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Boeing CEO warns of possible industry bankruptcy
- mateuszserafin 6y agoI'd like to see more innovation/players as an outcome of Boeing's and Airbus' problems :)
- ChuckNorris89 6y agoYou probably won't. The aerospace industry has one of the highest barriers of entry in cost, know-how, regulations and political connections. Both Boeing and Airbus received a lot of government funding to get started and grow and still do to this day. What will happen most likely is that the US and France/EU will just bail them out since they're not only vital for jobs but for defense and national security as well as their execs having strong ties to politicians in their respective regions who can push for a bailout package.
- eru 6y ago> Both Boeing and Airbus received a lot of government funding to get started and grow and still do to this day. If they went bankrupt, and there was less/no government funding, we'd see more innovation, I'd guess. There's still money to be made building planes, even if fewer. I agree with your assessment though: they are national champions, they will get bailed out.
- zpeti 6y agoI think you would be surprised. Somehow we've ended up with privately owned and founded rocket companies, which are higher entry in cost than airplanes. Just because in the current situation we can't imagine it being different doesn't mean there wouldn't be possibilities if it wasn't so government focused. I think a much bigger risk is that fact that I doubt many people will confidently fly like they did before for the next 10 years. I think airline travel will dramatically decline.
- badpun 6y ago> I think you would be surprised. Somehow we've ended up with privately owned and founded rocket companies, which are higher entry in cost than airplanes. Are they? How much regulation there is for cargo-carrying rockets vs passenger airplanes?
- cranekam 6y ago> Somehow we've ended up with privately owned and founded rocket companies, which are higher entry in cost than airplanes. Are you sure? There's a big difference between building single-purpose, unmanned rockets and commercial jets that carry hundreds of people, fly for 20 hours a day, and last two decades. According to Wikipedia Falcon development 9 cost $300-390 million [0]. The 787 program cost $32 billion [1]. Even the A320 neo, which is a refresh of the original A320, cost $1.3 billion [2]. [0] https://en.wikipedia.org/wiki/Falcon_9_v1.0 https://en.wikipedia.org/wiki/Falcon_9_v1.0 [1] https://en.wikipedia.org/wiki/Boeing_787_Dreamliner#Market,_costs,_and_production_issues https://en.wikipedia.org/wiki/Boeing_787_Dreamliner#Market,_... [2] https://en.wikipedia.org/wiki/Airbus_A320neo_family https://en.wikipedia.org/wiki/Airbus_A320neo_family
- kanox 6y ago> Somehow we've ended up with privately owned and founded rocket companies, which are higher entry in cost than airplanes. Quick browsing for airliner unit costs shows a B737 max starting from ~$100M which is more expensive than a Falcon 9. > I think a much bigger risk is that fact that I doubt many people will confidently fly like they did before for the next 10 years. I think airline travel will dramatically decline. This is the real problem, airline travel won't recover for many years.
- yardie 6y agoUnlikely. There are no other players making planes at this scales. Even China, who is dipping its toe into commercial planes, is still at the commuter/regional size jet. They aren’t anywhere near ready to announcing plans for an ETOPS, widebody plane.
- owenmarshall 6y agoMore innovation and players strikes me as unlikely and unreasonable. Aircraft for commercial travel are heavily regulated and a very niche product. I suspect we’d see the opposite: consolidation in the industry.
- throwaway55554 6y agoThe US needs to invest in alternate modes of high speed travel. We need more options than just the airline industry. Edit: Hmm... I guess not. Wow.
