Only 18 months ago, Boeing's reputation was good, sure it had screwed up its battle with Bombardier on the C-Series handing the project to Airbus that now has a full complement of aircraft from 100 seats all the way to 550 seats (ok ok the A380 is a financial quagmire). Still, Boeing had the upper hand with the B777 and the B787 and the B737 was a dependable workhorse for short haul flights.
In the space of 18 months throughout 2017 and 2018, Boeing repurchased nearly $20 billion worth of shares. The impact has been dramatic on December 31, 2016, Boeing's share price was near US$ 155. On March 1, 2019, the price of Boeing peaked at US$ 450.00 per share! In the space of 18 months, the share price of the airline had trebled! Since then it has lost nearly $100 per share!
The first "big" problem was the two accident that involved the B737MAX -- the savior aircraft for Boeing and its potential long term profit center. Cheap to develop (all things considered) Boeing was able to adapt the most modern engine on an aging aircraft and wing set! An engineering accomplishment for which it could be proud!
Then the trouble started, following the accident that appears to have been caused by faulty software (and poor training for the crew to identify the problem). Then older issues came out, that Boeing was largely self-certified, a result of the US federal government cutting the FAA's certification budget to the bone. Now there is a crisis of confidence, it is far from clear how and when the B737MAX will return in service.
Adding insult to injury are the lawsuits from Boeing customers. This is a massive issue; one airline (a large B737MAX customer) has already begun proceedings, and they are unlikely to be the only ones. However, now that the world is aware that unlike the European Boeing has been self-certifying for decades, other platforms will probably come under scrutiny (hello B787!).
Between 2017 and 2018 Boeing's management (and board) spent nearly US$ 20 billion buying back shares -- an activity that is certain to have contributed to the share price's spectacular rise! Not only did the company use free cash flow, but it also borrowed substantial sums of money "for general corporate purpose" which is fine, but now Boeing is in trouble, the quality of its product has been found wanting (the entire fleet of B737MAX is grounded) and doubt is emerging on the "quality" of its workhorse the B787.
It's still early to pass judgment, but it would appear that short term profit objectives were driving a lot of Boeing's decision over the past few years. The massive buyback (it's a matter of public records) has left the company few resources in a time of crisis. Knowing engineers way of working I am certain that there will be reams of memos outlining why keeping the "old wing" on the B737MAX was a massive error as it would dramatically change the aircraft balance. A new wing could have cost more than US$ 1 billion, and have delayed the program by several years -- giving the A320NEO a huge advantage.
Boeing's massive selling point was that the pilot was always in charge, the final authority, something that Airbus could not claim! However, Boeing's extensive military experience with "unstable aircraft" which defines military aircraft, that have for years used software to assist the pilot was a very good base on which to control the balance problem; for unknown reasons Boeing decided not to disclose this aspect of the aircraft management system to new pilots that assumed (wrongly as it turns out) that the B737MAX would retain the type's old flying characteristics! Via self-regulating the issue was approved by the FAA (which also lost a lot of feathers in this story)
I would not be entirely surprised to see "retirements" from the board and from the management of the company
Note: I have no position in Boeing stocks either directly or indirectly.
In the space of 18 months throughout 2017 and 2018, Boeing repurchased nearly $20 billion worth of shares. The impact has been dramatic on December 31, 2016, Boeing's share price was near US$ 155. On March 1, 2019, the price of Boeing peaked at US$ 450.00 per share! In the space of 18 months, the share price of the airline had trebled! Since then it has lost nearly $100 per share!
The first "big" problem was the two accident that involved the B737MAX -- the savior aircraft for Boeing and its potential long term profit center. Cheap to develop (all things considered) Boeing was able to adapt the most modern engine on an aging aircraft and wing set! An engineering accomplishment for which it could be proud!
Then the trouble started, following the accident that appears to have been caused by faulty software (and poor training for the crew to identify the problem). Then older issues came out, that Boeing was largely self-certified, a result of the US federal government cutting the FAA's certification budget to the bone. Now there is a crisis of confidence, it is far from clear how and when the B737MAX will return in service.
Adding insult to injury are the lawsuits from Boeing customers. This is a massive issue; one airline (a large B737MAX customer) has already begun proceedings, and they are unlikely to be the only ones. However, now that the world is aware that unlike the European Boeing has been self-certifying for decades, other platforms will probably come under scrutiny (hello B787!).
Between 2017 and 2018 Boeing's management (and board) spent nearly US$ 20 billion buying back shares -- an activity that is certain to have contributed to the share price's spectacular rise! Not only did the company use free cash flow, but it also borrowed substantial sums of money "for general corporate purpose" which is fine, but now Boeing is in trouble, the quality of its product has been found wanting (the entire fleet of B737MAX is grounded) and doubt is emerging on the "quality" of its workhorse the B787.
It's still early to pass judgment, but it would appear that short term profit objectives were driving a lot of Boeing's decision over the past few years. The massive buyback (it's a matter of public records) has left the company few resources in a time of crisis. Knowing engineers way of working I am certain that there will be reams of memos outlining why keeping the "old wing" on the B737MAX was a massive error as it would dramatically change the aircraft balance. A new wing could have cost more than US$ 1 billion, and have delayed the program by several years -- giving the A320NEO a huge advantage.
Boeing's massive selling point was that the pilot was always in charge, the final authority, something that Airbus could not claim! However, Boeing's extensive military experience with "unstable aircraft" which defines military aircraft, that have for years used software to assist the pilot was a very good base on which to control the balance problem; for unknown reasons Boeing decided not to disclose this aspect of the aircraft management system to new pilots that assumed (wrongly as it turns out) that the B737MAX would retain the type's old flying characteristics! Via self-regulating the issue was approved by the FAA (which also lost a lot of feathers in this story)
I would not be entirely surprised to see "retirements" from the board and from the management of the company
Note: I have no position in Boeing stocks either directly or indirectly.
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