24/7 Wall St.

As Airbus Cracks Up, A Little Light For Boeing (BA)

No one wanted to be in Boeing's (BA) shoes, at least until today perhaps. The big US airplane company has hit three delays for its 787 Dreamliner and there are rumors that union work stoppages could make that worse. The set-back threatens Boeing's earnings forecasts and could cause 787 customers to ask for late delivery penalties.

Now the spotlight is off Boeing and pointed toward it primary competitor, Airbus. The European firm has announced more delays to it A380 super-jumbo plane which competes with a new version of Boeing's 747.

According to Reuters "Airbus said it was unable to boost production as quickly as it hoped as it tries to recover from two years of production delays caused by problems in installing the wiring on the world's largest passenger plane."

The injured parties from all of this news are airlines who hoped to use the new jets for more fuel-efficient and modern fleets. The carriers are facing having to use old planes which burn more gas at a time when oil prices continue to move up. Many of these carriers are already inching into positions where they cannot meet debt service.

For Boeing, Airbus, and the carriers, it is one of the few games in town where everyone loses.

Douglas A. McIntyre

China Creates Competition For Airbus And Boeing

Neither Airbus nor Boeing (BA) seem to be able to get their newest airplanes to customers on time. The Airbus super-jumbo A380 has frustrated the company's customers for the better part of two years. The plane may be big and efficient, but if it never makes it into service, what difference does it make?

Boeing (BA) has suffered repeated sefl-inflicted humiliation at it continues to push back the final delivery date of the 787 Dreamliner. The chance of a large strike at the company could make the problems worse and Boeing's earnings are not immune from the tardiness. Several large airlines are also asking for compensation because they won't have their Dreamliners on contracted delivery dates.

China may end up capitalizing on all of this and begin to push the two international airplane companies out of it market, which will becomes the world's largest. According to Reuters, "Europe's Airbus has forecast that China's domestic market will increase fivefold by 2026."

The central goverment in the world's most populated country has now set up its own firm to build and market large commercial planes. China Commercial Aircraft Co has been established to make aircraft with 150 seats and more.

China will not be able to get larger jets into production anytime soon. But, if it can have deliveries scheduled within the next decade it could significantly vex the efforts of Boeing and Airbus in the country. If the new Chinese company can deliver just one plane on time, it will have a big head start.

Douglas A. McIntyre

Boeing (BA): Pole Axed By Its Own People

The Boeing (BA) Dreamliner has been delayed so many times that it defies counting. The plane was to have been out already and delivered to some customers. It has been hit by three setbacks. Boeing management has blamed suppliers for getting out key components too late. It is a convenient excuse which misses the point that the people running Boeing were not paying any attention.

The problems have gotten so bad that some airlines which were promised the plane have said they will insist on compensation for late deliveries. Boeing's stock has suffered accordingly.

Boeing has now been handed another surprise. Its unions plan to slowdown work on the Dreamliner. They feel that if they had been given the work, and the cash that went with it, to build key sections of the plane, that the delays would have been mitigated. Why use outside suppliers when your own people are so good?

The unions feel that they have Boeing cornered, and they are right. According to Bloomberg "unions say they made concessions as air travel fell after the 2001 terrorist attacks and will strike if needed for better wages and benefits."

It was not enough that Boeing management could not see supplier problems coming from way off in the distance. Perhaps the trouble could not have been solved completely, but it should have been addressed well before the three series of delays.

Now the people who run Boeing will be accused, and accused fairly, of not seeing problems brewing with their own employees.

Boeing has stuck to its earnings forecasts, assuming that it could make up for lost time with the Dreamliner. The unions will make sure that the heads of Boeing eat their projections. The stock will go down, and there will be hell to pay. Management still mean managing.

Douglas A. McIntyre

Another Big Delay For Boeing (BA) 787?

It appears that Boeing (NYSE: BA) is facing another delay for deliveries of its 787 Dreamliner and the company's CEO is facing a major challenge to his credibility. After two significant set-backs in the delivery timetable, the firm has said it is on schedule for next year.

