
Boeing CEO warns of possible industry bankruptcy - greatgib
https://www.marketwatch.com/story/guid/0B2733B6-946D-11EA-91ED-88BEE36E663F
======
wonderwonder
If it happens it's their own fault. Over the last decade their leadership have
spent ~96% of their free cash flow on stock buybacks. Boeing itself while not
the bankruptcy target of this article has spent 74%. Stock buybacks are
designed to simply prop up the share price to allow the leadership teams to
hit their bonus targets. If they had simply done what individuals are expected
to do and save money they would likely be fine. This collapse is a reminder
that we need to fundamentally change the way corporations are structured and
start encouraging more focus on the business as a whole, especially its
employees rather that obsess over stock price and executive compensation. 2008
was a reminder as well but we ignored it, just as I am sure we will ignore
this one. In the meantime they get massive bailouts while letting employees
go.

~~~
himinlomax
No non-trivial company can reasonably be expected to stay in business when
100% of their client base is literally prevented from doing any significant
business for months and likely to go bankrupt themselves.

The stock buyback thing is just idiotic. It's just dividends by another name.

Boeing/Airbus are not responsible for the current crisis, unlike the banks in
2008.

~~~
bigie35
Right, but should they spent 90% of their free cash flow doing a stock buy
back? Not a sound business practice IMHO.

~~~
asino
When a company (or anybody) has cash can do 4 things. (Assuming that the level
of debt is sustainable.) 1 reinvest in new projects 2 put the cash on safe
assets (bonds) 3 buyback 4 give back as a dividend

Buyback is more tax efficient than dividends.

What would you have done,if you were Boing CEO?

~~~
michaelt
_> What would you have done,if you were Boing CEO?_

If you're Microsoft or Apple or Google, the answer is "Hold hundreds of
billions of dollars of cash" [1]

That article, from late 2019, feels such holdings are in need of explanation;
today, they seem like common sense.

[1] [https://www.cnbc.com/2019/11/07/microsoft-apple-and-
alphabet...](https://www.cnbc.com/2019/11/07/microsoft-apple-and-alphabet-are-
sitting-on-more-than-100-billion-in-cash.html)

------
jdhn
What I want to see is antitrust action against them. Split them into 2
entities, commercial and military. If you're too big to fail, then perhaps
you're too big to exist.

~~~
cm2187
Having those two entities under one roof certainly creates some problems
(subsidising the civil through the military). But either of the two entities
would still be strategically important on its own and wouldn't allowed to go
bust.

~~~
jdhn
If they were split into 2, the military entity would still continue to exist
due to the fact that its primary customer would be the US military who isn't
in danger of running out of money anytime soon. The commercial entity may be
in trouble due to market conditions or poorly received planes like the 737
Max, but then they could declare bankruptcy and move on.

~~~
smileysteve
> poorly received planes like the 737 Max

Oh, they were received with open arms; they were just delivered with 2 crashes
that led to their grounding.

------
mateuszserafin
I'd like to see more innovation/players as an outcome of Boeing's and Airbus'
problems :)

~~~
ChuckNorris89
You probably won't. The aerospace industry has one of the highest barriers of
entry in cost, know-how, regulations and political connections.

Both Boeing and Airbus received _a lot_ of government funding to get started
and grow and still do to this day.

What will happen most likely is that the US and France/EU will just bail them
out since they're not only vital for jobs but for defense and national
security as well as their execs having strong ties to politicians in their
respective regions who can push for a bailout package.

~~~
zpeti
I think you would be surprised. Somehow we've ended up with privately owned
and founded rocket companies, which are higher entry in cost than airplanes.

Just because in the current situation we can't imagine it being different
doesn't mean there wouldn't be possibilities if it wasn't so government
focused.

I think a much bigger risk is that fact that I doubt many people will
confidently fly like they did before for the next 10 years. I think airline
travel will dramatically decline.

~~~
cranekam
> Somehow we've ended up with privately owned and founded rocket companies,
> which are higher entry in cost than airplanes.

Are you sure? There's a big difference between building single-purpose,
unmanned rockets and commercial jets that carry hundreds of people, fly for 20
hours a day, and last two decades. According to Wikipedia Falcon development 9
cost $300-390 million [0]. The 787 program cost $32 billion [1]. Even the A320
neo, which is a refresh of the original A320, cost $1.3 billion [2].

[0]
[https://en.wikipedia.org/wiki/Falcon_9_v1.0](https://en.wikipedia.org/wiki/Falcon_9_v1.0)
[1]
[https://en.wikipedia.org/wiki/Boeing_787_Dreamliner#Market,_...](https://en.wikipedia.org/wiki/Boeing_787_Dreamliner#Market,_costs,_and_production_issues)
[2]
[https://en.wikipedia.org/wiki/Airbus_A320neo_family](https://en.wikipedia.org/wiki/Airbus_A320neo_family)

------
generalpass
Bankruptcy is: a good thing.

It corrects the price of the assets to match current market.

It transfers assets to more efficient owners.

Bankruptcy is not: a vaporization gun.

