Boeing Has No Path To Recovery

Shares of The Boeing Company (NYSE: BA), once one of the great industrial companies of the world, remain down 39% so far in 2020, against the S&P 500 which is up 10%. No one should expect a recovery.

Boeing has received some good news. Its crash-prone 737 MAX will return to the skies over the U.S. and Europe. But, the airline industry has been scorched by a drop in passenger traffic due to COVID-19. Even with a vaccine, many experts believe normal passenger traffic will not return for years. In the meantime, carriers, some of which are bankrupt and other teetering in that direction, will not need new planes at any time in the foreseeable future. Boeing’s customers are as badly crippled as it is, if not worse.

Boeing’s third-quarter results were ugly. Revenue dropped 29% to $14.1 billion. Boeing lost $401 million compared to a profit of $1.3 billion in the year-earlier period. Negative operating cash flow was $4.8 billion compared with a negative cash flow of $2.4 billion in the same period a year ago.

The revenue picture was worse for Boeing’s commercial aircraft business, down 56% to $3.6 billion. At least its Defense, Space & Security operations did much better. Revenue was off only 2% to $6.8 billion. Boeing should consider spinning this business out to give investors something of substance to hold onto.

President and Chief Executive Officer Dave Calhoun commented as the results were released: “The global pandemic continued to add pressure to our business this quarter, and we’re aligning to this new reality by closely managing our liquidity and transforming our enterprise to be sharper, more resilient and more sustainable for the long term.”

The problem is that the pandemic’s effects will go on for years.

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Boeing, Pfizer give Dow big boost

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Stocks resumed their upward trend on Wednesday after Pfizer became the latest to deliver positive vaccine news, combined with more solid retail earnings and positive news for Dow member Boeing.

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The Federal Aviation Administration approved Boeing's 737 Max jet to fly again pushing the stock higher in the pre-market.


This helping lift Dow Jones Industrial Average futures which are up over 100 points, a gain of 0.5%, while the S&P 500 tracked higher by the same amount. The Nasdaq Composite was up 0.2%.

Ticker Security Last Change Change %
BA BOEING COMPANY 210.05 +7.65 +3.78%

Pfizer shares also rose in the pre-market after announcing a successful Phase 3 trial for its COVID-19 vaccine.

Ticker Security Last Change Change %
PFE PFIZER INC. 36.04 -1.29 -3.46%
BNTX BIONTECH SE 86.93 -4.59 -5.02%

Stocks took a pause Tuesday, with the exception of the Russell 2000 and the Dow Transports which both hit fresh records.

Ticker Security Last Change Change %
I:DJI DOW JONES AVERAGES 29783.35 -167.09 -0.56%
SP500 S&P 500 3609.53 -17.38 -0.48%
I:COMP NASDAQ COMPOSITE INDEX 11899.342877 -24.79 -0.21%


Target shares rose 1.7% after the Walmart competitor said it earned $2.79 a share on $22.34 billion in sales, compared to analysts' expectations of $1.60 on $20.93 billion in sales in its most recent quarter.

Lowe's, which competes with Home Depot in the home improvement space, is slated to report earnings before the market opens. Traders will be looking for earnings of $1.99 a share on $21.25 billion in revenue, up 22.2% year-over-year.

Ticker Security Last Change Change %
LOW LOWE’S COMPANIES INC. 159.86 -2.04 -1.26%
TGT TARGET CORP. 163.04 -2.14 -1.30%
TJX TJX 61.14 +0.05 +0.08%

TJX Co. is also set to release its latest earnings report, with investors looking for the discount retailer to earn 40 cents a share on $9.36 billion in sales.


Ticker Security Last Change Change %
NVDA NVIDIA CORPORATION 536.89 -3.72 -0.69%
L LOEWS CORP 43.67 +0.04 +0.09%

After the market closes, semiconductor giant Nvidia and L Brands are among the companies reporting their latest results.


Several economic reports tied to the U.S. housing markets will be released on Wednesday, with the EIA's weekly crude oil inventory report also due to be released.