The German daily Die Welt writes that it has become aware of delays though letters from Boeing to customers. As Reuters points out "None of the 55 or so airlines which have bought the plane have canceled their orders, but many have said they will seek compensation for late deliveries."

Leaving aside the embarrassment to Boeing's management, more delays on the time table could have a severe effect on the company's earnings forecasts. Boeing's stock has already taken a beating because of its earlier problems with the 787. It now trades at $85.69 down from its 52-week high of $107.83.

If the news is accurate, Boeing may have to adjust its financial projections. And, that will likely mean a sell-off in the company's shares.

Douglas A. McIntyre

Is Boeing (BA) Dreamliner Delayed Again

Perhaps it is a rumor and perhaps not. German magazine Focus has reported that the launch of the Boeing (BA) Dreamliner will be delayed another six months into 2010. The publication says it got is information from the Federal Aviation Administration.

Boeing says the report is a lie, although the American company used language less harsh than that.

The only reason the report may have some believability is that Boeing has delayed the plane three times. Some customers are even seeking damages from the company due to the delay. It is costing them money to fly older planes. All of the bad news has sent Boeing shares from 52-week high of $107.83 to $71.59.

Boeing says that the delays should not hurt earnings. That forecast is starting to look a little thin.

Douglas A. McIntyre

Boeing (BA): Dreamliner Delay Could Still Cost Billions

Wall St. has digested the fact that Boeing (BA) has delayed its 787 Dreamliner again and that it will be more than a year late in launching. The plane-maker also said it was sticking by 2008 guidance.

The trouble with Boeing management is that they have been wrong so often, it is hard to say when they will be right.

Delaying the Dreamliner has a ripple effect. Airlines counting on the plane for its fuel savings and larger passenger capacity are going to lose some amount of money flying the older aircraft while they wait for Boeing. They are beginning to make monetary claims against the big US firm.

Qantas, Air New Zealand, and All Nippon have all said they will make claims. In the worst case, some airlines may shift to products from Boeing rival Airbus.

The extent of the damage is hard to calculate. The total value of revenue from the new plane is high. According to Reuters "More than 50 airlines are waiting for 892 Boeing 787s, worth a combined $145 billion at list prices."

The airlines who are missing their Dreamliners are not going to pay for the lose of delays. They had the savings of flying the new plane in their budgets.

Boeing management has got it wrong. The whole mess will cost them a ton.

Douglas A. McIntyre

Another Disappointment From Boeing (BA)

As expected by many and hoped for by few, Boeing (NYSE: BA) delay, once again, the launch date of its 787 Dreamliner. It may want to drop the "Dreamliner" part of the name.

Boeing said the first flight of the all-new airplane will move into the fourth quarter of this year rather than the end of the second quarter, and first delivery is now planned for the third quarter of 2009 instead of first quarter.

The firm insisted that its financial guidance would not be affected. That hardly matters to the airlines who ordered the plane.

Douglas A. McIntyre

Boeing (BA) Hacks Off A Wing

Boeing (BA) will never finish its 787 Dreamliner, not at least during the lifetime of anyone over 40. The company said it would make a statement about it plans for the plane this Wednesday. It will almost certainly say that the launch of the 787 is off-track again.

According to Reuters "Such a setback would be the third major change to the original schedule and put first delivery of the lightweight, fuel-efficient aircraft as much as 18 months behind the original target."

By the time the plane is ready, fuel will be too expensive to fly it anyway.

Douglas A. McIntyre

Another Delay From Boeing (BA) As Company Loses Credibility

No wonder the Air Force rewarded its tanker contract to Northrop Grumman (NOC) and EADS instead of Boeing (BA). The US airplane maker can't deliver products on time. According to the FT Boeing said that "it would have to redesign parts of its troubled 787 Dreamliner, raising the prospect of a third delay in recent months to delivery of the new aircraft."

A another delay in the launch of the plane would trigger penalty payments from some carriers and might also cause some cancellations as buyers begin to look at alternatives from Airbus.

