Boeing Quarter raised new questions and provided few answers
Boeing (NYSE: BA) has been through a lot of turbulence in recent years. First, his 737 MAX was immobilized after two fatal crashes. More recently, the COVID-19 pandemic has plunged the airline industry into a dramatic fall and eroded demand for new aircraft.
In this video by Motley Fool Live, recorded on February 4, Focus on industry Host Nick Sciple and Motley Fool collaborator Lou Whiteman provide an update on the company and discuss the challenges it will face in the coming quarters.
Nick Sciple: Maybe we talk [laughs] arguments with the government and bad news about a company, I think that has certainly described Boeing over the past couple of years. What’s going on with Boeing lately?
Lou Whiteman: The good news is, we’re not going to talk about issues with the 737 MAX. The bad news is that we are going to talk about issues with the 777X which is a new version of their bigger plane, it’s their overseas international plane. It was delayed even before the 737 MAX. He was supposed to fly now. But now after the 737 MAX, with all the issues that have been uncovered, the regulatory review to get this thing certified is going to be even more intense. Now Boeing, just in the last few weeks, has said it won’t be 2022 when it flies the way they hoped, they are hoping for the end of 2023, which is only light years away for the industry. Specifically, it becomes a real albatross of a program, it’s not the plane the airlines need right now. This is the most important thing Boeing offers, it focuses on international flights at a time when we don’t see international flights, and it’s a huge deal for Boeing that they have invested billions and billions in. , and suddenly, worry about when it will be released and how it will sell.
Sciple: Give me some good news for Boeing. Because it seems like just over the past couple of years there just isn’t much, there is just more bad news every day it seems. What’s the positive twist? What is the light at the end of the tunnel for this business?
White: I’ll answer it by doubling down on the bad news. [laughs] One of the things we really need to watch out for with the 777X right now is that Boeing, in its annual report, has reduced its backlog by about a third. Now it’s mostly a matter of accounting. It is because it is going to be so late that some of its customers can opt out of these offers and therefore can no longer consider them a firm deal. This does not mean that they will back down. Chances are they will see cancellations. The good news here is that it just might save the Dreamliner program, which Boeing also had to cut. The Dreamliner is a smaller version. It is always made for international flights but it does not have all the seats, it is a little easier to operate in this environment, probably in the environment that we are going to see. The Dreamliner is arguably a bigger program for Boeing, and while they don’t want the 777X to end as a disaster, they’d rather save the Dreamliner. We have the Dreamliner, hopefully on the rebound, the 737 MAX flies, the airlines on their fourth quarter call they said passengers are not backing up. We are going to see money slowly, hopefully, slowly if not turn positive in 2021 with the MAX. The worst is over but it’s really hard to say, there isn’t much to do at the moment.
Sciple: I hear a lot of people say, “Well, air travel is going to come back with the vaccine and maybe that will decrease the demand for airplanes”, but with the nature of this activity, there is a lag. in the way it plays out.
White: Especially in this situation where the airlines had to go into debt to survive. Yes, I think there is going to be a bounce, but that bounce will be largely on the back of the existing metal and maybe there are a lot of planes you can get on the cheap right now. I think it is difficult to make your arguments. We’ll see new aircraft sales because a lot of these contracts, you can’t rock a lot. I think it’s hard to argue that we’ll see sales of new aircraft for Boeing or Airbus (OTC: EADSY) accelerating over the next five years, just as airlines heal their wounds and try to get back to normalcy.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.