Advertisements

Boeing May Have To Cut 737 MAX Production Again

With the timeline for ending the grounding of the 737 MAX pushed further out, the potential that Boeing will reduce the production rate of its flagship plane has risen, analysts say.

The company is beginning to show the financial strain of the crisis, announcing Thursday that it would take a $4.9 billion charge in its second-quarter earnings to cover compensation to buyers of the plane, who have been forced to wait for delivery as Boeing works with aviation safety regulators to fix the problems that led to two deadly crashes that killed 346 people.

In April, Boeing dropped 737 output from 52 planes a month to 42, but that production still comes at a considerable cost that isn’t being matched by incoming revenue. Boeing typically only collects 1% to 5% of the purchase price of the plane as a down payment, with the final 50% due on delivery and the balance coming in payments as the delivery date approaches. Boeing also said Thursday that the smaller production runs had raised production costs for the program by $1.7 billion. Meanwhile, undelivered planes are stacking up in temporary storage, presenting Boeing with logistical and maintenance headaches.

“I’d be very surprised if there weren’t another rate cut ahead,” says Richard Aboulafia, an aerospace analyst with the Teal Group. “Probably down to 36 or so.”

Boeing kept the 737 production line fully staffed after its April rate cut, but furloughs would be a possibility this time, he says.

There may be signs of a pending slowdown already in the supply chain. Chris Olin of Longbow Research said in a note Thursday that small aerospace parts suppliers his firm canvasses reported a sharp drop in orders in July. That’s “seen by some high-level executives as a leading indicator for additional [737] production cuts” in the second half, Olin wrote.

General Electric and France’s Safran, which produce the plane’s LEAP-1B engine through a joint venture, could decide to lower LEAP production independently for 2020, Olin says. He downgraded his rating of the shares of the specialty metals producers Arconic and Allegheny Technologies to neutral over uncertainty in demand ahead.

Kevin Michaels, managing director of AeroDynamic Advisory, sees a “30% to 40%” chance of a rate cut if the 737 MAX’s return to service slips to December or January. “It would be modest because it needs to keep the supply chain warm,” says Michaels. “Perhaps something like 36.”

Boeing has given no indication that a slowdown is in the offing. In the announcement of its $4.9 billion charge, the company said it was planning to gradually raise production from 42 planes a month to 57 in 2020.

In May, it was thought that Boeing was on track to receive approval from the U.S. Federal Aviation Administration to end the grounding of the 737 MAX by late June, but the timeline has slipped amid an exhaustive review of the safety of the plane that has turned up new areas of concern. Late last month, FAA test pilots discovered a data processing problem in the plane’s flight control computer that could occur in the event of a microprocessor failure, which Boeing is hoping to address through a software modification.

Boeing said Thursday it’s assuming that it will receive regulatory approval by early in the fourth quarter for its fixes for that issue and the MCAS flight control program implicated in the two crashes. Speculation had risen earlier in the month that return to service could be delayed to early 2020.

Over the past week, American Airlines, United and Southwest scrubbed the 737 MAX from their schedules through early November.

Airbus could be poised to benefit if Boeing reduces 737 production again, Olin believes. That would open up production capacity in the supply chain that could help Airbus ramp up production of the competing A320neo to 70 a month.

The 737 MAX is the linchpin of Boeing’s commercial aircraft business, with a backlog of 4,547 orders. With the order book dwindling for the 737 NG, it can’t sustain the 737 line on that alone. Boeing only delivered 24 in the second quarter, and it lists just 49 outstanding orders for the 737-800 and 737-800A, and five for business jet versions.

Boeing shares rose 4.5% to close the week at $377.36, with investors apparently happy that the company provided concrete numbers on the extent of the financial damage from the MAX crisis. Boeing shares have fallen 11% since the crash of Ethiopian Airlines Flight 302 on March 10, but the stock is still up 16.5% on the year.

Follow me on Twitter. Send me a secure tip.