Boeing is making a bid to be the worst managed company in the US this year. Just a few months ago, the company had everything going for it. Delays in some Airbus products allowed it to be aggressive marketing the 787 and a new version of the 747. Boeing's share price was almost $107 in early October. It is now at $73.45 and news of another product delay are likely to take it lower.

The bad news about the 787 can be added to one of the company's excuses for losing the Air Force contract. Boeing said if it knew the government wanted a larger tanker, it would have pitched its 777 instead of the smaller 767. The people at the company may have forgotten to read the driver's manual before getting behind the wheel for that bid.

Over the course of less than six months, Boeing has blown advantages which most companies could only dream about. Shareholders are going to pay an increasingly dear price for that.

Douglas A. McIntyre

Boeing (BA) Says It Can Get Tanker Deal

Boeing (NYSE:BA) talks as if it can reverse the Air Force decision to give a $35 billion tanker contract to Northrop Grumman (NYSE:NOC) and EADS, parent of Airbus. According to Reuters Mark McGraw, a company vice president, said he was "as confident as I can be" that congressional auditors would find fault with the U.S. Air Force's Feb. 29 choice 

Since the GAO and Congress have not really started looking into the matter, the Boeing statement may come a little early The US airplane-maker is counting on Congressmen, who want to keep their jobs, to get the deal back to Boeing and save US jobs. If EADS gets the contract some of the work will be done in its home market, which is Europe.

Boeing seems to be avoiding the facts in the selection, which does not make them bad people. They will do whatever they can to make money. The Wall Street Journal writes that all of the evidence points to the fact that the Airbus 330 will make a much better tanker than the Boeing 767. "The A330's size means it can haul more than Boeing's tanker design, which was "a significant advantage in the important areas of Aerial Refueling and Airlift," the Air Force noted." In simple English, that means that the EADS plane works and the Boeing plane does not.

Boeing is hoping that it can get politics to win over competence. That may happen. Politicians watch out for their own interests. Whether something works is not very high up on their list.

Douglas A. McIntyre

Boeing (BA) Slows Deliveries Of Dreamliner

Boeing (NYSE: BA) calls it the Dreamliner but a name with "nightmare" in it would have been more appropriate. After two major delays, there are now press reports that Boeing will only deliver 45 of the planes next year. The orgininal estimate was 112.

The Dreamliner has become an anchor tied to Boeing's share price. The stock trades at a 52-week low under $73 after trading at $107.83 last July.

During the middle of last year, Boeing seemed to have the world by the tail. Rival Airbus was late in delivering its new models. All Boeing had to do was stay on course.

That didn't work out

Douglas A. McIntyre

Boeing (BA) Cries To Congress

Boeing (NYSE: BA) made an official complaint with the Government Accountability Office about a $35 billion Air Force tanker deal which it did not get. The deal went to Northrop Grumman (NYSE: NOC) and French-based EADS.

All information out of the Air Force shows that the bidding process was reasonable and that the Northrop group got the deal on its merits. Boeing is hoping to sway Congress to reverse the contract because it would cause some of the jobs for the work to go abroad to Europe. In other words, it does not matter whether Boeing can do good work at a reasonable price. Legislators get to stay in their seats if they bring home the bacon to their districts. The most vocal complaints have come from law-makers who represent regions with big Boeing plants.

Congress needs to be careful. Boeing has tens of billions of dollars of contracts to deliver commercial jets to flag carriers in Europe. If the EU sees the decision on the tanker as one driven strictly by politics and Boeing gets the assignment, a lot of the purchase deals for Boeing products could be canceled by EU nations.

Douglas A. McIntyre

As Boeing (NYSE: BA) And Airbus Battle, China Walks In A Side Door

Boeing (NYSE: BA) and Airbus go toe to tor for almost very major commercial airline contract in the world. They haul each other into court over international trade practice questions. For pure blood sport, the competition can hardly be matched.

