Ethiopian Airlines Crash/ B737MAX grounding

Blut2

Damien360 wrote: »

This is true of pretty much all stock market listed companies. The CEO’s job depends on stock value, everything else is incidental.

Theres massive variance in the level of stock value emphasis between companies, and even within individual companies over time.

Boeing of old prioritized R&D and engineering, knowing producing good products would lead to a good stock value.

Boeing of the semi-recent past since the McDonnell influx have prioritized pumping up the stock value above all else. They successfully boosted short term stock value by cutting long term investments. However the results, and costs, of that are now coming to light.

HTCOne

Blut2 wrote: »

They're still paying out a dividend too, I believe. Which is just madness, given the cash crunch about to hit them. It just shows how obsessed with share price value the board are, to a point above all other considerations.

A cynic might wonder if the shareholders are trying to pull as much capital out of the company as possible before the impending tidal wave of lawsuits and compensation payments push the company into chapter 11.

As for the C919, IIRC it is expected to have similar fuel burn to the NG/CEO, so probably not likely to feature outside of China & Russia much.

Hotblack Desiato

C919 is a dead duck. Although an improvement on their two previous efforts, the 707 rip off and the MD-80 rip off.

Given Chinese industiral espionage and foolish Western "build under licence" deals, within 20 years it's perfectly possible that China will produce a globally certifiable, globally competitive airliner.

padjocollins

https://mattstoller.substack.com/p/airplanes-and-accounting-games-the

blackwhite

padjocollins wrote: »

https://mattstoller.substack.com/p/airplanes-and-accounting-games-the

There's cause for serious concern around Boeing's financial help - but that article makes some fairly incredible leaps in logic.

To try and claim that contract and program accounting is unusual is a blatant lie - it's the norm in the construction industry, and in any other industry where sales contracts can span multiple accounting years.
Trying to claim that they've "hidden" the risk around this type of accounting, when their Annual Report contains multiple disclosures about is pure spin.

The literally spell out the values and the future expected sales units for each program - but he's trying to spin it that they are "hiding" the risk.

The 2019 annual report will make for very interesting reading. Q3-19 filing doesn't show any significant write-down in inventories, which suggests they still expect to resume the 737Max programme and maintain the high level of orders. But it's an unaudited statement, so those assumptions won't have been challenged.
Year end report will be audited, so likely Deloitte will ask them some tough questions about the future assumptions, and will likely give a better insight into the future prospects for 737Max

L1011

The repeated restating of programme blocks to hide figures is probably the most worrying thibgy

josip

They are in such big doo-dah on every front right now.
https://www.bbc.com/news/science-environment-50855395


Chapter 11 is inevitable I think.

Fritzbox

josip wrote: »

They are in such big doo-dah on every front right now.
https://www.bbc.com/news/science-environment-50855395


Chapter 11 is inevitable I think.

Very unlikely. But it does seem as if Boeing can do nothing right at the moment.

Bob24

Fritzbox wrote: »

Very unlikely. But it does seem as if Boeing can do nothing right at the moment.

+1

They are a complete mess ATM, but no way the US government would let them go down. Too much of a strategic importance.

HTCOne

Bob24 wrote: »

+1

They are a complete mess ATM, but no way the US government would let them go down. Too much of a strategic importance.

I agree they won’t be allowed go under, but it may suit government and shareholders if they are allowed go into Chapter 11, under which they can essentially write off any debts (including worker pension obligations) and start again. Most US airlines did it after 9/11. Pensions eaten, staff laid off without redundancy then many (but not all) brought back on inferior ts & cs.

Fritzbox

Bob24 wrote: »

+1

They are a complete mess ATM, but no way the US government would let them go down. Too much of a strategic importance.

True, but I don't think they will need a bailout from the government or anything. Boeing group made a 12-billion dollar profit last year - I think they might just be able to absorb the losses from the present-day MAX fiasco - which may explain why the money markets still have some confidence in Boeing's stock.

wetoutside19

HTCOne wrote: »

I agree they won’t be allowed go under, but it may suit government and shareholders if they are allowed go into Chapter 11, under which they can essentially write off any debts (including worker pension obligations) and start again. Most US airlines did it after 9/11. Pensions eaten, staff laid off without redundancy then many (but not all) brought back on inferior ts & cs.

You can’t compare Boeing to the US airline industry which pretty much has a a circular of massive profits, massive losses, bankruptcy once every few decades, consolidation, rinse and repeat.

How would going into chapter 11 be in the interest of shareholders? They are last in the list of creditors once this happens.

