Boeing Company (BA)

The new Boeing 787 will transform the Air Transportation Industry. This medium sized long range jet will help to keep many Passenger Airline Companies viable well into the first quarter of the 21st Century. Boeing has gotten it right this time and built the 'right sized' airplane with an impressive mile range and fuel efficiency. Once everyone undestands what great vision Boeing has had with the design of this aircraft, the stock price with improve greatly.

787 plane will NOT fly by end of year, will be lucky if it flies by mid 2010. BA MUST deliver 450 planes just to break even at this point. STILL has major union problems, BA will slowly start moving to SC, have U seen the Seattle times paper this morn? SELL, SELL,SELL this pig NOW!!!

Boeing recent announcement that it will be forced to take a $1 billion writedown in relation to its 747-8 aircraft program only serves to emphasize the underlying problems that the company has had developing new products.^[1] In addition to BA's well publicized delays in its 787 Dreamliner program, which are expected to cost Boeing $2.5 billion in writedowns for 3Q09, this new development with regard to its 747 program makes the company vulnerable to market share loss relative to Airbus. Boeing's main competitor, Airbus, may be able to take advantage of the 747-8 backlog and gain market share with its A380 jet.^[1]

Getting the 787 Flying is only the begining. That can be done with an airplane full uncertified parts. Boeing management is not to be trusted, that has been well proven. Certification, Flight Test an Delivery still stand in th way of any positive cash flow. Boeing has lost control of its supply chain and does not have the engineering team to recover anymore. Emergency layoffs are hurting morale and 787 progress. First Flight, like the roll out is a high level Boeing mirage. This company has serious integrity problem. Sell FAST.

Because of the impending global recession, airlines worldwide are cutting new aircraft orders because of lower demand for travel. For example, in December 2008, China's Civil Aviation Administration announced that it was urging its airlines to cancel or postpone new aircraft orders for 2009. During the first two months of 2009, BA had a net total of minus ten new orders - thirty-two orders for 787 jets were canceled during the month of February alone.^[1]

If Boeing decides to withdraw itself from the tanker race, it could prove embarrassing to the Air Force, which has gone to great pains to ensure a fair and open proposal process after the Government Accountability Office (GAO) backed a petition brought by Boeing that the U.S. Air Force altered the auction for a $35 billion aerial-tanker contract in the initial bid that was awarded to the Northrop Grumman/EADS joint venture in February.

But Boeing supporters were critical of the revised bid, which was released last week, claiming it favored the larger tanker model originally proposed by its rivals. Some members of Congress have been quite vocal about the U.S. defense contract going to a European firm.

The new criteria “appear to favor a tanker larger than any real-world scenarios would require,” said Rep. Norm Dicks, a Washington state Democrat, Reuters reported, implying that the new requirements give the edge to Northrop Grumman and EADS.

California-based Northrop feels the new bid process is more than fair.

“We are reviewing the draft RFP with an eye toward ensuring that it addresses the issues raised by the GAO in a way that facilitates a fair and non-political evaluation of the competing bids,” said Northrop vice president Randy Belote, AFP reported.

High fuel costs may decrease orders for commercial airplanes. In 2008, for example, the Air Transport Association expects fuel costs for the airline industry to increase by over 50%, totaling $61.2 billion. Because of these higher fuel expenses, many airlines have reduced their capacity or Available Seat Miles (ASMs) and thus have reduced their new aircraft purchases.

Intense competition from Airbus could continue to take profits from Boeing.

January 20, 2009

Now that Barack Obama has taken the oath of office, it is very likely that his policies will have a negative impact on Boeing. First of all, Boeing produces the F-22 fighter jet with Lockheed Martin, Pratt & Whitney, and the US Air Force;^[1] Obama is currently deciding whether or not to cut funding for the jet.^[2] Because Obama has stated his intention to review the federal budget on a line-by-line basis,^[3] it seems very likely that he will decide to cut the F-22 budget or shift to more competitively-priced alternatives. In light of his history of questioning the competitiveness of existing Boeing contracts,^[4] this outcome seems especially likely. Other unforeseen defense-related budget cuts that will hurt Boeing seem likely, as well - Jim Albaugh, chief of Boeing Co.'s Integrated Defense Systems unit, believes the federal defense budget will dwindle because of economic pressures.^[5]

In late February 2009, Obama claimed that the United States' spending on helicopter projects had "run amok" and made clear his intentions to slash budgeting for Lockheed Martin projects;^[6] the president vowed to combat the "excesses of procurement,"^[6] which will surely hurt BA's bottom line and does not bode well for the fate of the F-22. As predicted, Obama released his 2010 FY budget on February 26, 2009, and, while the finer details of defense spending were kept classified, it did ensure that growth in government expenditures headed towards companies like Boeing will be strictly limited and scrutinized.^[7] On March 4, 2009, President Obama reaffirmed his dedication to cutting the defense budget and was quoted saying, "The days of giving defense contractors a blank check are over."^[8] On March 24, 2009, he announced that his administration had already identified $40 billion in potential savings through "obvious procurement reforms," but gave no specifics^[9] - the likelihood of these expenditure cuts hurting Boeing is incredibly high.

On March 30, the Government Accountability Office reported that the military's 96 biggest defense contracts (worth $1.6 trillion) were overrun by 25% or $296 billion.^[10] The report is just one more reason for the Obama administration to cut expenditures that would otherwise prove lucrative for Boeing.

From Q4 2007 to Q4 2008, Boeing's cash and cash equivalents dropped more than 50%.^[1] During the same period, its pension liabilities shot from $1.2 billion to $8.4 billion^[1] and the company's tangible equity dropped a cumulative $9.5 billion from $2.7 billion to $6.8 billion in the red.^[1] In the midst of general economic turmoil, Boeing will not be able to perform well as sorting out its $7 billion debt and staggering pension liabilities take priority over actually getting the long-awaited 787 Dreamliner in the air.