Over the course of the last week, the battle between the two companies moved up a notch as the Air Force gave a $35 billion tanker program to Northrop Grumman (NYSE: NOC) and EADS, the parent of Airbus. Members of Congress may try to keep the deal with Boeing and the issue should be messy for several months.

While Boeing and Airbus beat the living daylights out of one another, China is planning to begin to build its own large commercial aircraft. China is one of the biggest markets for the two airplane company leaders, and as the need of big jets there increases, the Asian company was going to be a meal ticket that might last for decades.

Things are not going as planned. According to The Wall Street Journal "China has confirmed plans to set up a company to make large passenger airplanes." The paper also writes that Boeing thinks China will need over 3,300 new jets by 2026.

China could be making its own planes by then, leaving Boeing and Airbus to bicker over military contracts.

Douglas A. McIntyre

Boeing (BA) Whines About Tanker Loss

Now that Boeing (NYSE: BA) has officially lost the bidding for a new Air Force tanker to Northrop Grumman (NYSE: NOC) and EADS, parent of Airbus, it will probably make an official complaint to the US government.

"What is clear now is that reports claiming that the Airbus offering won by a wide margin could not be more inaccurate," the company said in a statement, according to Reuters. Almost all the comments made by military officials contradict that, so it is difficult to believe it is true.

Part of the leverage that Boeing has is members of Congress who want to keep jobs building the tanker in the US. EADS would do some of the work in its home markets of France and Germany.

Boeing may end up cutting its own throat. If EADS and the governments in large European countries believe that the decision about who should get the contract is purely political, Boeing might find some of its commercial airplane orders from the large flag carriers in the region cut. That could cost Boeing more than the tanker contract is worth.

Douglas A. McIntyre

Air Force Tankers: The Case Against Northrop (NOC) And EADS

The theater which is congressional politics would have missed an entire act if the porcine members who are re-elected for their ability to bring home the bacon to their districts had not raised a great cry of "foul" when the military passed over Boeing (NYSE: BA) for the contract to build $35 billion worth of tankers. To make matters worse the eventual value of the deal could move to $100 billion and one of the big winners was French company EADS.

According to Reuters "The Congressional delegation from the Seattle area said they were "outraged." Kansas Republican Rep. Todd Tiahrt vowed to seek a review of the decision "at the highest levels of the Pentagon and Congress" in hopes of reversing it." Another member of the House was even more pointed-- "We should have an American tanker built by an American company with American workers. I cannot believe we would create French jobs in place of Kansas jobs."

Members who cannot keep employment high in their districts and are viewed as being soft on the French, a nation which has been throwing spit-balls at US foreign policy for several years, are both un-American and un-electable. Being paid to live in Washington and sup with lobbyists is a privilege reserved for those who can close deals for their districts and keep jobs at home.

The first flaw in this argument that Boeing should have gotten the contract because it is an American company resides in the truth that all of the companies in the bidding were multinationals. EADS will be doing much of its work on the tankers in Alabama. GE (NYSE: GE) will be supplying $5 billion in engines for the planes. If Boeing had gotten the contract the odds are near 100% that many of the components of the tankers would have come from suppliers outside the US.

The Air Force will be dragged before Congress to justify its decision of giving a large military contract to a consortium of companies which includes one based in France. It should be a good way for representatives from states which will not get some of the plumb jobs because Boeing lost out to preen for the cameras. They can object to what they cannot fix.

Perhaps Northrop Grumman (NYSE: NOC) and EADS got the business because they were the lowest bidder. But, why should that matter?

Douglas A. McIntyre

Military Tanker Award May Have Served US Interests (GE)(BA)(NOC)

A number of politicians and other patriots were worried that the US military awarding of a contract to build tankers may not have been good for US industry. The contract went to American firm Northrop Grumman (NYSE:NOC) and EADS, the French-based owner of Airbus.

Boeing (NYSE:BA), the predicted winner, was left out in the cold.

Some of these concerns miss a critical point. GE (NYSE:GE) will get an order for almost 400 jet engines as part of the larger contract. That is worth about $5 billion.