In terms of loan write offs, Have you looked at their financials? Historically Boeing have very little debt, they have taken on $10bn in bridging debt since max issue, you can bet your bottom dollar that this lender is well protected here.

In general a lot of misinformation on this thread about Boeing’s financials, suggest people give this a read (latest quarterly SEC filing), very interesting not just for financial information. Gives a good overview of the company sectors down to delivery of each model

https://s2.q4cdn.com/661678649/files/doc_financials/quarterly/2019/q3/3Q19-Press-Release.pdf

Damien360

wetoutside19 wrote: »

You can’t compare Boeing to the US airline industry which pretty much has a a circular of massive profits, massive losses, bankruptcy once every few decades, consolidation, rinse and repeat.

How would going into chapter 11 be in the interest of shareholders? They are last in the list of creditors once this happens.

In terms of loan write offs, Have you looked at their financials? Historically Boeing have very little debt, they have taken on $10bn in bridging debt since max issue, you can bet your bottom dollar that this lender is well protected here.

In general a lot of misinformation on this thread about Boeing’s financials, suggest people give this a read (latest quarterly SEC filing), very interesting not just for financial information. Gives a good overview of the company sectors down to delivery of each model

https://s2.q4cdn.com/661678649/files/doc_financials/quarterly/2019/q3/3Q19-Press-Release.pdf

How can you quote a backlog in your books ? As we have seen, customers cancel or renegotiate all the time. I didn’t see the Max orders in that list so are they putting them in as 737 orders ? Based on drop off in orders, I assume so. Is the military revenue guaranteed (backlog at end of statement) ? It is considerably smaller than commercial revenue. States 5500 backlog orders but not all commercial I assume. 737 production ramping to 57 per month. Is this wishful thinking ?

You may work as an analyst so you are better placed than me to figure that statement out. Is that something the stock market would have confidence in ? Or does the market believe the US will never let it fall off a cliff and therefore a safe bet ? We had banks in that scenario previously in relation to a safe bet.

cson

Its a non GAAP measure so its unaudited. So they can quote backlog in the Financial Statements. They could quote it at a million if they so wished.

L1011

Boeing CEO has "resigned" now.

GM228

L1011 wrote: »

Boeing CEO has "resigned" now.

Fired by the board more like it, he held his position over two plane crashes and multiple safety issues of late which killed hundreds, but the Starliner orbital filure which killed 0 and resulted in no loss of assets was the final nail in the coffin for him, go figure.

plodder

There's a term used in software called Technical debt which is very applicable here too. It's where you incrementally upgrade a product over a period of time, creating a design debt that eventually has to be repaid, usually by redesigning either the entire product or at least major sub-systems of it, and hopefully before you exhaust the ability to keep on upgrading the original design.

The 737 has to be the worst ever example of technical debt being allowed to pile up with no plan on how it would be repaid and then pushing the original design to a breaking point.

L1011

GM228 wrote: »

Fired by the board more like it, he held his position over two plane crashes and multiple safety issues of late which killed hundreds, but the Starliner orbital filure which killed 0 and resulted in no loss of assets was the final nail in the coffin for him, go figure.

Plus on his watch were the Bombardier case which drove the CSeries in to the arms of Airbus who immediately gave it the credibility it needed for big orders; and the Embraer tieup with their core new aircraft too heavy to be bought by the bulk of their customers.

Rawr

plodder wrote: »

There's a term used in software called Technical debt which is very applicable here too. It's where you incrementally upgrade a product over a period of time, creating a design debt that eventually has to be repaid, usually by redesigning either the entire product or at least major sub-systems of it, and hopefully before you exhaust the ability to keep on upgrading the original design.

The 737 has to be the worst ever example of technical debt being allowed to pile up with no plan on how it would be repaid and then pushing the original design to a breaking point.

Throughout all of this I couldn't help but wonder if Boeing ever had the option, or even ever considered sitting their major 737 customers down a few years ago and say:

"Listen folks; we want to keep delivering a plane to the specs the you like, but we've been looking down the road and the future is in larger engines. If you want to benefit from better performance and fuel usage we're going to need to build a plane that's higher off the ground. This may need to be a redesign or replacement of the 737NG.

We've gotten as far as we can get with a design from 1966 and although we know wouldn't like it, you'll need to adapt to a higher plane while we make the cockpit as similar as possible to the NG. But they will need to recertify, as this will be a different plane. The pay off is a familiar Boeing craft that can take on your competitors using the NEO, while still being safe."

Of course all of that is very naive of me, Boeing was never likely to stop pandering to the demands of their main customers. Problem is, in this case, it feels like they really should have.