I help direct our coverage of autos, energy and manufacturing, and write about aerospace and defense. Send tips to jbogaisky[at]forbes.com

Source: Boeing May Have To Cut 737 MAX Production Again

Advertisements

Plane Talk: 737 MAX In Focus For Boeing Q2, With F-35 Top Of Mind At Lockheed

Getty Images
Getty Images

Key Takeaways:

  • Lockheed and Boeing are reporting Tuesday and Wednesday
  • Boeing’s troubled 737 MAX likely to be in spotlight
  • Lockheed navigating geopolitical issues

It’s a tale of two planes this week as Boeing (BA) and Lockheed Martin (LMT) earnings line up on the runway.

After months of grappling with 737 MAX troubles, Boeing (BA) doesn’t seem likely to get much of a lift from earnings season when it reports Wednesday. Thanks to BA’s announcement last week of a nearly $5 billion charge related to the situation, some of the financial mystery surrounding the crisis is out of the way as earnings approach.

At LMT, geopolitics are a potential challenge for sales of the popular F-35 jet fighter and might be a discussion point on its earnings call Tuesday.

Boeing Quarter to See No Contribution from Key Airliner

For BA, Q2 is the first this year to fully reflect the complete grounding of the troubled 737-MAX plane after two deadly crashes.

Last Thursday, Boeing said it will record an after-tax charge of $4.9 billion, or $8.74 per share, connected with its estimate for potential concessions and other considerations to customers for disruptions. This charge will result in a $5.6 billion reduction of revenue and pre-tax earnings in the quarter. The entire estimated amount will be recognized as a charge in Q2.

The good news—if you can find any in a situation like this—is that BA also said it expects to get the plane back into service by early in Q4, which is earlier than some analysts had expected. Before BA’s announcement, some media reports speculated it wouldn’t get into the air again until next year. Also, the charges might look relatively small compared to BA’s $210 billion market capitalization.

Big Drop in Q2 Deliveries for Boeing

Maybe even harder to swallow for BA and its investors is the competitive impact of the crisis. Deliveries of BA’s airliners slid 37% in Q2, even as Europe’s Airbus (EADSY)—the world’s other leading aircraft manufacturer—made solid strides.

Airbus said it delivered 389 planes in the first half, up 28% from 303 a year earlier. It’s on pace to deliver a record number of planes this year. Meanwhile, BA’s deliveries went the wrong way in the first six months of 2019, falling to 239, from 378 a year earlier. Deliveries of the company’s 737 model fell by more than half.

BA reported no orders of the 737-MAX in June for the third-straight month since the separate crashes that killed 346 passengers earlier this year and in 2018. The company continues to work through software issues with the troubled jet, including another flight control issue involving failure of a microprocessor announced by the Federal Aviation Administration (FAA) last month.

BA’s earnings conference call is probably going to sound more like a “737-MAX” conference call, so consider listening closely for any updates on fixes to the jet. Some analysts say BA is doing the right thing by not focusing too much on timetables and emphasizing a quality outcome over timing.

Even if BA can satisfy the government that it’s taken all the necessary steps to make the plane safe again, airlines would need more than a month in many cases to get the planes back into flying condition, The Wall Street Journal reported recently. Several airlines have now pushed back their estimates of when they can get the 737 MAX back into their rotations, with Southwest (LUV) the latest to do so. Last week, LUV pulled the plane off of its flight schedule into early November, a month longer than it had expected in June. LUV is the largest U.S. operator of the jet.

BA’s Q1 earnings report barely reflected the 737-MAX issue, because the plane wasn’t grounded until nearly the end of that quarter. In Q2, it was on the tarmac for all three months, so now investors can get a sense of the full impact.

However, even in Q1 things weren’t all that positive, with BA noting then that cash flow fell nearly 10% from a year earlier due to lower 737 aircraft deliveries. Revenue came in slightly below expectations in Q1 and fell $500 million from the same quarter in 2018.

This time around, struggles could get worse, if analysts are correct. Beyond that, BA—like other industrial companies—faces the challenge of higher materials costs due in part to U.S. tariffs on steel and aluminum from China. These are important components of aircraft building.

