an incompetent but politically connected firm. [] https://en.wikipedia.org/wiki/Heinkel_He_177 https://en.wikipedia.org/wiki/Heinkel_He_177
  - emodendroket 7y ago
    Well, too late. That's already the way it works.
cmarschner 7y ago
Short term supply will be inelastic - Airbus wouldn’t be able to fill all the demand if customers turn their backs on Boeing. The opportunity might be for COMAC to gain some ground...
totalZero 7y ago
Not even close. There are only two companies in the world that can do what Boeing and Airbus do. The real question is, why is BA stock still trading above 330? Why are big money guys so confident about the company's future?
- rossdavidh 7y ago
  If you are not thinking on a 10-year timespan, but more of a 10-month, 10-day, or 10-minute timespan, it will take a while before long-term doom is reflected in the price. Even in the late 1970's, when GM's fate was more or less sealed, their price was holding up reasonably well. http://omurtlak69.blogspot.com/2012/01/general-motors-stock-price-history.html http://omurtlak69.blogspot.com/2012/01/general-motors-stock-...
  - totalZero 7y ago
    Interesting point. For me it's more a question of whether the post-2016-election rally is organic. "Why the appreciation in value" is a different question than "why hasn't the stock sold off?" We have seen incredible growth in market cap. Ultimately Boeing does big business with the Department of Defense and their spending is up, but the lion's share of Boeing's profits come from commercial aviation if I'm not mistaken. The tax cuts and cash repatriation holiday were great too, but how much can that reduction in tax burden really account for this rally in the value of BA? Seems like a sell to me on first glance, but the fact that there is strong support here at 330 despite all that has happened is telling that some big money players are confident that Boeing is irreplaceable. A friend of mine refuses to bet against BA because it makes up a large component of the DJIA, which the President appears to treat as his own personal economic scoreboard.

olefoo 7y ago

Given that they are sitting on close to $10 Billion in unsold and possibly undeliverable inventory. I would not be surprised to see them re-org.

btilly 7y ago

The big wild card here is SpaceX. As with all things Elon, SpaceX is built on a financial pyramid. It either wins big, or loses big. And Boeing is a clear loser if SpaceX succeeds. A rule of thumb is that the rare big projects that will do well starts announcing that they are ahead of deadlines early, and that continues. Big projects that won't do not declare slipping deadlines until they can't hide it, and there is never any sense of what the real schedule is. Right now SpaceX is announcing that they are ahead of deadlines. Boeing is consistently slipping. What would the losses be? Well consider: Boeing is counting on billions of dollars for deliveries to the ISS. They are being heavily subsidized and do not have a proven technology for doing so. SpaceX is running routine missions and if their Super Heavy works out will see a dramatic cost drop. Boeing has billions more at stake with the SLS system for deep space launches and a return to the Moon. But the project is in peril and missing deadlines. Political connections favor Boeing. But if Super Heavy is anything close to what is promised, Elon can as a publicity stunt afford to (unpaid) do missions for a few million dollars that Boeing failed to deliver for 10s of billions. How long will the gravy train continue? And the giant wildcard is SpaceX suborbital flights. Suppose that SpaceX delivers in the next 5 years on a point to point flight time from anywhere on Earth to anywhere else in a maximum of 1 hour. It will take time for people to conclude that it is safe. But consider, a first class transatlantic flight costs $10,000 and takes ~14 hours. If the SpaceX launch costs their estimated $2 million and carries an average of 250 people, they can charge first class prices for a 30 minute flight, and take home a $500k profit per trip. Anyone who has done a long plane trip will see the appeal of not spending 14 hours in the plane. So your first class passengers switch to SpaceX. The economics of airline travel are that first class tickets pay a very large chunk of the fixed costs of the flight, while economy tickets pay the marginal costs of adding a person to the flight. Take away the first class tickets and average tickets have to go up in price. The result? Higher ticket prices, more passengers per plane, and a consolidation in the airline industry. SpaceX does not have to take that large a fraction of the volume to trigger that consolidation. The phrase "consolidation in the airline industry" should be extremely worrying to airplane manufacturers. Fewer and fuller long-range flights means that nobody needs to buy new airplanes for a while. Which means that Boeing's core business craters. The long and short of it is that if SpaceX delivers, Boeing dies. We will know one way or the other in 5-10 years.

TimTheTinker 7y ago
What percentage of Boeing's revenue and profits comes from NASA contracts and ULA?
- btilly 7y ago
  Glancing at 4th quarter 2018 from https://investors.boeing.com/investors/investor-news/press-release-details/2019/Boeing-Reports-Record-2018-Results-and-Provides-2019-Guidance/default.aspx https://investors.boeing.com/investors/investor-news/press-r... commercial aircraft are about 60% of Boeing's revenue and 65% of its profit. They do not separate NASA from defense department spending, but government was about 35% of revenue and only 16% of profit. The rest is consulting. The upshot is that if SpaceX embarrasses Boeing in space, it is a black eye and a sizable chunk of Boeing's business but not critical. But if suborbital flights replace even a modest chunk of long-haul commercial flights, Boeing will be in a world of hurt. Consider, aircraft tend to operate for about 30 years. If SpaceX causes a 20% reduction in long-haul flights, it would result in a period of 6 years where nobody wants to buy new aircraft, followed by a resumption in sales at about 80% of the previous volume. There is no way that Boeing is prepared for that kind of business shift. And SpaceX does NOT have to replace 20% of passenger trips to do it. If only the most profitable few percent of passenger trips disappear, then between more expensive seats and fuller flights, the number of flights will drop by a lot more than what SpaceX does. The impact on Boeing will be outsized.

emodendroket 7y ago

I think they're going to become more dependent on defense business, which is unlikely to go anywhere.

lainga 7y ago
That's even less reassuring to me. I don't want North America's defence to rest on some American version of the Reichsfeuerzeug [], designed by an incompetent but politically connected firm. [] https://en.wikipedia.org/wiki/Heinkel_He_177 https://en.wikipedia.org/wiki/Heinkel_He_177
- emodendroket 7y ago
  Well, too late. That's already the way it works.

cmarschner 7y ago

Short term supply will be inelastic - Airbus wouldn’t be able to fill all the demand if customers turn their backs on Boeing. The opportunity might be for COMAC to gain some ground...

totalZero 7y ago

Not even close. There are only two companies in the world that can do what Boeing and Airbus do. The real question is, why is BA stock still trading above 330? Why are big money guys so confident about the company's future?

rossdavidh 7y ago
If you are not thinking on a 10-year timespan, but more of a 10-month, 10-day, or 10-minute timespan, it will take a while before long-term doom is reflected in the price. Even in the late 1970's, when GM's fate was more or less sealed, their price was holding up reasonably well. http://omurtlak69.blogspot.com/2012/01/general-motors-stock-price-history.html http://omurtlak69.blogspot.com/2012/01/general-motors-stock-...
- totalZero 7y ago
  Interesting point. For me it's more a question of whether the post-2016-election rally is organic. "Why the appreciation in value" is a different question than "why hasn't the stock sold off?" We have seen incredible growth in market cap. Ultimately Boeing does big business with the Department of Defense and their spending is up, but the lion's share of Boeing's profits come from commercial aviation if I'm not mistaken. The tax cuts and cash repatriation holiday were great too, but how much can that reduction in tax burden really account for this rally in the value of BA? Seems like a sell to me on first glance, but the fact that there is strong support here at 330 despite all that has happened is telling that some big money players are confident that Boeing is irreplaceable. A friend of mine refuses to bet against BA because it makes up a large component of the DJIA, which the President appears to treat as his own personal economic scoreboard.