Douglas A. McIntyre

Black Day For Boeing (BA)

Boeing (NYSE: BA) and its stockholders were counting on getting the US military contract to build new refueling tankers. The deal is worth $40 billion, and Boeing is the incumbent.

Things didn't work out. Northrup Grumman (NYSE: NOC) and Boeing rival EADS, the parent of Airbus, won the contract.

Boeing shares are down 3.5% after hours to under $80. NOC is up 5.6% to $83.

Douglas A. McIntyre

What If Boeing (BA) Loses $40 Billion Military Contract

The US military's aerial refueling tanker contract is up for bid. The deal is worth $40 billion and involves building 179 planes. Boeing (NYSE: BA) and its investors are counting on the deal. But, EADS, parent of Airbus, and Northrop Grumman (NYSE: NOC) have teamed up to try to get the business.

According to the AP, with more tankers to be replaced in the next several years "s much as $100 billion over the next 30 years is at stake, says Loren Thompson, a defense industry analyst with Lexington Institute, a policy think tank."

If Boeing does not win the contract, its shareholders face a potential big drop in company's shares. Boeing's stock have already fallen from a 52-week high of $107.83 to $83.04. Much of the drop is due to delays in the launch of the company's new 787.

Another piece of bad news and the shares could end up back below $75, near their 52-week low.

Douglas A. McIntyre

Boeing Backlog More Impressive Than Guidance (BA)

Boeing Co. (NYSE: BA) posted earnings of $1.36 EPS on $17.5 Billion in revenues for its fourth quarter.  Estimates from First Call were $1.32 EPS and $17.33 Billion in revenues.  Boeing is also making "raised guidance projections" for 2008 with EPS in a range of $5.70 to $5.85, while First Call estimates were $5.95 on last look.  The aerospace and defense giant noted that its raised guidance came from productivity gains being realized ahead of earlier plans.

As far as the 787 Dreamliner, it doesn't look like any real changes are any different than from earlier this month.  It now expects the first flight to occur around the end of the second quarter of 2008 and the first delivery in early 2009. The Dreamliner program won a record 369 orders in 2007 for the 787, bringing total firm orders since launch to 857 airplanes from some 56 customers.

This backlog makes IBM's $100+ Billion look like chopped liver.  Boeing's stated backlog is $327 Billion, or roughly 5-years worth of 2007 revenues.  Boeing spent $890 million for some 9.4 million shares in the fourth quarter as part of its expanded share buyback plan.

As this guidance for 2008 is under plan, Boeing shares are initially indicated down 1.4% at $79.79 in pre-market trading.  The 52-week trading range is $74.12 to $107.83.

Jon C. Ogg
January 30, 2008

MTC Technologies White Christmas Buyout (MTCT)

This morning, MTC Technologies, Inc. (NASDAQ: MTCT) has confirmed its buyout news from late Friday night where MTC Technologies, Inc. (NASDAQ: MTCT) has signed a definitive merger agreement to be acquired by BAE Systems, Inc.

The transaction is valued at roughly $450 million for a cash price of $24.00 per share plus the assumption of debt.

As BAE Systems is a huge defense and aerospace operation, it will be simple to integrate MTC's aircraft modernization and sustainment, as well as its logistics and other operations with Department of Defense and national security agencies.

MTCT close at $17.78 Friday, and its 52-week trading range is $15.31 to $25.42.

Jon C. Ogg
December 24, 2007

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Boeing (BA) Takes More Flak On 787 Launch

Boeing (BA) missed it projections on the date of the first flight of its new 787 Dreamliner. The company blew hitting that milestone, by its own estimate, but six months. The plane is still not in the air.

The misfire cost Boeing a great deal of its credibility with Wall St.

And, that cycle is about to repeat itself as the aircraft company has made promises about the production rate of the new plane that it almost certainly cannot keep.

Boeing say that it will make 100 of the 787 Dreamliners in the next two years. "Reaching the planned monthly production rates to achieve 109 deliveries by the end of 2009 is still a near-Herculean task, in our view," said Bear Stearns according to MarketWatch. That is a pleasant way of saying it will never happen.

