
Boeing, expecting a long slump, will cut 16k jobs - ra7
https://www.nytimes.com/2020/04/29/business/boeing-earnings-coronavirus-jobs.html
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cotillion
Boeing is one of few companies using program accounting. Won't this kind of
slump drastically cut the number of planes they can distribute their
development costs over for the 787 and 737 Max projects also?

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imglorp
That's what I wonder.

More to the point, their stock is up 8% today on this news, because short
term, this quarter, will look better with reduced costs. Who cares about the
quarter after that, where production will have to be impacted by reduced
workforce.

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mason55
> _Who cares about the quarter after that, where production will have to be
> impacted by reduced workforce._

You were being sarcastic but you're kind of right. In the same way that this
quarter isn't the be all-end all, neither is next quarter. Over, say, a 10
year time horizon, the next couple quarters will just be a blip.

Plus, Boeing doesn't exist in a vacuum. The US Govt is going to let anything
happen to them due to national security reasons and they've shown that they
aren't willing to wipe out shareholders as part of a bailout.

Frankly I'd be much more worried about the culture that allowed the 787MAX to
happen than I would be about short-term COVID-19 reductions.

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thephyber
I disagree that this quarter will be a blip, but I agree with the sentiment
here.

There are runways and parking lots in Washington full of undelivered planes
which are waiting on contractual disputes related to the quality assurance of
the _737_ MAX issues. A significant percentage of Boeing planes are currently
undeliverable and post-pandemic world airlines are likely going to cancel /
downsize contracts or at least spend significant legal fees to attempt to do
so.

Barring a quick and easy vaccination or herd immunity that accidentally
happens much faster than expected, travel is unlikely to recover this year and
perhaps not next. Clearing their backlog of planes will likely take 4+ years
unless the company can convince people and airlines to trust them again.

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whatok
Delivery has taken so long that they are going to run into refund periods
soon. There's normally massive down payments for these which deters
cancellations but these aren't ordinary times. You are almost certainly going
to see consolidation within the airlines and there's little to no chance of
more plane purchases in that case.

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newswasboring
> Boeing said it hopes to reach its job cut targets through voluntary means,
> including buyouts and early retirement offers. Employees who take the buyout
> will receive three months of health care and one week of pay for every year
> they have worked at Boeing, up to 26 years, the company told workers last
> week.

I don't have any reference here because I have worked only in europe or asia,
but is this a good offer? I don't think its a very good offer. Why will
someone take this?

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alistairSH
By American standards, it's not awful. There are very few legally mandated
protections for employees.

2 weeks per year of service is also a typical value.

Healthcare is often not included, which is a real shit sandwich for the ex-
employee. Their options are COBRA (basically, pick up the full tab for
coverage on their own dime - employer usually pays >50% of the cost of a
policy). Or, buy a plan on the ACA marketplace. Or, do without.

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mark-r
I didn't think "do without" was a legal option anymore.

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brianwawok
Enforcement of the health care mandate was shut down by trump. Without a
mandate, the ACA doesn’t work

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xienze
It’s debatable that it worked even with the mandate. Plenty of young, healthy
people decided paying the penalty was a better option than paying some amount
of money greater than the penalty for bad coverage.

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lotsofpulp
It would work if the option was for people to purchase health insurance on
healthcare.gov or pay the equivalent amount in extra taxes. Then people
wouldn't have any reason not to purchase it. But also, everyone would have to
be directed to healthcare.gov without exception to create the appropriate mix
of healthy and sick lives for a viable marketplace, which means banning
employer involvement in health insurance.

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brianwawok
Your first part doesn’t follow the second

You could keep employee insurance. If everyone else has to sign up, you still
get a diverse risk pool. Maybe not perfect but way better than what we have
now.

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newacct583
This is another situation where an industry deemed "essential", and unaffected
directly by lockdown directives, is still impacted.

While there's some ambiguity, nothing in the state-level lockdowns prevents
travel in a meaningful way (it's just a jurisdictional thing). But no one is
travelling anyway, because no one is willing to sit in an airplane right now.

And Boeing sees that, and knows the recovery will be slow no matter when the
official "end" of the lockdowns arrives.

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raiyu
Travel has certainly been a great deal affected, but the 737 Max was a pretty
massive disaster in an of itself.

With the coronavirus this is a huge 1-2 blow to Boeing.

I wonder how much of their go forward business will be military contracts, as
the their civilian aviation business seems to be dead for the next 3-5 years.

They can get the 737 Max recertified to fly, but I think the damage to the
reputation is done, so they probably will need to release a brand new plane to
be competitive. Not sure on the design to production timeline for an airplane,
but that's where I assumed 3-5 years.

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chx
> They can get the 737 Max recertified to fly,

That is getting more and more dubious every day. Do you have a source which
says this is doable? To recap, the 737 Max was not only fitted with the MCAS
to save money but because it was relying on being grandfathered in to be able
to be certified at all. So if they are forced to make so much change to the
MCAS to require recertification they will fail doing so.