The assets remain in the physically existent universe, as do the employees and
even the entire industry, even if it is diminished.

~~~
nunorbatista
> Bankruptcy is: a good thing.

This comment represents, unfortunately, what's wrong with capitalism and, at
the same time, what makes it work. Bankruptcy is used by companies to get rid
of debt and refocus their business, which is good. In the case of Boeing, an
eventual bankruptcy comes as a consequence of a decade of buybacks to fill
investor targets and lousy engineering in the case of the 737 Max. But hey,
with infinite FED money, Boeing is not going down that easily.

~~~
generalpass
> > Bankruptcy is: a good thing.

> This comment represents, unfortunately, what's wrong with capitalism and, at
> the same time, what makes it work. Bankruptcy is used by companies to get
> rid of debt and refocus their business, which is good. In the case of
> Boeing, an eventual bankruptcy comes as a consequence of a decade of
> buybacks to fill investor targets and lousy engineering in the case of the
> 737 Max. But hey, with infinite FED money, Boeing is not going down that
> easily.

The Federal Reserve system is anti-capitalistic because it removes choice and
agency from the market, which are critical components of capitalism.

Bankruptcy is also used by creditors to take possession of the assets of bad
borrowers, which typically is not to the benefit of the borrowers.

Financing issues rarely impact engineering decisions. If there is something
outside of Boeing influencing this, the more likely culprit is regulatory
capture effectively blocking innovators from entering the market.

~~~
nunorbatista
> The Federal Reserve system is anti-capitalistic because it removes choice
> and agency from the market, which are critical components of capitalism.

I can completely agree with this if Boeing is nationalized. While it's not, if
they receive FED money, they would just use it to keep operating, come back to
profits in a few years and distribute dividends then. This is a capitalist
behavior.

I wouldn't generalize the fact that financial issues can't impact engineering
decisions because I've seen that happening in the past. In the case of the 737
Max is evident: they adapted the 737 with a new engine that was too big and
because there was no space to put it, they placed it in an odd position and
compensated with Software that was operating silently. They did this to avoid
developing a new plane, which would cost them time and money.

~~~
generalpass
> > The Federal Reserve system is anti-capitalistic because it removes choice
> and agency from the market, which are critical components of capitalism.

> I can completely agree with this if Boeing is nationalized. While it's not,
> if they receive FED money, they would just use it to keep operating, come
> back to profits in a few years and distribute dividends then. This is a
> capitalist behavior.

> I wouldn't generalize the fact that financial issues can't impact
> engineering decisions because I've seen that happening in the past. In the
> case of the 737 Max is evident: they adapted the 737 with a new engine that
> was too big and because there was no space to put it, they placed it in an
> odd position and compensated with Software that was operating silently. They
> did this to avoid developing a new plane, which would cost them time and
> money.

Agreeing that the Federal Reserve system is anti-capitalistic but things under
it are capitalistic is a nonsensical argument. You seem to be applying
"capitalism" to anything you don't like. This is poor argumentation and makes
for very poor discussion.

Every engineering project has some sort of budgetary constraints, no matter
the source of the funding. Even under ideal conditions, poor engineering
decisions have been made. Attempting to just blame everything on a singular
cause that you happen to not like does not result the important critical
thinking required to uncover and correct actual causes of actual problems.

~~~
nunorbatista
I honestly don't see a lot of sense on your answer, mainly because I never
said I liked or disliked a certain attitude from the FED or Boeing. You're
generalizing what I said, and this is a recipe for misunderstandings, but even
knowing this is poor discussion, I'll still make an effort: The FED can
perfectly take anti-capitalistic actions (i.e. inject money to keep liquidity
and thus interfering in the free flow of capitals) and Boeing can use that
money to keep operating and pay dividends in 2 or 3 years, which is a
capitalistic behavior. A similar situation is happening with BMW at the moment
and here I'm clear with my statement: this is inherently bad because that
money comes from our taxes.

You were the one bringing up there was some kind of connection between money
and the engineering mistakes with the 737Max. If you read my critical thinking
above, I'm just saying that capitalistic behaviors (stock buybacks to pursue
investor targets) together with lousy engineering (proven in the case of the
737Max) are the actual cause of the problem. Now I clearly don't know enough
about plane engineering but from what is known, the main reason for the issue
was cost.

------
panarky
If the virus disappears tomorrow, the airline industry would take many months
to return to its previous patterns and volumes.

But the virus will not disappear tomorrow. It will be with us for at least a
year, probably two. Other pathogens will follow. Passengers and airfreight
will not return to 2019 volumes in the foreseeable future.

That means fewer flights, smaller planes, point-to-point instead of hub-and-
spoke. Short hops will fall even more than long-haul as people trade flying
for driving.

The airline industry is inherently mal-configured for this new world, and
cannot be profitable with even 20% less volume.

So the airline industry cannot, and should not, survive in its present form.
But Boeing and the dinosaur carriers can't manage the re-configuration on
their own because they'll keep trying to re-invent the past.

We'll trade a few massive, lethargic, inefficient and customer-hostile
megacorps for many more small, nimble, innovative, clever and customer-focused
niche players.

Bankruptcy, liquidation, and reorganization of the underlying assets by new
entrants is the only way.

Transferring even more billions of borrowed government money to the dinosaurs
only delays the inevitable.