In the meantime, rival Airbus is picked up orders for its A350 and A380 jets. Airbus was left for dead last year when it missed production targets on almost every product it designed.

MarketWatch adds "Despite the delayed launch (of the 787), Boeing only shaved three planes off its planned rate of 112 by the end of 2009, an assembly rate deemed dicey by some analysts, such as those at J.P. Morgan Chase and BernsteinResearch"

Boeing's shares have fallen from almost $99 to under $93 so far this month. If the company hints that analysts are right about the 787 production schedule, Boeing could be back at its 52-week low of $84.60 in no time.

Douglas A. McIntyre

S&P Lowers Boeing (BA) on Delay, Sort Of....

BOEING (NYSE:BA) Downgraded to "BUY" from "STRONG BUY" by Standard & Poor's Equity analyst.  S&P noted the Boeing first delivery of its new 787 in Nov.-Dec. 2008, compared with prior May 2008 expectation. S&P believes this delay reflects the complexity of the airplane, a tight aerospace parts market, and Boeing's extensive use of suppliers for the 787.  While S&P now see more risk, it also sees Boeing's commercial airplane backlog of over $207B as a major asset, particularly given recent problems at competitor Airbus. S&P has cut its 12-month price target price by $4.00 to a new $118.00 target based on the view that delivery delays will reduce near-term free cash flow.   Based upon the "Strong Buy" cut to "Buy" the ratings agency continues to view Boeing shares as attractive.

We noted earlier about how we had been looking at the maiden flight delays potentially bringing delays on deliveries.  This was somewhat trying to be factored into the markets.  But it caused some even wider problems for the stocks of its suppliers today.

Jon C. Ogg
October 10, 2007

Boeing Design Partners Getting Whacked (SPR, BEAV, HON, COL, LMIA, TIE, PCP)

Shares of Boeing (NYSE:BA) are getting hit hard after the jet-maker and aerospace giant finally came clean about the delay of the Dreamliners.  The DJIA component is down 3% on the day and it has pulled the price-weighted DJIA down a bit more with it.  We have covered this wondering about the first flight delays having a cascading effect, but if you look at Boeing's aerospace partners on the Dreamliner you will see that they are all being hit (and some even harder than Boeing):

• Spirit Aerosystems (NYSE:SPR) is the ex-Boeing unit, which makes fuselage parts, shares down 4.8% to $36.50.
• BE Aerospace (NASDAQ:BEAV) has cabin and seating contracts with Boeing, shares down almost 4% at $43.30.
• Honeywell (NYSE:HON) has the cockpit award, shares down 2% at $60.00.
• Rockwell Collins (NYSE:COL) has information management pacts with Boeing, shares down 3.3% at $73.35.
• LMI Aerospace (NASDAQ:LMIA) has Boeing as principal customer for structural components, assemblies, and kits, shares down 3.5% at $27.65.
• Titanium Metals (NYSE:TIE) has long-term Boeing titanium/metals supply pacts; shares down 1.7% at $33.29.
• Precision Castparts (NYSE:PCP) manufactures aerospace structural castings, aerospace airfoil castings, industrial gas turbine castings, shares down 3.4% at $146.75.

There are other stocks that will be affected and impacted by this, but now the game is to figure out which of these companies will have to preannounce that the Dreamliner delay will hurt their earnings for one to two quarters out.

Jon C. Ogg
October 10, 2007

Jon Ogg produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Boeing (BA) Screws Up

Boeing (BA) kept saying that its new 787 Dreamliner would be delivered on time in May 2008..

Analysts, the press, and industry experts kept saying "no way". 24/7 Wall St. ran several articles saying the date was not realistic. Production was too far behind. Some parts suppliers were running late. The plane still had to go through a number of trials.

But, Boeing would not bend. It would make the date. Period. For some period of time before it told shareholders otherwise, the company must have known it would miss the date.