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gizmo686
I thought the MCAS was to grandfather in _pilots_ to be able to fly. Without
it, the plain itself would still be certifiable; but pilots would need
training before being allowed to fly it.

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zerocrates
Basically all the issues of the Max come down to the pilot certification
issue: the shared "type rating" with the prior 737s. That's why they needed to
make the necessary changes to fit bigger engines on the old design, why they
added MCAS to basically "simulate" more similar handling in some situations,
and why they made so many decisions to downplay the existence of the system or
offer new indicators or controls.

The whole business case for the Max was to fend off the A320neo, and if
airlines were going to have to retrain pilots, that's one less reason for
legacy customers to stay.

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mrep
Sure, but they have already delivered about 400 of them and have another 400
built and waiting to be delivered. At 100 million a piece, that's 40 billion
they will probably have to refund in some fashion if they scrap the ones
delivered, and another 40 billion in sales waiting to be realized. Granted,
they probably could get some money back by scrapping all of those planes, but
I cannot imagine them losing more money training some pilots than refunding
and scrapping all of those planes (at least for the currently built ones).

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lukewrites
I read this as another step by Boeing to get rid of its unionized workforce in
Washington in favor of plants in other states and in China. The market
downturn provides a nice rationale for doing so.

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toomuchtodo
With $BA stock at a lower valuation, the union should go to the capital
markets to perform a leveraged buyout and take control of the company. Likely
better management material in the ranks than at the top.

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puranjay
Can someone help me understand why the broader stock market is actually up
compared to six months ago despite all these dire numbers being thrown around?
Heck, Boeing stock is up today!

The economy looked very rosy in October 2019 and NASDAQ was near 8300. Now
it's 8900 even when millions are unemployed and even millions more furloughed.

Should the stock market simply be seen as an isolated, self-contained entity
with no real correlation to the broader economy?

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airstrike
Because the stock market going up or down is a proxy for _changes_ in
expectations about the future. If people are slightly less pessimistic than
before, it will go up. Boeing being in dire straits is old news – it's all
priced in, pretty much.

Besides, there are lots of news out there, including the fact that we're
seeing stimulus that dwarfs even what was done during the '08-'09 crisis. Case
in point, the top story at the WSJ website now is:
[https://www.wsj.com/articles/federal-reserve-interest-
rates-...](https://www.wsj.com/articles/federal-reserve-interest-rates-
decision-april-2020-11588111763?mod=hp_lead_pos1)

Think of stock market swings as the second derivative of the actual
information you're seeing.

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cik2e
That’s assuming perfect information. Behavioral economics begs to differ on
that being even close to reality.

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nickff
Almost nobody assumes absolutely perfect information; even Adam Smith was
relying on approximations of actual behaviour. Most economics relies on the
assumption that information is close enough to perfect that we can just assume
away any difference.

Behavioural economics has proven unreliable, with results that are (at least)
difficult to replicate, and non-predictive.

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cik2e
Sure, you can say behAvioral economics experiments are unreliable. But even if
this field did not exist, assuming close to perfect information is simply
naive in my opinion. Unless you account for insider trading, which the
pessimist in me believes is rampant. In truth, none of us know, but I think
it’s worthwhile to consider the alternative to what is taught in textbooks.

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jhwang5
The Boeing bailout was sold as a measure to keep jobs, then of course they
turn around and do this.

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Aloha
Boeing has not taken a bailout, they didnt like the fact that the government
would take an equity position. The bailout was as much targeted at Boeing
suppliers as it was at Boeing itself.

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jhwang5
Boeing was negotiating with gov to drop the equity requirement - does anyone
know what the upshot was? They also did take money from other programs
targeted at Airline industry, though I don't know exactly how much.

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whatok
Boeing has received no bailout money.

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jokit
Boeing has been stealing contract money forever. Great investment, NASA.

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a3n
Stealing how, from who? Defense to Commercial?

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tgsovlerkhgsel
Weren't both Airbus and Boeing "booked out" with year-long order queues pre-
Corona?

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avs733
in Boeing's case, a lot of that backlog is 737 max...which comes off the lime
and immediately goes into storage, which (I'm guessing) means no delivery hand
off and no booked income.

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jdkee
Nationalize Boeing in the interest of national secuirty.

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trianglem
No, capitalism is good we just have to reign it in like Europe and Asia.

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bagacrap
Capitalism sort of implies competition...

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vkou
The only thing that capitalism implies is the existence of a class that does
not work, but collects profits from the capital it owns.

That class sees competition is an unnecessary, and a profit-reducing
problem[1] that can be routed around.

[1] See Thiel's monopoly essay.

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Ididntdothis
Instead of aspiring to be capitalistic we should aspire to have a competitive
market economy.

