Boeing's Pain Spreading to Passengers and Airlines

Summary

The transcript discusses the impact of Boeing's production issues on aircraft deliveries and the airline industry. It highlights a potential reduction in Boeing's 2024 deliveries to 450 from an estimated 500, and suggests that the full effect of these issues may not be felt until the following summer. The conversation also touches on the challenges faced by airlines, particularly those operating single-fleet systems like Southwest, in switching to competitors like Airbus. Additionally, it mentions regulatory considerations and the balance between supporting Boeing as a US aerospace leader and ensuring safety standards are met.

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Q & A

What is the main issue being discussed in the transcript?

The main issue discussed is the impact of Boeing's production setbacks on aircraft deliveries and the potential effects on airlines and the market.

How has the market reacted to Boeing's production issues so far?

The market has not significantly adjusted Boeing's delivery numbers yet, but there is an expectation that it will after Southwest's report.

What is the estimated reduction in Boeing's 2024 deliveries?

The estimated reduction is about 50 deliveries, potentially bringing the total from around 500 to 450.

Why might the effect on airlines be muted for the summer travel season?

The effect may be muted because airlines typically receive their aircraft for the summer season by March or April, so the full impact will take a year to be felt.

What is the current capacity situation for the US airline industry?

The US airline industry appears to be slightly over capacity, especially for budget seats, with Southwest being a major player in this category.

How might fares be affected in the short term?

There may not be a significant spike in prices immediately, but fares could become firmer in the US market.

What is the potential long-term risk for Boeing?

The potential long-term risk is that the effects of the production issues may be felt more strongly in the following summer, indicating a prolonged impact on the company.

Is Boeing currently perceived to have the situation under control?

No, the commentary from Boeing has not provided new guidance, and they are still in the investigation process, so it is not believed that they have the situation under control yet.

What is the role of the regulator in this situation?

The regulator is expected to help ensure safety and guide Boeing in stabilizing their production processes, while also being mindful of the company's importance to the US aerospace industry and as a major exporter.

Are Boeing planes currently being offered at a discount?

There is no specific mention of discounts, but it is implied that buyers might be able to negotiate favorable prices due to the current weak sales environment.

What is the significance of the DOJ investigation for Boeing?

The DOJ investigation adds an additional layer of scrutiny and pressure on Boeing to resolve their production issues and could influence the company's strategies and market perception.

Outlines

00:00

🚀 Impact of Boeing's Production Delays on Airline Operations and Market

This paragraph discusses the implications of Boeing's production setbacks on the airline industry. It highlights the uncertainty surrounding Boeing's production numbers and the market's lack of adjustment to these changes. The discussion includes an estimated reduction in Boeing's 2024 deliveries, potentially affecting summer travel without a significant impact on fares. The conversation also touches on the challenges airlines face in switching from Boeing to Airbus fleets, emphasizing the long-term commitment required for such a transition. Additionally, there's mention of the Department of Justice's (DOJ) involvement and the ongoing investigation into Boeing's production issues, as well as the potential impact on Boeing's future strategies and market position.

05:01

📉 Weak Sales and Future Outlook for Boeing

The second paragraph focuses on the weak sales figures for Boeing in February and the potential for customers to negotiate better prices for aircraft orders. It also mentions the uncertainty surrounding the company's future, with the involvement of Josh Ferguson from a fly mega talent agency, suggesting that significant changes or orders may not be expected in the near term.

Keywords

💡production numbers

Production numbers refer to the quantity of goods or products manufactured within a certain period. In the context of the video, it specifically relates to the number of aircraft produced by Boeing. The discussion revolves around how the production numbers are affected by the ongoing issues at Boeing, with a focus on the potential reduction in deliveries for 2024.

💡disaster

In this context, a disaster refers to a significant adverse event or situation that has a negative impact on operations, in this case, at Boeing. The term is used to describe the situation that is causing a holdback in production and affecting delivery numbers.