GM228

Rawr wrote: »

Throughout all of this I couldn't help but wonder if Boeing ever had the option, or even ever considered sitting their major 737 customers down a few years ago and say:

"Listen folks; we want to keep delivering a plane to the specs the you like, but we've been looking down the road and the future is in larger engines. If you want to benefit from better performance and fuel usage we're going to need to build a plane that's higher off the ground. This may need to be a redesign or replacement of the 737NG.

We've gotten as far as we can get with a design from 1966 and although we know wouldn't like it, you'll need to adapt to a higher plane while we make the cockpit as similar as possible to the NG. But they will need to recertify, as this will be a different plane. The pay off is a familiar Boeing craft that can take on your competitors using the NEO, while still being safe."

Of course all of that is very naive of me, Boeing was never likely to stop pandering to the demands of their main customers. Problem is, in this case, it feels like they really should have.

With Airbus developing the A320neo at the time and American Airlines about to make a large Airbus order that was never going to be an option.

The MAX8 was never about pandering to the demands of Boeing's customers, it was about competition with Airbus and the loss of business had it gone down the brand new design route.

Turbulent Bill

Boeing mismanaged the lifecycle of the 737, and the MAX was essentially a panic response once this was realised. It should have been clear by the early 90s that the A320 had at least a 20 year head-start, with good options for future expansion. That was the time for a major redesign, while the existing models provided cash flow. Instead they got lazy and greedy, which eventually lead to the MAX crashes.

Roger_007

Rawr wrote: »

Throughout all of this I couldn't help but wonder if Boeing ever had the option, or even ever considered sitting their major 737 customers down a few years ago and say:

"Listen folks; we want to keep delivering a plane to the specs the you like, but we've been looking down the road and the future is in larger engines. If you want to benefit from better performance and fuel usage we're going to need to build a plane that's higher off the ground. This may need to be a redesign or replacement of the 737NG.

We've gotten as far as we can get with a design from 1966 and although we know wouldn't like it, you'll need to adapt to a higher plane while we make the cockpit as similar as possible to the NG. But they will need to recertify, as this will be a different plane. The pay off is a familiar Boeing craft that can take on your competitors using the NEO, while still being safe."

Of course all of that is very naive of me, Boeing was never likely to stop pandering to the demands of their main customers. Problem is, in this case, it feels like they really should have.

It doesn’t matter what Boeing or the regulators do now. The reputation of the MAX type is irrevocably damaged. The public will simply vote with their feet and refuse to fly in this plane, (assuming it does get recertified), no matter how safe they claim it to be.
This debacle has echoes of the De Haviland Comet back in the 1950s. (That didn’t end well).
This is an existential threat to the Boeing company. Their only hope is the fact that they are so vital to the US aviation industry and to the US government. I would guess that they will have to be kept afloat in the national interest.

Pronto63

GM228 wrote: »

Fired by the board more like it, he held his position over two plane crashes and multiple safety issues of late which killed hundreds, but the Starliner orbital filure which killed 0 and resulted in no loss of assets was the final nail in the coffin for him, go figure.

The most recent Starliner orbital failure was due to a clock in the spacecraft not syncing with the rocket. The craft basically ran out of fuel trying to sort out its orbit and therefore couldn't attempt a docking with the space station.

The previous test resulted in only 2 out of the required 3 parachutes deploying for landing.

Why?

Because Boeing staff failed to connect a pin!!

It's due for manned flight soon.

All aboard!!

https://www.militarytimes.com/news/your-military/2019/12/22/boeing-capsule-returns-to-earth-after-aborted-space-mission/?utm_medium=social&utm_source=facebook.com&utm_campaign=Socialflow+MIL

Pronto63

L1011 wrote: »

Boeing CEO has "resigned" now.

Wonder will he get a John Delaney style golden handshake!

Any idea?

Van.Bosch

Pronto63 wrote: »

Wonder will he get a John Delaney style golden handshake!

Any idea?

His will put Delaney’s to shame.

Hotblack Desiato

Rawr wrote: »

Of course all of that is very naive of me, Boeing was never likely to stop pandering to the demands of their main customers.

I don't think it's even that.

The bean counters wanted the "solution" with the least capital investment.

Then again, the last time Boeing started off with a clean sheet of paper they got themselves into development hell with the 787. 777X isn't looking too clever either.

wetoutside19

Hotblack Desiato wrote: »

I don't think it's even that.

The bean counters wanted the "solution" with the least capital investment.