~~~
Shared404
> Transferring even more billions of borrowed government money to the
> dinosaurs only delays the inevitable.

And costs tax money.

------
jbverschoor
Good. Someone else will buy their assets and continue. Hopefully but people
with integrity

~~~
henvic
This is what should happen. Unfortunately, state parasites will probably say
they're "too big to fail" and bail them out, sending money from everyone their
way.

------
zurn
We really need to cut air travel because of the climate crisis, it would be
good to reduce production of new airliners but it's not nearly enough.

~~~
aneutron
Here's the thing: I'm very aware of the fact that our climate is going to
shit, and I try to conciously help however I can, but airplanes is one thing
where I can't seem to figure out how to replace.

It is extremely practical and at times without alternative (e.g. long distance
flights, think 12 hours). I am however not anywhere near the field, so I'm
pretty sure I'm ignorant in regards to alternatives.

Do you happen to know any alternatives ? Or maybe some strategies, new fuels,
or anything that can help with emissions in regards to airplanes ? I'd love to
read more about that stuff.

~~~
ehnto
I don't think there is a short term alternative that isn't simply "Stop
travelling, even for work". It takes energy to fly, and we currently only know
how to make it work commercially and at the scale we need it with fossil
fuels.

It's a hard pill to swallow, and I think we're going to be seeing more of
those situations popping up. We're very much used to "Progressing" our
problems away and never compromising, making our lives better by making the
problems disappear with technology. But we're starting to see some hard
barriers in our planets ecology, and we're going to need to sacrifice instead.
At least for now.

Plastic is a good example. Coke won't stop making plastic bottles because it's
not what consumers want, but of course it's not what consumers want.
Consumers, myself included, want the continued march of progress to make our
lives better without compromise.

~~~
zurn
It's not quite as dramatic as that, you can take the train or bus for some
travel (either shorter trips, or long ones where you stay for a good while at
the destination). How limiting this is depends on where around the world you
live...

The COVID-19 crisis teaches us a lot about remote meetings and remote work,
and will impose friction on air travel for a while yet, so hopefully this will
become a culturally easier choice to make for business meetings.

------
throwaway55554
The US needs to invest in alternate modes of high speed travel. We need more
options than just the airline industry.

Edit: Hmm... I guess not. Wow.

~~~
me_me_me
Like what exactly? High powered skateboards? Or maybe rockets?

------
lidHanteyk
During the Bronze Age Collapse [0], we lost the ability to write in many
civilizations around the Mediterranean. Literacy rates could have been as low
as 10% in these places, and so when systems collapsed, literacy couldn't be
sustained. To this day, we have not yet recovered the ability to read
languages like Linear A [2] and the Byblos script [3]. Not every civilization
lost writing, and eventually the Phoenician family of scripts flourished and
everybody switched to alphabets and abjads.

Could we be on the verge of losing the ability to fly? We would still have
airplanes, and some parts of the world might retain the ability, but without
Boeing, we could see a dramatic reduction in the amount of airplanes, flying,
airports, and tourism.

[0]
[https://en.wikipedia.org/wiki/Late_Bronze_Age_collapse](https://en.wikipedia.org/wiki/Late_Bronze_Age_collapse)

[2]
[https://en.wikipedia.org/wiki/Linear_A](https://en.wikipedia.org/wiki/Linear_A)

[3]
[https://en.wikipedia.org/wiki/Byblos_syllabary](https://en.wikipedia.org/wiki/Byblos_syllabary)

~~~
romanovcode
This is just ridiculous. Boeing CEO wants bailouts, this is why he released
the statement.

Without Boeing other companies will emerge. There is no way in this day and
age (globalization) tourism/traveling will cease to exist.

~~~
DrScientist
I would agree unlikely, but if the virus continues to be a problem, or others
emerge then tourism as we know it could come to an end.

Once you have a drop in traffic, the remaining traffic could become more
expensive to operate, further reducing demand, making air travel rare rather
than everyday again.

It's only cheap now because of the number of people travelling it's a virtuous
spiral up, but there is also a sister spiral you can travel down.

~~~
tobylane
That kind of happened to supersonic travel. We don’t have Concorde any more
but we still know how to make them, and there’s a lot of development into
unmanned supersonic flight. Now I have a hankering to go to an airplane
museum.

~~~
9nGQluzmnq3M
Supersonic travel in the Concorde era was never profitable due to expensive
aircraft, insane fuel consumption, and sonic booms limiting possible routes.
(Yes, BA/AF eventually figured out how to making _operating_ them profitable
simply by charging through the nose, but not at sufficient scale to build more
planes, much less improve them.)

There are various startups like Boom who think a new generation of supersonics
could be a profitable niche, but they were a long shot at best of times and
much more so in these times.
[https://boomsupersonic.com/](https://boomsupersonic.com/)