If you’re looking for any good news from BA, perhaps it’s worth noting that the company did deliver a record 18 of its 787 Dreamliner jets in June, with monthly production of that jet now at 14.

Boeing Earnings and Options Activity

When BA releases results, it is expected to report adjusted EPS of $1.78, down from $3.33 the prior-year quarter, on revenue of $19.99 billion, according to third-party consensus analyst estimates. That revenue would represent a 17.6% drop from a year ago. These earnings projections don’t reflect the charges announced by BA last week.

The options market is implying about a 3.1% stock move in either direction around the upcoming earnings release. Implied volatility was at the 22nd percentile as of Monday morning.

Looking at the July 26 weekly expiration, put volume has been light overall, but heaviest at the 365 and 370 strikes. Call volume has seen a little more action, most heavily at the 375 and 380 strikes.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.

No Turkish Delight for Lockheed

Like BA, Lockheed Martin (LMT) faces a possible headwind from tariffs on materials it uses to build products. It also has its own issues with a plane, though arguably they’re nowhere near the level of BA’s concerns.

LMT’s F-35 fighter jet, which makes up about 30% of the company’s sales, recently came into the spotlight when the U.S. government halted delivery of two F-35 planes to Turkey. This was in response to Turkey making a multi-billion dollar deal to buy a Russian missile system. The issue becomes more serious for LMT because Turkey also faces the forfeiture of 100 promised F-35 jets, CNBC reported.

Complexities build for LMT when you consider that the F-35 is financed and manufactured partly by Turkey. That means LMT could need to replace the manufacturing done in that country.

For now, LMT sounds hopeful about its fighter jet despite the Turkey controversy.  “We continue to see strong demand both from our existing partners and potential new international customers and are confident the F-35 program will continue to grow,” a company official told the WSJ.

However, the company’s earnings call tomorrow could include questions from analysts about any deeper financial impact LMT might face.

A couple other factors to consider going into the call include whether the recent strong dollar is having an impact on foreign demand for LMT products, and whether business is seeing any impact from the U.S./China tariff situation.

There’s a sense that LMT and other defense companies could be getting helped by rising defense budgets, including in the U.S. However, the U.S. defense budget for next year remains contested in a battle between Democrats who control the House of Representatives and President Trump and congressional Republicans. Democrats in the House passed a $733 billion defense budget bill earlier this month that Trump and Republicans oppose. Trump had proposed $17 billion more in spending.

The House and Senate have a few weeks left to reconcile their competing versions of a defense bill. Any delay on a new budget agreement might raise questions about demand for LMT’s products in the coming months.

Lockheed Earnings and Options Activity

Lockheed crushed estimates in Q1, with earnings up 49% from a year earlier. At the time, LMT updated its forecast for 2019 financial results, with earnings anticipated between $20.05 a share and $20.35 a share. Expected full year revenue was also increased, to a range between $56.8 billion and $58.3 billion.

One thing to watch when LMT reports tomorrow is whether any of that guidance changes.

Lockheed Martin is expected to report adjusted EPS of $4.77, up from $4.05 in the prior-year quarter, according to third-party consensus analyst estimates. Revenue is projected at $14.2 billion, up 6% from a year ago.

The options market is implying about a 2.5% stock move in either direction around the coming earnings release. Implied volatility was at the 18th percentile as of Monday morning.

thinkorswim chart

TREADING WATER: Boeing shares (candlestick) have basically been treading water for a few months now, as this year-to-date chart shows, while Lockheed shares (purple line) have retreated from recent highs. Data Source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

thinkorswim

TD Ameritrade® commentary for educational purposes only. Member SIPC. Options involve risks and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options.

I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100

Source: Plane Talk: 737 MAX In Focus For Boeing Q2, With F-35 Top Of Mind At Lockheed

How China Could Ruin 2019 For Apple, Tesla, Boeing

Image result for china economy ruins america

It was 27 years ago when Deng Xiaoping observed that “Saudi Arabia has oil; China has rare earths.”

Talk about a prescient observation. In the early 1990s, China’s then-supreme leader had zero inkling of the iPhones, Tesla cars, drones, robots and high-tech fighter jets yet to come. Yet China’s dominance over these vital inputs is more relevant than ever as the trade war intensifies.