Mortgage applications for the week ending Nov. 14 will be released at 7 a.m. and housing starts and building permits for October will be released at 8:30 a.m.

Ahead of the weekly inventory report, crude oil rose on Wednesday to $42.07 a barrel, a gain of 1.5%.



In other commodities, cold declined to $1,872.90 an ounce, a decline of 0.6%.


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World News

Boeing 737 Max, the plane that's been grounded since 2019 after two crashes killed 346 people, is safe to fly again, according to Europe's aviation regulator

  • Europe's aviation regulator says that Boeing's 737 Max is safe to return to the skies. The FAA, which is Boeing's main regulator, has not committed to a date that the 737 Max will be able to fly again.
  • And American Airlines just announced plans to fly 737 Max planes between Miami and New York starting December 29th.
  • The 737 Max was grounded in March of 2019, following two crashes that resulted in the death of 346 people. Authorities around the world, including the FAA, have been reviewing the 737 Max's design and safety features. 
  • Boeing completed its first recertification test flight in June this year.
  • Visit Business Insider's homepage for more stories.

Boeing's 737 Max, an update to the 737 first announced in 2011, has been grounded since March 2019. Two crashes, during which pilots struggled to control the plane, resulted in the death of a combined 346 people and led to questions about the plane's design and features.

Since grounding the plane, Boeing has been working on a complete redesign of the plane's flight software.

On Friday, Patrick Ky, executive director of the European Union Aviation Safety Agency, told Bloomberg that he's satisfied with the changes Boeing has made to the aircraft. Ky added that the 737 Max could begin flying in Europe before the end of 2020. 

American Airlines announced on Sunday plans to fly 737 Max planes between Miami and New York from December 29th through January 4th. The airline said it's taking a "phased approach," and has not confirmed whether it will continue using the aircraft beyond that period. American Airlines' plans are contingent on a green light from the Federal Aviation Administration, which hasn't yet committed to a timeline for approval of the 737 Max.

Touted as a more fuel-efficient version of the 737 consumer plane, the 737 Max is said to have a longer range, lower operating cost, and enough in common with previous models that pilots could switch back and forth between the two seamlessly. 

The crashes called into question Boeing's training practices, as well. During the aircraft's rollout, pilots were only required to take a brief tablet-based course, rather than training in a simulator like they would for a new plane.

A so-called synthetic sensor, a software update demanded by the EASA in 2019, still hasn't been implemented by Boeing, and isn't expected to be ready for another two years. But the EASA says that the plane currently meets safety standards, and the "third sensor" would meet even higher safety levels.

The FAA is Boeing's main regulator, and under international law, the 737 Max won't be able to fly until the FAA allows it. In June, Boeing completed its first recertification flight test, one of many steps required before the plane can return to service.

There are several federal investigations underway, looking into the design of the jet as part of an effort to determine how it was allowed to be certified in the first place and whether there was criminal negligence behind the design. The fallout from the crashes ultimately cost then-CEO Dennis Muilenburg his job.

Meanwhile, Boeing is currently seeking to settle cases brought by the families of those killed in the second of the two fatal crashes. An Ethiopian Airlines plane crashed into the ground in March 2019, killing all 157 people on board.

Boeing has largely settled cases from the earlier October 2018 crash of a 737 Max operated by Indonesia's Lion Air, where 189 people died. 

But the cases brought in relation to the Ethiopian Airlines crash, Boeing is taking a "scorched earth" approach, a contrast to the Lion Air cases, Business Insider has reported. 

One lawyer involved in the case says that Boeing's lawyers were refusing to provide evidence that the victims' representatives requested. Boeing says that it had taken its obligations to provide evidence "seriously." 

Get the latest Boeing stock price here.

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FAA Administrator Tests Boeing 737 MAX Flight

Boeing’s most popular 737 MAX, which has been grounded for long following two fatal crashes, has passed a major milestone in its efforts to return to service.

In a statement, Federal Aviation Administration or FAA announced that Administrator Steve Dickson has completed Boeing 737 MAX flight before the FAA approves the aircraft’s return to service.