💡market adjustment

Market adjustment refers to the process by which the market participants revise their expectations, prices, or delivery forecasts in response to new information or changing circumstances. In the video, the market has not yet adjusted its delivery numbers in light of the recent developments at Boeing.

💡airlines

Airlines are companies that provide air transport services for passengers and cargo. In the video, the discussion focuses on how the production issues at Boeing might affect airlines, particularly during the summer travel season.

💡capacity

Capacity in the context of the airline industry refers to the total number of passengers or amount of cargo that can be transported by an airline or the entire industry. The script discusses the U.S. airline industry being over capacity, especially for budget seats.

💡fare

Fare refers to the price charged by an airline for a ticket on a flight. The discussion in the video revolves around whether there will be a significant change in fares due to Boeing's production issues.

💡Defense Contractor

A defense contractor is a company that provides products or services to a country's defense industry. In the context of the video, Boeing is mentioned as a significant U.S. defense contractor and a major exporter, which adds a layer of complexity to the regulatory response to their production issues.

💡investigation

An investigation in this context refers to the process of examining and inquiring into the circumstances surrounding Boeing's production issues. The Department of Justice (DOJ) and the Federal Aviation Administration (FAA) are mentioned as entities involved in the investigation.

💡order backlogs

Order backlogs refer to the total number of goods or services, in this case, aircraft, that have been ordered but not yet delivered. The script discusses the order backlogs at both Boeing and Airbus, indicating that they stretch years into the future.

💡fleet

A fleet refers to the collection of aircraft owned or operated by an airline. The discussion in the video touches on the challenges airlines face when considering switching their fleet from one aircraft manufacturer to another.

💡regulation

Regulation in this context refers to the rules and oversight provided by government agencies to ensure safety, fair competition, and other objectives in the aviation industry. The script discusses the role of regulators in addressing Boeing's production issues.

Highlights

Discussion on Boeing's production numbers being affected by recent issues.

Market has not yet adjusted delivery numbers in response to the crisis.

Southwest's report may lead to a reevaluation of Boeing's delivery numbers.

Boeing's 2024 deliveries may be reduced by 50 units, dropping from 500 to 450.

Impact on airlines, especially for summer travel, is expected to be muted due to delivery timelines.

The full effect of the production issues will be felt over a year, not just during the summer season.

The U.S. market is still overcapacity, particularly in budget seats.

No significant increase in fares is expected, but prices will firm up in the U.S.

Concerns about Boeing's ability to control ongoing issues, especially with DOJ involvement.

Boeing has not provided market reassurance or clear guidance on the situation.

Boeing has 90 days to report to the FAA on how to stabilize the production process.

Boeing's potential purchase of Spirit Aerosystems might affect air quality.

Airbus's potential advantage in the current situation is unclear.

Airlines with single-type fleets, like Ryanair and Southwest, have limited options to switch.

Carriers like United and American, with dual fleets, might switch to Airbus due to complications.

Regulators worldwide face the challenge of addressing the issue without harming Boeing or the industry.

Safety remains the highest priority for regulators in their decision-making process.

Boeing planes might be available at a discount due to weak sales.

Transcripts

George, can we go straight into production numbers?

Just how much is this disaster held back production at Boeing?

I think that's something we don't know yet.

We've all been trying to figure out. I think the market has largely not

adjusted a lot of their delivery numbers yet.

But after last week's report from Southwest, I think people will take

their pencil to that. You know, we're looking at cutting about

50 deliveries out of Boeing, 7.37 deliveries for 2024 probably brings them

from about a 500 level to a 450. Could could come down even a little

more. I think some of the effect on the

airlines, especially for summer travel season, will be a bit muted.

And I think it's because, you know, you're you're getting your deliveries

that you're going to use in the summer by, what, March or April as you get an

airplane into your you know, into your schedule.

So, you know, this whole effect is it's going to take a whole year to be felt.