There is a pervasive view that President Xi Jinping’s government has less leverage over Donald Trump’s. Why, then, is Xi the one walking away from a truce? With Trump increasingly desperate for a win, any win, on the global stage, China could get off cheap.

Xi’s team could be misreading the moment. Or putting testosterone ahead of geopolitical peace. A more interesting reading: Beijing reckons it has more cards to play in this game than investors recognized.

In May, Xi made a pointedly-timed visit to a rare earth facility. Though not quite Saudi oil, China’s massive store of elements vital to myriad tech products gives Beijing considerable leverage over Silicon Valley.

It’s but one example of how China may have Trump over a barrel. What other cards are up Xi’s sleeve?

Louis Gave of Gavekal Research just put out one of the more intriguing lists of possibilities. On it: banning rare-earth exports; making life “impossible” for U.S. executives operating in China; devaluing the currency; dumping huge blocks of U.S. Treasury securities; engineering a plunge in global energy prices; sharp drops in orders of goods across the board.

There are a couple of other options. One, dissuading mainland consumers from visiting America. Two, pull a Huawei Technologies on pivotal U.S. companies. This latter step could wreak immediate havoc with the Dow Jones Industrial Average.

Imagine the blow if Xi’s government suddenly closed off Boeing’s access to Asia’s biggest economy. Or if General Motors found its cars parked at Chinese customs. Halting Apple Inc.’s sales would send its own shockwaves through corporate America. Curbing Chinese imports of American soybeans would do the same in agricultural circles.

So far, China has kept retaliatory moves to a minimum. Xi seems to be rolling the dice that Trump will get distracted or impatient and move on to another target—like Japan. His calculation also seems aimed at 2020. Why give away the store to Trump when Americans might elect a less erratic leader?

Weaponizing rate-earths minerals might be Xi’s first real shot across Corporate America’s bow. The U.S. has other sources, of course. If U.S. deposits don’t suffice, companies could turn to Australia, Myanmar, India, Brazil or Thailand. And Trump seems tight enough with Vladimir Putin to score some stock from Russia. But the supply chain disruptions would surely have top CEOs — who tend to be big campaign donors — calling Trump to register their dismay.

It could backfire, too. In 2019, Beijing deprived Tokyo of rare-earth metals and China’s market share has never been the same since. “Unfortunately,” Gave says, “this would give China a ‘feel-good’ boost, but be as productive as landing a mild blow on Mike Tyson’s nose. Such an export ban would undermine China’s long-term production capacity, for the simple reason that rare earths are not that rare.”

The dumping-dollar-debt option could be especially dangerous. Just like an “uncontrolled currency depreciation,” says Michael Hirson of Eurasia Group, selling huge blocks of U.S. Treasuries would “threaten blowback to China’s economy.”

Any surge in bond yields could devastate the American consumer. The shockwaves would quickly zoom from Wall Street to Shanghai. Xi might be hinting at such a move, though, as Beijing buys fewer and fewer Treasuries. At present, China has more than $1.1 trillion of U.S. government securities. Xi seems to think that’s more than enough.

Even so, markets may live in semi-constant fear of a massive bond route bearing Chinese fingerprints. Or any number of ways in which China would ratchet up tensions with Trump and vice versa.

“The path to a potential de-escalating deal is fraught with challenges as both sides dig in, and how markets react will likely help determine the outcome of talks,” say analysts at Fitch Ratings. “Over the longer term, we maintain our long-held view that protectionist trade policy led by the US is likely to persist in the years ahead, marked by cycles of escalation and de-escalation.”

Roughly a week after Xi’s rare-earths pilgrimage, he visited Jiangxi Province, the starting point of Mao Zedong-era 1934-1936 “Long March.” There, Xi called for a new one as Trump’s America does its worst to halt China’s march to the top of the economic rankings.

That hardly sounds like a Chinese leader who’s going to cave to Trump. More like one who’s in this trade battle for the long haul.