- lidHanteyk 6y agoDuring the Bronze Age Collapse [0], we lost the ability to write in many civilizations around the Mediterranean. Literacy rates could have been as low as 10% in these places, and so when systems collapsed, literacy couldn't be sustained. To this day, we have not yet recovered the ability to read languages like Linear A [2] and the Byblos script [3]. Not every civilization lost writing, and eventually the Phoenician family of scripts flourished and everybody switched to alphabets and abjads. Could we be on the verge of losing the ability to fly? We would still have airplanes, and some parts of the world might retain the ability, but without Boeing, we could see a dramatic reduction in the amount of airplanes, flying, airports, and tourism. [0] https://en.wikipedia.org/wiki/Late_Bronze_Age_collapse https://en.wikipedia.org/wiki/Late_Bronze_Age_collapse [2] https://en.wikipedia.org/wiki/Linear_A https://en.wikipedia.org/wiki/Linear_A [3] https://en.wikipedia.org/wiki/Byblos_syllabary https://en.wikipedia.org/wiki/Byblos_syllabary
- romanovcode 6y agoThis is just ridiculous. Boeing CEO wants bailouts, this is why he released the statement. Without Boeing other companies will emerge. There is no way in this day and age (globalization) tourism/traveling will cease to exist.
- DrScientist 6y agoI would agree unlikely, but if the virus continues to be a problem, or others emerge then tourism as we know it could come to an end. Once you have a drop in traffic, the remaining traffic could become more expensive to operate, further reducing demand, making air travel rare rather than everyday again. It's only cheap now because of the number of people travelling it's a virtuous spiral up, but there is also a sister spiral you can travel down.
- tobylane 6y agoThat kind of happened to supersonic travel. We don’t have Concorde any more but we still know how to make them, and there’s a lot of development into unmanned supersonic flight. Now I have a hankering to go to an airplane museum.
- jbverschoor 6y agoGood. Someone else will buy their assets and continue. Hopefully but people with integrity
- generalpass 6y agoBankruptcy is: a good thing. It corrects the price of the assets to match current market. It transfers assets to more efficient owners. Bankruptcy is not: a vaporization gun. The assets remain in the physically existent universe, as do the employees and even the entire industry, even if it is diminished.
- c54 6y agoThanks for pointing this out, I think for most people bankruptcy is thought of as the event horizon of a black hole, where in reality it’s a debt restructuring that really only affects the CEO/board, who, you know, are supposed to take the blame for mismanagement.
- foxyv 6y agoIt will be interesting how this changes up the regulatory environment. If all the established interests are diminished or gone, will we start seeing more innovation and investment into other forms of travel? The US is spending only about $150 billion dollars on science and technology funding. I wonder what could be done with interstate travel using another $25 billion that is being used to bail out airlines. High speed rail? Hyper loop? Gravity powered gliders? Then again, California has managed to spend nearly twice that on a not so high speed train that probably won't exist...
- nunorbatista 6y ago> Bankruptcy is: a good thing. This comment represents, unfortunately, what's wrong with capitalism and, at the same time, what makes it work. Bankruptcy is used by companies to get rid of debt and refocus their business, which is good. In the case of Boeing, an eventual bankruptcy comes as a consequence of a decade of buybacks to fill investor targets and lousy engineering in the case of the 737 Max. But hey, with infinite FED money, Boeing is not going down that easily.
- generalpass 6y ago> > Bankruptcy is: a good thing. > This comment represents, unfortunately, what's wrong with capitalism and, at the same time, what makes it work. Bankruptcy is used by companies to get rid of debt and refocus their business, which is good. In the case of Boeing, an eventual bankruptcy comes as a consequence of a decade of buybacks to fill investor targets and lousy engineering in the case of the 737 Max. But hey, with infinite FED money, Boeing is not going down that easily. The Federal Reserve system is anti-capitalistic because it removes choice and agency from the market, which are critical components of capitalism. Bankruptcy is also used by creditors to take possession of the assets of bad borrowers, which typically is not to the benefit of the borrowers. Financing issues rarely impact engineering decisions. If there is something outside of Boeing influencing this, the more likely culprit is regulatory capture effectively blocking innovators from entering the market.
- jdhn 6y agoWhat I want to see is antitrust action against them. Split them into 2 entities, commercial and military. If you're too big to fail, then perhaps you're too big to exist.
- cm2187 6y agoHaving those two entities under one roof certainly creates some problems (subsidising the civil through the military). But either of the two entities would still be strategically important on its own and wouldn't allowed to go bust.
- jdhn 6y agoIf they were split into 2, the military entity would still continue to exist due to the fact that its primary customer would be the US military who isn't in danger of running out of money anytime soon. The commercial entity may be in trouble due to market conditions or poorly received planes like the 737 Max, but then they could declare bankruptcy and move on.