Boeing came out yesterday and said that they could not make the date. The 787 is delayed until November or December of next year. It should not have a material impact on financial results. But, shareholders got sucker-punched, which raises an interesting disclosure question.

The stock nose dived from $102 to $97.54 on the announcement.

Douglas A. McIntyre

Boeing (BA): Will The 787 Go Missing?

In the face of concerns that Boeing (BA) may not be able to launch its 787 Dreamliner on time, the company seems unconcerned. The first customer is to get the first plane in May. "That's still our target," said Adam Morgan, spokesman for Chicago-based Boeing.

Boeing could be risking a large measure of its reputation both with Wall St. and its customers. Last week, Lehman Brothers said it thought the plane could be four to six months late, according to MarketWatch. That could hurt cash flow.

How much are Boeing's shares at risk?  Probably a great deal  Over the last couple of days, the shares have moved down a bit from their 52-week high of almost $108. They now change hands at just under $103. But, it should not be forgotten that early last November, the stock was under $80. There has been a great deal of excitement about the huge volume of Dreamliner orders since then.

Delivering the plane on time may be a bigger deal than is evident at first glance.

Douglas A. McIntyre

Boeing (BA) Gets Hand-Outs From US Govt, According To Airbus

All that work that Boeing (BA) gets to build military aircraft. It is really a disguised way to help the US company's profits so that it can beat the daylights out of Airbus in the commercial aviation business. The same holds true for tax breaks that Boeing gets in places like Washington state so that it will build and expand factories.

According to Reuters, Airbus is arguing to the World Trade Organization that Boeing's work for NASA and the Defense Department also saves it R&D money because the by-products of government work can be used to build commercial planes. "We will produce the cold facts to demonstrate subsidy by subsidy how U.S. subsidies have benefited Boeing and injured Airbus interests," an Airbus official told the news service.

Airbus and the European Union say unfair U.S. subsidies to Boeing over the past two decades and running to 2024 total $23.7 billion.

It is nice that Boeing gets all of that government work, but the real question is whether some other company could have gotten it just as well, if it had the capacity to give US agencies what they needed in terms of products.

Proving that the US favored one company that way could be very hard to prove.

Douglas A. McIntyre

Suppliers Mock Boeing

Boeing (BA) insists that it 787 Dreamliner will be delivered on time next year, despite a multi-month delay in its maiden flight. Lack of parts for the new plane and assembly problems have vexed the big US airplane maker, much as they did rival Airbus over a year ago. Airbus delays cost its orders for its new planes, and many of these customers went to Boeing.

Apparently, Boeing's suppliers are willing to say what Boeing is not. The Wall Street Journal writes: "We looked at each other and said, 'Are they kidding?'" said a senior Boeing supplier who listened in on the conference call in which Boeing broke the news to Wall Street analysts and reporters.

Is Boeing acting responsibly toward its investors and customers? Probably not. The odds that it cannot deliver the plane on time are clearly increasing very quickly. In its analysis, The Journal adds "according to people familiar with the program, suppliers at factories in Italy, Japan and the U.S. continue to experience chronic parts shortages."

Boeing needs to come clean on what the market already know. It cannot deliver its 787 on time. If its comes close, it is no shame. If customers think they have been toyed with, Boeing starts to get a reputation like the one Airbus has. It cannot deliver products and it is not willing to admit that until it is too late for customers to change their plans.

Douglas A. McIntyre

Boeing: Straighten Up And Fly

Boeing (BA) is delaying the initial flight of its new 787 Dreamliner, again. It is now set for the middle of December, about three months after the planned date.

Fliers, airlines, and investors are already a little nervous. A Boeing 737 had some fire problems in Japan last week, by no one was hurt.

Reuters writes: "The new date truncates Boeing's already shortened test flight schedule but will not delay first delivery of the plane in May next year and does not affect financial forecasts, the company said."

Boeing wants to avoid the Airbus label. Everything is late, and then it is broken when it gets there.

With over 700 orders for the new Dreamliner, another delay will cost shareholders a bundle.

