Anonymous asked in Cars & TransportationAircraft · 2 months ago

What is the future of Boeing with 737max issues still lingering and bleeding profits?

Will Boeing recover soon , like BP who was at fault for Deepwater Horizon ?

3 Answers

  • Joseph
    Lv 7
    2 months ago

    Boeing got hit with a One-Two punch.  The MCAS issues damaged the reputation of the 737Max, and then the pandemic that grounded a large portion of the worldwide airline fleet.  Even with the FAA allowing the Max to fly again, many airlines may not want to take delivery of the completed aircraft right now even if they still have the 737Max in their future plans.  How quickly can Boeing clear the inventory of the stored 737s depends on how quickly the air traffic will recover after the pandemic.

    Ultimately, Boeing may be forced to advance its plans for the 737 replacement.  The original design is already nearing 60 years, and there is only so much you can do with it, as the Max fiasco clearly demonstrated.  Before launching Max Boeing considered an all new design but decided that the technology wasn't quiet there yet to give it a clear advantage over the Airbus.  

    The decision on the 737 replacement, however, is not so simple.  Boeing has been hemming and hawing about the NMA, the replacement for the 757, for years and its still hovering somewhere in the background.  Boeing obviously doesn't want to cede that market segment to the extended ranger version of the A321neo.  

    Boeing may have no choice but to go ahead with both programs simultaneously.  Then it will have to muster the financial and technical resources to design, flight test and put in production two major new aircraft programs at the same time.  That's no small task.  The cost of both programs may well exceed $20 billion.  Boeing did put two all new aircraft in production at the same time in the past, but unlike the 757/767 that share many common systems the NMA and the 737 replacement will have little in common.  

    Another issue is the nearly 5,000 aircraft 737Max backlog.  Boeing doesn't want to kill its cash cow.  Ironically, if airlines cancel the Max orders, either due to its damaged reputation or to COVID, the decision on its replacement will become easier.

  • 2 months ago

    The Deepwater Horizon accident does not make the product BP sells any less safe relatively speaking.

    This is not the same for the aircraft, where trust and faith in the safety has been impacted.

    The 737 kept going because it relied on grandfather clauses that makes any component that may not be considered adequately safe today, using the latest certification rules, nevertheless acceptable because they once were accepted. The 737 was first certified in 1968, and since it uses some parts originally designed for 707, may have components that were designed in the mid-1950's.

    Boeing had a huge backlog, something like a solid 9 years of production, for the 737MAX when the aircraft were grounded and deliveries halted. Due to the lead time in supply chain, this means there are parts that were ordered for thousand of aircraft, and that may be in various level of production, so there is a desire to see those put in completed plane as opposed to scrapped.

    But the fact remains that the 737 is very old tech, that was pushed by Boeing because it is profitable: it does not cost much to produce since the tooling and infrastructure was paid decades ago, and it only needs to be competitive in sales price with the much more modern A320, meaning that it allowed a lot of profit margin.

    Boeing has a tough decision to take: it needs to design a *modern* replacement for the 150-200 seat medium range airliner market. The 737 should be put to pasture, and much of the problem that aircraft has is due to putting band-aids on a aircraft that deviates immensely from the original variants, but carries the design choices that were perhaps justified 60 years ago, but are no longer pertinent--and in some cases, detrimental--and are kept in the name of cost cutting, passed forward using grandfather clauses.

    The question is: is the public perception affected to the point where they cannot trust Boeing anymore, even with a clean sheet design, and how much will a clean sheet design cost? The last clean sheet Boeing did was the 787, and it ended up costing $32 billion--a rather large departure for the budgeted $7 billion, which was imposed by senior management that wanted a new plane for 40% of the design cost of the previous design (the 777). Seems to me: try to make it for half the cost, and it will end up costing 4 times more. Has management leaned their lesson?

  • 2 months ago

    If we could know the future we could make a large bet on the NYSE.

    I am still waiting for the other shoe to drop as far as the total cost of the whole fiasco.

    Boeing has taken on billions in debt in anticipation of future unknown costs, my guess is it will be many years before the debt is repaid out of profits.

    By contrast BP was able to pay for cleanup, fines etc, out of current cash flow, because their products, oil and refined products, kept selling all through the cleanup.

    Boeing has taken a double whammie because right after the Max was grounded, demand for all other product lines fell due to Covid.

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