- smileysteve 6y ago> poorly received planes like the 737 Max Oh, they were received with open arms; they were just delivered with 2 crashes that led to their grounding.
- op03 6y agoHand it over to Elon and Bezos. They will take care of the boomer brigades inside, wasting everyone's time.
- zurn 6y agoWe really need to cut air travel because of the climate crisis, it would be good to reduce production of new airliners but it's not nearly enough.
- loceng 6y agoThe Boring Company's Hyperloop in time will replace a lot of flight, otherwise either Elon or someone else will hopefully come up with a viable electric long-distance plane.
- re-actor 6y agoThe hyperloop is just a shittier more expensive train, I really don't see it ever taking off.
- loceng 6y agoYou clearly don't know much about the Hyperloop for such an ignorant comment.
- re-actor 6y agoWhat problem exactly is it solving that isn't solved better by a train? You still need to secure the land and build the track but instead of a cheap traditional track you need a low-pressure vessel. The costs and increased complexity are really not worth the shorter trip times.
- loceng 6y agoAre you thinking about Hyperloop-One which isn't Elon's Hyperloop but a company that misappropriated the term Hyperloop and is doing above ground tunnels? Elon's Hyperloop is digging tunnels. Do some research, analysis, create a list of pros and cons - https://www.boringcompany.com/ https://www.boringcompany.com/ their website if you don't know where to start.
- deleted 6y ago[deleted]
- wonderwonder 6y agoIf it happens it's their own fault. Over the last decade their leadership have spent ~96% of their free cash flow on stock buybacks. Boeing itself while not the bankruptcy target of this article has spent 74%. Stock buybacks are designed to simply prop up the share price to allow the leadership teams to hit their bonus targets. If they had simply done what individuals are expected to do and save money they would likely be fine. This collapse is a reminder that we need to fundamentally change the way corporations are structured and start encouraging more focus on the business as a whole, especially its employees rather that obsess over stock price and executive compensation. 2008 was a reminder as well but we ignored it, just as I am sure we will ignore this one. In the meantime they get massive bailouts while letting employees go.
- himinlomax 6y agoNo non-trivial company can reasonably be expected to stay in business when 100% of their client base is literally prevented from doing any significant business for months and likely to go bankrupt themselves. The stock buyback thing is just idiotic. It's just dividends by another name. Boeing/Airbus are not responsible for the current crisis, unlike the banks in 2008.
- bigie35 6y agoRight, but should they spent 90% of their free cash flow doing a stock buy back? Not a sound business practice IMHO.
- asino 6y agoWhen a company (or anybody) has cash can do 4 things. (Assuming that the level of debt is sustainable.) 1 reinvest in new projects 2 put the cash on safe assets (bonds) 3 buyback 4 give back as a dividend Buyback is more tax efficient than dividends. What would you have done,if you were Boing CEO?
- wonderwonder 6y ago
- panarky 6y agoIf the virus disappears tomorrow, the airline industry would take many months to return to its previous patterns and volumes. But the virus will not disappear tomorrow. It will be with us for at least a year, probably two. Other pathogens will follow. Passengers and airfreight will not return to 2019 volumes in the foreseeable future. That means fewer flights, smaller planes, point-to-point instead of hub-and-spoke. Short hops will fall even more than long-haul as people trade flying for driving. The airline industry is inherently mal-configured for this new world, and cannot be profitable with even 20% less volume. So the airline industry cannot, and should not, survive in its present form. But Boeing and the dinosaur carriers can't manage the re-configuration on their own because they'll keep trying to re-invent the past. We'll trade a few massive, lethargic, inefficient and customer-hostile megacorps for many more small, nimble, innovative, clever and customer-focused niche players. Bankruptcy, liquidation, and reorganization of the underlying assets by new entrants is the only way. Transferring even more billions of borrowed government money to the dinosaurs only delays the inevitable.
- Shared404 6y ago> Transferring even more billions of borrowed government money to the dinosaurs only delays the inevitable. And costs tax money.