I think you need to read up on the case a little. Long term yes they didn’t want to make the huge investment to a fresh design and they stalled on this for years, but the Max decision was reactionary to the airbus NEO offering, at that stage a fresh design would take too long and customers wanted a product similar to what airbus was offering which was minimum to no training for the existing type pilots

Charles Babbage

wetoutside19 wrote: »

I think you need to read up on the case a little. Long term yes they didn’t want to make the huge investment to a fresh design and they stalled on this for years, but the Max decision was reactionary to the airbus NEO offering, at that stage a fresh design would take too long and customers wanted a product similar to what airbus was offering which was minimum to no training for the existing type pilots

the Airbus strategy was hardly a secret and Boeing knew as much about upcoming engine technology as anyone. They just went for short term profit over investment.

wetoutside19

Charles Babbage wrote: »

the Airbus strategy was hardly a secret and Boeing knew as much about upcoming engine technology as anyone. They just went for short term profit over investment.

It’s not that simple. Airbus were able to make their decision to upgrade quickly, figure out what was needed and announce to the market. Boeing on the other hand had the issue of the new engines offerings being too big for their 737 and they sat on making the decision of whether to go with a brand new model or somehow figure out how to fit the bigger engines to the existing model.

It was the success of Airbus’s NEO, especially the AA order in 2011 that forced Boeing’s hand to get something to market quickly or face Airbus becoming dominant while Boeing did a clean sheet design. Customer expectations of minimal pilot training was also high up on the importance list, as not having this gave existing 100% Boeing 737 customers another reason to not rule out Airbus for orders. The rest is history

Here is a very good article from the journalist Dominic gates back in 2011 as Boeing announced the Max, while the journalist is based in Seattle he has not been afraid to confront Boeing with the tough questions
https://www.seattletimes.com/business/big-737-order-still-leaves-boeing-with-egg-on-face/

At this stage it was far from “bean counters” dictating the direction of the company as the poster above suggests. It was clear strategy failure putting Boeing on the backfoot. They relied too much on their cash cow 737 to fund their other projects and took it for granted. They should have been working on the replacement years prior to the eventual forced decision.

Turbulent Bill

Hotblack Desiato wrote: »

Then again, the last time Boeing started off with a clean sheet of paper they got themselves into development hell with the 787. 777X isn't looking too clever either.

With the 787, they put a lot of immature technologies (composite wings, lots of electrical systems etc.) in one project. It ended up making the project risky and expensive, but ultimately I think Boeing will reap the rewards in future planes.

The irony is that the first beneficiary will probably be the 737's replacement...

banie01

More disturbing evidence of what would best be described as "obfuscation" but could also be seen as hiding the evidence.

Very worrying and can only be seen as a further nail in the coffin of the MAX imo.
Trust in the airframe cannot be recovered in the light of the continuing stream of tidbits of information that Boeing were not only aware of issues but sought to suppress them rather than rectify them.

https://eu.usatoday.com/story/news/nation/2019/12/24/boeing-reveals-new-very-disturbing-documents-737-max-jetliner-faa-house/2743402001/

murphaph

Trust in Boeing itself is completely gone now.

HTCOne

The entire civil aircraft operation needs to be audited top to bottom by ICAO, EASA etc. To be honest everything they have done since the MacDac merger is tainted.

padjocollins

the long and the short of the story. morals/ethics .
https://blog.apaonline.org/2019/04/08/the-ethical-failures-behind-the-boeing-disasters/

Muahahaha

wetoutside19 wrote: »

It was the success of Airbus’s NEO, especially the AA order in 2011 that forced Boeing’s hand to get something to market quickly or face Airbus becoming dominant while Boeing did a clean sheet design. Customer expectations of minimal pilot training was also high up on the importance list, as not having this gave existing 100% Boeing 737 customers another reason to not rule out Airbus for orders. The rest is history

Just wondering can anyone put into context how much time/resources it takes to train a pilot on a new plane? Is it a matter of days or weeks? And if this was a concern of airlines could Boeing not have offered to pay for the cost of training to mitigate the disadvantage to Airbus?

Bob24

Muahahaha wrote: »

Just wondering can anyone put into context how much time/resources it takes to train a pilot on a new plane? Is it a matter of days or weeks? And if this was a concern of airlines could Boeing not have offered to pay for the cost of training to mitigate the disadvantage to Airbus?

I will let those who know better than me answer on the exact training cost/timelines (but it is not days). However I believe that beyond training cost, another advantage of having the old and the new generation of the plane share the same certification is operational flexibility. If an airline has both the old and the new model in their fleet and they share the same certification, it means any pilot can be assigned to any aircraft. Now if they have 2 different certifications, it means each pilot is now specific to either the old or the new model and cannot quickly be deployed to fly the other one.