Chinese President Xi Jinping visits a memorial hall marking the departure of the Long March by the Central Red Army in Yudu County, Ganzhou City, during an inspection tour of east China's Jiangxi Province.

Chinese President Xi Jinping visits a memorial hall marking the departure of the Long March by the Central Red Army in Yudu County, Ganzhou City, during an inspection tour of east China’s Jiangxi Province.

Xinhua/Xie Huanchi

I am a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.”

Source: How China Could Ruin 2019 For Apple, Tesla, Boeing

The History Of Boeing 747 ( Video Biography) – Largest Dams

The Boeing 747 is an American wide-body commercial jet airliner and cargo aircraft, often referred to by its original nickname, “Jumbo Jet”. Its distinctive hump upper deck along the forward part of the aircraft has made it one of the most recognizable aircraft, and it was the first wide-body airplane produced. Manufactured by Boeing‘s Commercial Airplane unit in the United States, the 747 was originally envisioned to have 150 percent greater capacity than the Boeing 707, a common large commercial aircraft of the 1960s. First flown commercially in 1970, the 747 held the passenger capacity record for 37 years.

The four-engine 747 uses a double-deck configuration for part of its length and is available in passenger, freighter and other versions. Boeing designed the 747’s hump-like upper deck to serve as a first–class lounge or extra seating, and to allow the aircraft to be easily converted to a cargo carrier by removing seats and installing a front cargo door. Boeing expected supersonic airliners—the development of which was announced in the early 1960s—to render the 747 and other subsonic airliners obsolete, while the demand for subsonic cargo aircraft would remain robust well into the future…..

 

 

Your kindly Donations would be so effective in order to fulfill our future research and endeavors – Thank you

 

Boeing Introduces its New Fuel-Efficient, Twin-Engine Jet for Long-Haul Flights: The 777X

The 777X is the most efficient twin-engine jet in the world, with larger windows, a wider cabin, new lighting and architecture. Learn more: www.newairplane.com/777X What’s Boeing’s latest innovation? Subscribe to the Boeing YouTube Channel: https://www.youtube.com/boeing More great aviation videos: ► 777X Flight Deck Reveal: https://youtu.be/TOJnj_tLD4s ► 777X Starts Production: https://youtu.be/okZPIyCL5A0 ► How Boeing Tests the Wing Spars of the 777X: https://youtu.be/ZQQSW8a-vXY ► Boeing’s Advanced Manufacturing Improves 777 Assembly: https://youtu.be/GevBp3nj878 ► Boeing’s News 777X Composite Wing Center: https://youtu.be/H2kUosgZmxU ► 777X Long Folding Wings Based on Flying Birds: https://youtu.be/rzJA6iS39i8 Our social media handles: ► Facebook: https://www.facebook.com/Boeing/ ► Twitter: https://twitter.com/Boeing  ► Instagram: https://www.instagram.com/boeing/ ► Linkedin: https://www.linkedin.com/company/boeing/ ► Website: https://www.boeing.com

 

 

Your kindly Donations would be so effective in order to fulfill our future research and endeavors – Thank you

5 Real Life Blockchain Implementations Outside of Cryptocurrency – Bill Doerrfeld

1.jpg

What do Pied Piper and blockchain tools have in common? Both are always “coming soon.”

By now most of us are familiar with blockchain, the technology underpinning cryptocurrencies like Bitcoin and Ethereum. Outside of cryptocurrency, blockchain has many purported use cases in scenarios that require an immutable ledger.

Rhetoric has elevated blockchain to godly status, labeling it as a bleeding edge technology poised to disrupt all facets of life, from voting, to smart guns, health data, stock trading, international shipping, and beyond.

We’ve seen a ton of other innovative blockchain ideas too, yet many are unproven or simply hypothetical. So, the question is, what projects are successfully implementing blockchain in practice?

In this article we’ll strive to separate fact from fiction by showcasing 5 living projects that are actually using blockchain, with real world results. We’ll gauge the viability of such projects, and see how proven use may affect the global climate and attitude toward blockchain adoption.