So it's not going to all be this summer. The U.S.

still seems a little over capacity to us, especially for budget seats this

summer, which, you know, Southwest is one of those major participants in the

budget seat category, I'd say. So not sure we're going to see a big

move in fares, but it'll firm them for the US.

So the good news, George, if I'm hearing you correctly, is we're not going to see

a spike in prices off the heels of this, most likely in the United States,

because this is going to be a long process.

The bad news is maybe next summer we're going to feel the effects of this.

And it's a sort of long simmering process as Boeing tries to work this

out. Is that correct?

Yes. I mean, obviously, we have to see how

demand holds up for next summer. But yes, I think the bigger risk is

absolutely out there. So then there's this question of do we

even have a sense right now of whether Boeing is getting on it and actually

getting a lot of the issues under control, given the fact that the DOJ

seems to be concerned? Investigators have identified problem

sites. They have not been able to find a report

that they asked for. Where are we in this?

Yeah, I don't think we have a sense that Boeing has it under control yet.

I'd say, you know, the commentary coming out of Boeing, they provide no more

guidance. So, you know, they're not they're not in

the process of trying to reassure the markets.

And we're still deep into this investigation process.

Like you said, DOJ is investigating. Boeing has 90 days to come back, the

report to the FAA and how they're going to stabilize the production process.

We know they're exploring a purchase of Spirit Aerosystems.

Haven't heard anything more on that that could do something in the air quality.

I think we're still in sort of the early days of figuring out what Boeing's game

plan is going to be and what we think the effect is going to be on the company

on its production. So not much reassurance right now.

George, as you've told us repeatedly over the last few months, the order

backlogs at Airbus, at Boeing stretched years out.

And what's less clear to me is how the likes of an Airbus can take advantage of

the current situation. When you think about what's happening

with Ryanair, United and Southwest, George, what options to those airlines

actually have? They don't have a lot, right?

So the airlines that are flying, you know, very single type fleets, you know,

all-boeing fleets like Ryanair, like Southwest, it would be a major move for

them to take, you know, to move from the 737 to the competitor of the Airbus

A320. I'd probably take a decade for somebody

to switch their fleet over. It changes their whole game plan, right?

They're all built around low cost, very homogenous fleet Pilots are rated on a

single subtype or single type. So I just don't see that right now.

I think it's got to get a lot worse. The ones you will see, see, peel away

are carriers like United that are flying dual fleets already carriers like

American that are flying duel fleets already to to use you to us examples

those are the carriers I think Boeing has to be very careful about they don't

want to lose a lot of business with them and they're starting to lose in united

because again the the complications of adding another type to their fleet

doesn't even add another type of 30 flying Airbus.

It's easier for them to switch and some of them are starting to do it.

George Competition concerns are always close by in this industry that's not

new, but it's going to be under the spotlight again, I would say.

George Now with this, given there are very few options.

What does the regulator do going forward from here and not just in the United

States, I mean, worldwide, how do they fix this?

Well, I mean, I think we're looking for the regulator to help, you know, shine a

light through maybe as a way to say for blowing up and put their production

processes back in place. The regulator has to, I think, also be

very careful because, you know, this is a US defense contractor.

It's very important to us industry, US aerospace, one of the biggest exporters

in the country. So it's a it's a very delicate balance

they're doing here. But at the end of the day, I think

safety has to take the highest priority and the regulator has to go that way and

make, you know, make the calls based on safety.

But they're really trying to help the company through the process more than

trying to hurt the company, which is hard.

In the meantime, as we focus on safety and all that.

Are the Boeing planes currently going for a discount?

You know, there hasn't been a lot of sales.

We looked at sales for February. It was a pretty weak month.

I think if you stepped up to take an airplane from Boeing today and you were

going to bring an order inside size, you could probably get a decent price on it.

Josh Ferguson, a fly mega talent agency, might not get the plane anytime soon,

though. George, thank you, sir.