Dickson’s flight, which took two hours, included a number of scenarios to demonstrate the proposed software and design changes to the aircraft’s automated flight control system.

Dickson noted that his flight was separate from the official certification process that’s still underway by the FAA.

The Administrator, along with FAA Deputy Administrator Dan Elwell, completed the new recommended pilot training for the aircraft on Tuesday.

The FAA noted that Dickson’s flight is an important milestone, but other key steps remain in its evaluation of Boeing’s proposed changes to the aircraft’s flight control system and training.

These include Flight Standardization Board or FSB Report, Final Design Documentation and Technical Advisory Board or TAB Report, Continued Airworthiness Notification to the International Community & AD, FAA Rescinds Grounding Order, Certificates of Airworthiness, as well as Operator Training Programs.

The U.S. aviation regulator said these actions are applicable only to U.S. air carriers and U.S.-registered aircraft. The FAA will inform other civil aviation authorities, but they are required to take their own actions to return the Boeing 737 MAX to service for their air carriers.

The agency did not want to speculate about how long it will take for the aircraft to return to passenger service.

“We will lift the grounding order only after FAA safety experts are satisfied that the aircraft meets certification standards,” the agency said.

It was in late June that the FAA began its formal test flights of Boeing 737 Max, evaluating the proposed changes to the automated flight control system on the aircraft.

Boeing’s best-selling aircraft was grounded worldwide in March 2019 after two crashes killed all 346 people aboard Lion Air Flight 610 and Ethiopian Airlines Flight 302.

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Boeing Sees Pandemic Battering Global Jet Sales 11% This Decade

While Boeing Co. (NYSE: BA) expects demand for new commercial jets to decline by about 2% over the next 20 years, most of the pain is going to come in the next decade. The aircraft maker said Tuesday that it expects demand to fall by 11% in the next 10 years.

In its 2020 Boeing Market Outlook (BMO), it forecasts a total market value for new commercial planes and services over the next decade at $8.5 trillion, somewhat lower than the $8.7 trillion the company forecast in its 2019 BMO. The COVID-19 pandemic gets the blame.

The coronavirus outbreak cut air travel by around 90% earlier this year, and the recovery, so far, has reduced that cut to a decline of between 60% and 70%. Even though the recovery has begun, a full recovery to pre-pandemic levels will take years.

Between 2020 and 2029, Boeing is forecasting global demand for 18,350 new commercial aircraft, well below half the 20-year forecast for 43,110 new planes. The outlook for the commercial market “reflects a combination of the unprecedented near-term industry disruption and the long-term resilience” the industry has seen for decades.

In a typical year, carriers retire 2% to 3% of their airplanes. Following the Great Recession, the retirement rate rose to around 4%, and following the 9/11 attacks, the replacement rate rose to nearly 5%. Boeing expects to see replacements running at the higher rate over the first 10 years following the pandemic.

The demand for commercial services is expected to reach about $3 trillion by 2029 before tripling to $9 trillion in 2039. Boeing noted that digital solutions will become more critical to its customers as they focus on reducing costs to adjust to “future market demand.”

Over the next 20 years, passenger growth is expected to rise by an average of 4% a year. Last year, Boeing projected passenger growth of 4.6% annually for the 20-year period to 2038.

The 2019 BMO also expected about 44% of all new planes over the 20-year period to replace older aircraft. This year’s outlook expects replacements to account for 56% of all new planes. That does not augur well for higher passenger counts.

It’s no surprise that Boeing forecasts that single-aisle planes like its 737 Max will comprise the lion’s share of new airplanes over the next 20 years. The BMO projects that 32,270 new planes over the period will be single-aisle models. That’s 75% of total demand through 2039.

In another telling sign of how hard the airline industry has been hit by the pandemic, the 2020 BMO forecasts demand for new pilots and other aviation personnel at 2.4 million. Last year’s BMO forecast demand for 2.5 million new people.

Boeing’s share price has dropped by about 3% in the noon hour Tuesday to $166.12, in a 52-week range of $89.00 to $378.70. The consensus price target on the stock is $175.77.

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