For Airplane Makers, The Sky Is Falling

The aviation financiers gathered together in Phoenix this week to commiserate -- with each other as well as the commercial aircraft manufacturers. Their message: "You can build 'em, but you can’t get financing for 'em!" Uh oh!

One attendee opined that we who live in the Pacific Northwest are about to see whitetails (vernacular for undeliverable aircraft) at Boeing’s (BA) finishing plant in Seattle (as are the French at the Airbus plant in Toulouse). The ultimate consequence of this shortfall in funding is that Airbus and Boeing -- plus Bombardier and Embraer (ERJ) -- are about to encounter the same thing that has happened to the executive aircraft manufacturers (not to mention the automobile makers, et al): Too many pieces of equipment and too few buyers with money. Darn!

Of course, the affected stocks have forewarned us of this impending disaster. While the S&P 500 is down 41.5% over the last 52 weeks, Boeing is off by 55.0%, B/E Aerospace (BEAV) is down 78.2%, Esterline Technologies (ESL) is down 59.5%, Hexcel (HXL) is down 68.8%, Ladish (LDSH) down 78.8%... and the list goes on.

Perhaps -- just perhaps -- ILFC (the World’s largest aircraft leasing company which, in turn, is owned by AIG) can convince its parent to furnish it with enough (government) funds so that it can "keep ‘em flying!" Otherwise, will the last person out of Seattle, Renton and Everett please turn off the lights?

Let us continue praying!

Comments

[PeteK:]

Boeing, as predicted, since the Union Strike last year, won't be the
same any more. Weaker, and may need bailout later. Who knows !!
Share holders always the losers.

Mar 19 03:08 AM

[oldman:]

this is a short term issue and an opportunity.

Mar 19 10:31 AM

[tukuemuaca:]

Boeing will come out of this stronger than anyone else....It's the 787, stupid. The best fuel economy of any flying aircraft or any being planned? This will make it unique in the market, and the airline leasing companies and all the rest will be able to show that lifetime costs of the 787 can justify replacing old, inefficient airplanes.

Goodby those crappy Airbus' that we have to ride from Boise to Michigan. Welcome, 787!!!!

Good job, Boeing. Too bad, Socialist Aircraft Company!

Mar 19 02:57 PM

[Chris B:]

Good point oldman. Will people be flying in airplanes 5, 10, or 15 years from now? Yes. Is air travel still increasing in Latin America, Asia, and the Middle East? Yes. Does lack of financing mean a lack of market demand? No, it just creates a backlog.

The risk is that one or several of these companies will go under in the short term due to cancelled orders or bankrupt customers. There's also the risk that they will all emerge from this financially crippled and the new Chinese aviation companies will be the only ones with capital.


On Mar 19 10:31 AM oldman wrote:

> this is a short term issue and an opportunity.

Mar 19 04:30 PM

[Yellowhair148:]

<Chris B. said:There's also the risk that they will all emerge from this financially crippled and the new Chinese aviation companies will be the only ones with capital.>

And Boeing, Airbus, McDonnell Douglas, Bombardier and Embraer can only blame themselves for the transfer of technology and knowledge to be able to do it. The Chinese and Japanese would not have figured out the wing box without their help.

Mar 21 05:14 PM

[User 357469:]

Most likely it will be far more than shareholders who will lose if unions are not legislated out of existence. America itself will lose. Unions have already destroyed American manufacturing. That is why most American companies now manufacture their products outside of America. They refuse to deal with union crap. Thank goodness for companies like Toyota and Walmart who had the guts to stay here and say no to unions, and threaten to close down any operations if a few lazy employees try to form one there. Too bad GM, Boeing, Ford and others did not have management with the guts to do the same. Unions cost taxpayers and consuners a lot more for products and services. Only union employees or sympathizes will claim otherwise. End of story!

On Mar 19 03:08 AM PeteK wrote:

> Boeing, as predicted, since the Union Strike last year, won't be
> the
> same any more. Weaker, and may need bailout later. Who knows !! Share
> holders always the losers.

Mar 21 06:50 PM

[tukuemuaca:]

Don't put Ford in the same pile as the other union suckups. They built that plant in Brazil....remember? They have also cut the slag two years ago. They will be among the stongest automakers in the USA...and they won't have to have government subsidies like Toyota, Honda, BMW, etc. have used forever to stay solvent.

Ford, in my estimation, is a company that has shown us how it can be done without bailouts, subsidies despite anything that the UAW has tried to make them like GM and Chrysler.

End of Story!


On Mar 21 06:50 PM User 357469 wrote:

> Most likely it will be far more than shareholders who will lose if
> unions are not legislated out of existence. America itself will lose.
> Unions have already destroyed American manufacturing. That is why
> most American companies now manufacture their products outside of
> America. They refuse to deal with union crap. Thank goodness for
> companies like Toyota and Walmart who had the guts to stay here and
> say no to unions, and threaten to close down any operations if a
> few lazy employees try to form one there. Too bad GM, Boeing, Ford
> and others did not have management with the guts to do the same.
> Unions cost taxpayers and consuners a lot more for products and services.
> Only union employees or sympathizes will claim otherwise. End of
> story!
>
> On Mar 19 03:08 AM PeteK wrote:

Mar 22 11:50 AM

[tukuemuaca:]

Controlled, communist industries have continuously failed over the last 80 years. The USSR was supposed to dominate all aviation...with stolen or rehashed technology. Airbus has a monstrosity with the 380, nothing new, just bigger. Not a whit of new innovation, same old aluminum tubes.

The Chinese? Not a single industrial innovation can be attributed to China. Not a single one. To be a true leader, you need manufacturing capability, a supply chain, effect research, top engineering and good service. Which if any of these business basics have the Chinese shown leadership. The only thing they have brought to the table is "slave labor"....cheap wages.

Watch: The Chinese aircraft will go the way of Illushin.




On Mar 21 05:14 PM Yellowhair148 wrote:

> <Chris B. said:There's also the risk that they will all emerge from
> this financially crippled and the new Chinese aviation companies
> will be the only ones with capital.>
>
> And Boeing, Airbus, McDonnell Douglas, Bombardier and Embraer can
> only blame themselves for the transfer of technology and knowledge
> to be able to do it. The Chinese and Japanese would not have figured
> out the wing box without their help.

Mar 22 11:56 AM

[Caltorguy:]

If governments ever decide to take global warming seriously then high speed rail as a far preferable solution to everyone flying everywhere. Air will still make sense for long hauls but everything under 500 miles (which would include most of the Eastern Seaboard and ever, just, New York-Chicago) could be done faster and more efficiently with the kinds of 250 mph trains that are now common place in Europe. Will take significant government investment but we'd be kiidding ourselves if we said the same hasn't been true of air travel.

Mar 25 01:05 PM

[Minlita:]

This is a screener to see the performance of the major Us airlaines (not very nice IMO):
www.finviz.com/screene...

Mar 25 10:37 PM