1. Arcade City

Peer-to-peer blockchain-based ridesharing

Arcade City is a new peer-to-peer rideshare startup whose goal is to disrupt the disruptor. They’re taking on Uber and Lyft to cut out the middleman and protect driver rights, and they’re basing their platform on the Ethereum blockchain.

Many drivers have had negative experiences using Uber, and Arcade City aims to alleviate those issues by giving them complete autonomy. Arcade City drivers set their own prices, accept their own form of payment, form guilds with other drivers, and can have open conversations with users within the app.

Available only in select cities worldwide, you can download the Arcade City app on the App Store.

2. Helperbit

Humanitarian fundraising vetted with blockchain

Helperbit is a fundraising site that emphasizes philanthropic global initiatives that increase well-being in foreign countries.

Current projects range from natural disaster relief, clean water for African communities, helping educate children in Papua New Guinea, to even a North Pole exploration.

Tying each donation to the blockchain helps increase economic transparency. As corruption in charity and insurance is an unfortunate reality, Helperbit aims to bring fundraising power straight to the people through decentralization.

3. Boeing

IoT-driven blockchain unites assembly line operations

It’s not just startups and nonprofits excited about blockchain. Aviation engineering behemoth Boeing is already integrating an IoT-driven blockchain into their engineering operations.

Building an airplane takes hundreds of thousands of components, and tracking them throughout the build lifecycle can be a nightmare. Using an IoT-centric blockchain, “Boeing holds complete provenance details of each component part.”

This helps by increasing transparency between multiple groups in the production process: manufacturing teams, aircraft owners, maintainers, and government regulators. In addition to optimizing engineering efforts, their IoT blockchain benefits issue resolution by minimizing aircraft turnaround time.

4. Medicalchain

Digitize health records and share access on the blockchain

Healthcare needs a kick in the butt. Not only is cost staggeringly high, but the industry suffers from improper diagnosis, terrible user experience, and continual patient safety concerns. Much of this can be fixed through improved data usage.

Medicalchain aims to use blockchain technology to securely store medical records. Using a distributed ledger for healthcare is a godsend as it allows doctors, hospitals, laboratories, pharmacists, and health insurers to have more immediate access to health records, which could help save lives. Medicalchain ingests MedTokens and is working on a complementary telemedicine platform MyClinic.com.

Granted Medicalchain is in an early stage; it’s still taking on pilot patients and practitioners and must build credibility on both fronts. That being said, it’s a great case study on the power of blockchain to disrupt an inefficient industry.

5. CargoConX

A blockchain for the logistics and transport industry

CargoConX‘s main selling point is allowing shipping logistics companies to “Uberize” their spare capacity in containers. For this to operate correctly, CargoConX uses smart contract technology based on blockchain to increase accountability amongst all partners.

Their CSS Connect API backbone drives six main modules to improve the shipping industry. As their documentation states:

“Smart Contracts between network participants and can guarantee payment via an escrow facility to all parties involved in the shipping journey, this occurs through trigger points and milestones setup in the blockchain Smart Contract.”

In midst of an ICO, CargoConX boasts 10 early adopters (significant for large B2B partnerships).

The Pseudo-Reality of Blockchain

Fortune says “blockchains will change the world,” and there is some truth to that. However, a lot is still untested — the Internet may not be as decentralized as Silicon Valley’s Pied Piper would like.

Don’t believe the hype. Sierra Leone actually did not hold the world’s first blockchain election. And regardless of how cool it sounds, we’re probably not a node in a universal blockchain created by aliens.

No doubt the blockchain buzz is turning heads and there is legitimate action. We’ve seen how multiple industries are implementing it to increase transparency, disrupt competitors, and streamline internal operations. Other credible use cases include smart legal contracts, solar power networks, distribution of government benefits, and digital payments.

Blockchain projects need time to receive funding, acquire users, and build out their platforms before they are evangelized. We’ll just have to wait and see which ones become a proven reality, and what stays as fiction.

 

 

Your kindly Donations would be so effective in order to fulfill our future research and endeavors – Thank you
https://www.paypal.me/ahamidian

%d bloggers like this:
Skip to toolbar