Julie Johnsson’s Post

Two historic milestones for Boeing came into view within a span of a few hours on Sunday, and provided a new insight into the depths of its crisis. The Justice Department is pressing the planemaker to plead guilty to fraud as part of a settlement that would resolve some of its most pressing legal issues. And Boeing announced a $4.7 billion deal to acquire its largest supplier, Spirit AeroSystems, a deal that would unwind its largest foray into outsourcing after nearly two decades. It's hard to imagine either happening if not for a near-catastrophe involving a 737 Max in January. The Congressional hearings, investigations and parade of whistleblowers that ensued have cast a harsh light on the company's culture and its struggles as a manufacturer in a post-pandemic world. For investors, there's some relief to better understanding two of the company's biggest risks. But others remain -- like a potentially crippling strike in September. The Spirit deal would cut out the red tape that comes with a subcontractor, giving Boeing more leeway to address incomplete or defective work head-on. One of the eye-opening facets of the factory breakdown that led to a door-plug exploding out of an Alaska Airlines Max in January is the wrangling between the two companies over repairing five defective rivets until the jet had reached the end of a Renton assembly line. Boeing executives had promised to wrap up the transaction by the end of the second quarter, and the deal squeaked over the line in most US time zones. The announced terms revealed another cost to shoring up Spirit's operation and finances. That's the $559 million Boeing is effectively paying Airbus to take over money-losing Spirit factories in Belfast and North Carolina that support the A220 and A350 programs. Airbus will get control of the facilities and tooling for a token $1. But with Spirit wracking up nearly $1 billion in forward losses on those two jet programs since 2019, only time will tell if Toulouse got the bargain of the year -- or overpaid. #Boeing #Airbus #aviation #MNA

There's some intriguing context to Bloomberg's scoop today on the mega-A330neo order being contemplated by China in the aftermath of Xi's state visit to Paris last month, as Siddharth Philip, Danny Lee 李嘉洪 and I reported. If it's completed, the 100+ jet deal would expand the A330-900 backlog by around 60%, a boon for Airbus. For China's largest airlines, there's a silver lining to the model's lackluster sales in a market glutted with used versions. The A330neo offers a chance to refresh their widebody fleets at a time when that nation's joint venture with Russia for a long-haul jet is stalled -- and Boeing's 787 and Airbus's A350 are mostly sold out thru late decade. But diplomatic wrangling playing out in the background means the sale is far from certain. China is eager to forestall European sanctions on its electric vehicles, especially after the Biden administration imposed heavy tariffs. The US penalties coincided with a mysterious halt in Boeing deliveries to China, ostensibly so that regulators could examine the design of a revamped cockpit voice recorder that's already been approved by their counterparts in the US and Europe. Stay tuned. #aviation #Airbus #Boeing

Boeing's balance sheet risks are coming into sharper focus with a downgrade by Moodys hours after its earnings report, and S&P's decision today to put the company on credit watch with a negative outlook. All three ratings agencies have Boeing hovering one notch above junk status, a reflection of the growing financial pressures on the aviation titan. These concerns should start to fade once Boeing is churning out 737 jets at a steady pace. After all, it's part of a global duopoly and demand for new planes has never been greater. Problem is: no one can say with any certainty when this will occur. As I explained in this story, the company is being squeezed by two opposing forces. Boeing needs to take the time to reinforce quality controls in its factory and supply chain. But with cash dwindling, it needs to ramp production soon. CEO Dave Calhoun sketched out a roadmap for a sharp turnaround within months. It may be tough to achieve with the FAA in the driver's seat. #Boeing #aviation

Sorry for the late post, but I thought I'd share our scoop from yesterday since it generated a fair bit of discussion on Boeing's earnings call today. Boeing's complex, three-way talks to takeover Spirit AeroSystems have hit a snag over pricing for the plants that supply Airbus. Negotiations are progressing at a snail's pace. Given Boeing's nearly $4 billion cash burn in Q1, maybe that's not such a bad thing, says analyst Robert Spingarn of Melius Research. #Boeing #MNA #Airbus

Boeing's burned through a lot of cash in the first quarter -- $3.9 billion -- as it slowed production and compensated airlines for delivery delays and a brief grounding of its Max 9 models. While that's not as horrible as the $4.4 billion free cash flow outflow that Wall Street had expected, it underscores the urgent need for the US planemaker to resolve questions around the quality of the workmanship in its factory. The planemaker's cash balance plunged to $7.5 billion from $16 billion at the start of the year. That doesn't leave Boeing with much leeway to absorb the costs of its slowed production or to finance its planned acquisition of supplier Spirit AeroSystems Holdings Inc. But Boeing CEO Dave Calhoun, who plans to step down later this year, told workers the planemaker is "seeing early signs of more predictable, stable and efficient cycle times in our 737 factory, and expect this will continue to slowly improve." #Boeing #earnings #737Max

My latest with Siddharth Philip on a historic day for Boeing Co. In a stunning move, three of the planemaker's most powerful leaders are exiting: CEO Dave Calhoun is leaving at the end of the year; Chairman Larry Kellner isn't standing for re-election and Boeing Commercial Airplanes' chief Stan Deal abruptly retired. Boeing's board was largely appointed by Calhoun and Kellner in the wake of tragedies five years ago that spurred a global grounding of the 737 Max and badly damaged confidence in the US planemaker. Directors' loyalty has been sorely tested over the past few months as another crisis involving the model engulfed the US planemaker. Within the past week, FAA Administrator Mike Whitaker raised alarms about Boeing's safety culture on the NBC Nightly News, while a trio of powerful airline chiefs with the backing of their peers and a trade group pushed to voice their concerns directly to directors -- without Calhoun present. So, the existential crisis around the 737 Max continues to change Boeing in ways that would've been unthinkable not long ago. The company is unwinding its largest outsourcing move with talks to re-integrate Spirit AeroSystems Holdings Inc. There's the sweeping leadership overhaul at both the board and exco levels that critics have long demanded. And Calhoun even predicted to CNBC today that his successor would develop the next new airplane for the Boeing Co. Boeing being Boeing, there's no shortage of speculation as to who directors should tap for the ultimate fixer-upper. Some have suggested they bring in a Larry Culp-like figure, and others think the GE CEO himself might be up for the challenge once the spinoff is completed. Stephanie Pope retains her COO title at Boeing even as she takes charge of BCA, a reminder she's being prepared for a greater role. Pat Shanahan would bring a wealth of operations experience if he, like Spirit, rejoins Boeing. Carrier CEO Dave Gitlin, who's a Boeing director, and American Airlines chairman Greg Smith, Boeing's ex-finance chief, are widely respected by investors. #Boeing #succession #aviation https://lnkd.in/gJTw-W4g