Douglas A. McIntyre

Boeing's China Fantasy: A Twenty Year Forecast

Boeing (BA) says it. There will always be a market for airplanes in China. Not matter what happens. Even it military hard liners move in. Even if the overheated economy collapse under its own weight.

Reuters writes that Boeing, which won 112 firm orders in China in 2006, sees exponential growth in Chinese aviation for at least the next two decades The big aircraft company "expects China will need 2,900 commercial airplanes over the next 20 years, 64 percent of which would be single-aisle jets." It hopes to hold 60% of the market during that period, with most of the balance going to Airbus.

Of course, twenty years out, that could be off by a percentage point or two.

Douglas A. McIntyre

Boeing & The Aerospace Group: Set For Life (BA, GE, BEAV, ATI)

If you were born with a solid trust fund or if you won the lottery, you are probably set for the rest of your life.  If not, you will at least hope your name is Boeing (BA-NYSE) or that you do business with it.  The company has given some long-term figures for a 20-year outlook to 2026 and it is staggering.  Boeing has forecast that the worldwide demand over the next 20-years will be some 28,600 new airplanes with a total market value estimated at $2.8 Trillion.  The forecast last year to 2025 was for 27,210 new planes over the similar timeframe, with Russia and a few more markets being included.

There are of course some caveats, and you know pushouts can come at any time.  Asia Pacific is the largest increase and the rest is coming from increased passenger travel (traffic estimated up 5% annually) and increased cargo (traffic estimated up 6.1% annually).  Combined with the retained fleet, these new deliveries will result in a world commercial airplanes fleet of more than 36,400 airplanes by 2026.

On a delivery-dollar basis, the largest market is projected to be the Asia-Pacific region, with 36 percent of the $2.8 trillion total. North America will make up 26 percent of the delivery dollars, and Europe, Russia, and the CIS (Commonwealth of Independent States) will make up a total of 25 percent. Deliveries to airlines in Latin America, the Middle East, and Africa will represent the remaining 13 percent of the delivery dollars between 2007 and 2026.  Here is the breakdown of the estimates, and keep in mind that this is the commercial non-private market only:

3,700 regional jets, below 90 seats;
17,650 single-aisle airplanes, 90-240 seats, dual-class;
6,290 twin-aisle airplanes, 200-400 seats, tri-class;
960 airplanes 747-size or larger, more than 400 seats, tri-class.

Also, the push is not solely on these super-jumbo jets and the focus is going to be on more fuel efficient planes.  The 90 to 400-seat categories will account for almost all of the growth in air travel over the next 20 years. Airlines will continue to accommodate that growth by adding frequencies and nonstop flights -- not by flying larger and larger aircraft.  Boeing is focused on offering new airplanes that burn less fuel and spend less time in maintenance.

Some of the go-to aerospace supply companies like Allegheny Technologies (ATI-NYSE) that supply much of the aerospace metals and BEA Aerospace (BEAV-NASDAQ) that make airline interiors and seating have to think this is music to their ears.  General Electric (GE-NYSE) is probably already licking their chops over the engine and service pacts that this will translate into.

Jon C. Ogg
June 13, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Cramer Outlines Long-Term Growth in Aerospace

On today's Wall Street Confidential video on TheStreet.com, Jim Cramer says that aerospace stocks are great buying opportunities on down market days like today and yesterday.  Aerospace is tied into a long-term cycle, not really part of the stock market.  Honeywell (HON) is even better than Boeing (BA). BEA Areospace (BEAV) is great on the interiors for planes.  Other great aerospace plays he gave were Brush Engineered Materials (BW), Allegheny Tech (ATI), Precision Cast Parts (PCP), and AAR Corp. (AIR).  He also gave some defense names, but the main point was on the long-term growth trends. 

For some conjecture, let's hope that idf things ever slow down too much that waves of order cancellations don't come into play like they have in past down-cycles.  If that happens, Cramer will probably remember that these aren't permanent growth engines.  To prove a point, BEAV traded well under $5.00 at the lows during the last down-cycle in the sector.

Jon C. Ogg
June 6, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.