Boeing Crash and Burn $BA

Boeing (NYSE:BA) my my my. Despite recent news reports and market commentary Boeing is doing rather well. Earnings and revenues are up. Deliveries are still strong. Margins are improving. Passenger air travel will increase driving demand for fuel-efficient new aircraft.

Everything is peachy keen good. No worries. Just buy a little bit more. Yes all the metrics everyone is talking about are positive. so lets talk about the 800 lb gorilla sitting in the room that can disrupt everything.

Oil or more precisely jet fuel JP4 if I have the nomenclature correct.

If oil jumps and stays up the cost or air travel will increase. People will cut back on air travel. air lines will cut back on order purchases etc etc etc.

So its nice to follow the Boeing story. The 787 Dreamliner with its carbon body that flexes on take off is very sexy.

But it comes down to the price of oil which is a geo-political risk that even the most astute and sophisticated businessman cannot manage around.

So yes the new fleet is more fuel-efficient. But a terrorist can drive up the price of oil faster than an engineer can wring fuel efficiency out of the technology.

George Gutowski writes from a caveat emptor perspective.

22 Possible Black Swan Events for Boeing $BA #caveatemptorperspective

Boeing (NYSE:BA) has twenty-two (22) possible Black Swan events. Most big cap companies play CYA and publish possible risks to the business. The list is meant to mitigate any possible exposure to litigation by disgruntled shareholders who may choose to believe they were not sufficiently informed. Once you get past the boiler plate style the fundamental investor will appreciate the twenty-two (22) possible Black Swan Events as an analytical framework for the Buy-Sell-Hold or Ignore Matrix. Remember only the paranoid survive.

  1. general conditions in the economy and industry, including those due to regulatory changes;
  2. reliance on commercial airline customers;
  3. the overall health of  aircraft production system, planned production rate increases across multiple commercial airline programs, commercial development and derivative aircraft programs, and aircraft being subject to stringent performance and reliability standards;
  4. changing acquisition priorities of the U.S. government;
  5. dependence on U.S. government contracts;
  6. reliance on fixed-price contracts;
  7. reliance on cost-type contracts;
  8. uncertainties concerning contracts that include in-orbit incentive payments;
  9. dependence on subcontractors and suppliers, as well as the availability of raw materials,
  10. changes in accounting estimates;
  11. changes in the competitive landscape in our markets;
  12. non-U.S. operations, including sales to non-U.S. customers;
  13. potential adverse developments in new or pending litigation and/or government investigations;
  14. customer and aircraft concentration in Boeing Capital’s customer financing portfolio;
  15. changes in ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments;
  16. realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures;
  17. the adequacy of insurance coverage to cover significant risk exposures;
  18. potential business disruptions, including those related to physical security threats, information technology or cyber-attacks or natural disasters;
  19. work stoppages or other labor disruptions;
  20. significant changes in discount rates and actual investment return on pension assets;
  21. potential environmental liabilities; and
  22. threats to the security of Boeing and/or customers’ information.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti . Follow his evil twin brother who writes Wall Street Murder Thrillers @georgegutowski

Boeing Late Fees Become Material. Reg FD Implications $BA

English: Boeing 787 Dreamliner at roll-out cer...

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Boeing (NYSE:BA) is arguing with Air India and the Indian government over late fees that may be applicable over the much delayed but finally flying 787 Dreamliner. The Indian Government is asking for $1 Billion. Boeing is offering $500 million. Depending on the options package this amounts to about one free dreamliner.

Boeing is not arguing the late fee rationale. They are just negotiating the size of the delay fee. The Dreamliner program is much delayed and Boeing may be looking at billions in late fees. Currently the Indians are asking for 10% of Boeing’s cash on hand. Boeing has countered with 5%. Thats just India. Would it be too racist to accuse them of a nickel and dime mentality? What about side deals and special arrangements which Boeing is only too happy to make. Why do you need to press for the big cash?

There has been no attempt at financial guidance from Boeing for late fees. Looking at it from the profit and loss viewpoint. The $1 Billion Indian position is equal to 25% of last years $4 Billion net profit. Note to regulator check for short sales position ultimately controlled by Indian Government or associated cronies. Note to other regulator review disclosure in the context of REG FD and determine when Boeing splained that this big number and perhaps other big numbers may become detrimental to Boeing’s shareholders in the very near future.

The entire quandary is becoming a gaming theory conundrum. Play poker with the Indian government. Do not alarm shareholders in real-time. Ignore the regulator now while you jaw down a major client who is also a sovereign country. Extraterritoriality is a nice touch. So far Prashant Sukul, joint secretary of the country’s aviation ministry told reporters that they have asked for more. Boeing has not said a thing. So perhaps they can argue that until the negotiations are a done deal they did not have the basis for accurate material disclosure. So Thank You to the Indian government who has taken this out into the public domain.

George Gutowski writes from a caveat emptor persepctive.