Inquitus

Muahahaha wrote: »

Just wondering can anyone put into context how much time/resources it takes to train a pilot on a new plane? Is it a matter of days or weeks? And if this was a concern of airlines could Boeing not have offered to pay for the cost of training to mitigate the disadvantage to Airbus?

Boeing agreed a deal with their biggest 737 customer Southwest Airlines that if Sim training was required, they would have to discount the price of each plane by $1m.

Turbulent Bill

Inquitus wrote: »

Boeing agreed a deal with their biggest 737 customer Southwest Airlines that if Sim training was required, they would have to discount the price of each plane by $1m.

It's crazy that Boeing were so commercially weak with Southwest (even considering the historical sweetheart deals they had together). No airline was going to divest in a new 737 just because of training costs. They'd end up paying multiples of this to switch to the A320, even if a delivery slot was available.

Tenger

The Boeing/Southwest relationship is quite odd. With 2 in every 5 B737s being built for Southwest, Boeing will bend to their demands.

Boeing even built a variant of the B737 specifically to suit Southwest.
(from memory, it was the -500, but with the same cockpit as the - 200. As in analogue dials)

cml387

When the 707 was launched it became apparent that the aircraft was lacking in horizontal stability and that with lesser pilots there was a danger of instability leading to a dangerous dutch roll (essentially the tail fin was too small).
Tex Johnson (chief test pilot) noticed this when training new pilots. He himself promised that Boeing would fix it at Boeing's cost, and they did fit a ventral tail which fixed the problem.

Nowadays it seems that Johnson would have been shut up and the inevitable blood sacrifice would be required.

goingnowhere

The ventral fin issue on the 707 was something the UK CAA pushed hard on before allowing them on the UK register.

banie01

goingnowhere wrote: »

The ventral fin issue on the 707 was something the UK CAA pushed hard on before allowing them on the UK register.

It was a very politicised action by the CAA, at the time despite its penchant for metal fatigue related depressurisation and airframe loss, the later mks of the Comet were considered to be at risk of sales loss if the 707 was given easy market access.

It was as much an anti-competitive protection measure as a passenger one.

padjocollins

https://media.ccc.de/v/36c3-10961-boeing_737max_automated_crashes

goingnowhere

banie01 wrote: »

It was a very politicised action by the CAA, at the time despite its penchant for metal fatigue related depressurisation and airframe loss, the later mks of the Comet were considered to be at risk of sales loss if the 707 was given easy market access.

It was as much an anti-competitive protection measure as a passenger one.

To be fair Boeing offered the modifications the UK sought to all customers globally free of charge and all new 707's came from factory with the modifications.

Had the Comet not crashed and the excellent program of work to figure out why, or the T tail stall issue which the UK found via the VC10/Trident, Douglas/Boeing would almost certainly have been caught out.

Back then there was transparency and old fashioned professional courtesy of letting the competition know of the critical lessons you learned in the interest of safety.

Tenzor07

Newly discovered wiring issues, will cause further delays for Boeing getting these aircraft back into service:

https://www.nytimes.com/2020/01/05/business/boeing-737-max.html

L1011

That one apparently needs a few small parts and 2h to fix but it could also be required on the NG. The deeper they dig the more risk of something unacceptable and extant in the NG there is

Inquitus

Boeing to recommend SIM Training for 737-Max Pilots, that's not going to go down well with the customers, currently only 34 SIMs available globally.

Boeing will recommend that pilots train in flight simulators before flying its 737 Max and plans to inform airlines of its decision soon, according to two people familiar with the matter, a move it had previously resisted.

The Max has been grounded since March following two crashes that killed 346 people, and Boeing has been working for months on changes to the software that contributed to both accidents. The training requirement further complicates the company’s efforts to return the plan to service.

Boeing recently informed the administrator of the Federal Aviation Administration, Stephen Dickson, of its recommendation. The final decision to require the simulator training would be made by the F.A.A., which is likely to follow the company’s advice. The regulator still has to complete testing of the plane.

https://www.nytimes.com/2020/01/07/business/boeing-737-max-simulator-training.html

L1011

1m/airframe compo to Southwest with that act alone - but that's small change at this stage of the costs.

Inquitus

L1011 wrote: »

1m/airframe compo to Southwest with that act alone - but that's small change at this stage of the costs.

Aye a $300m cheque needs to be cut for that alone to SW, never mind the rest of the compensation required either in cash, future discounts or whatever to SW.

Muahahaha

Would it be possible for them to up the amount of sims in a short space of time? Surely with only 34 there would be a huge backlog of pilots waiting to use them