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Boeing - One Letter That Tells It All

Summary

Boeing's activity indicates a new upcoming rate cut.

Swapping orders from 777 to 787, will help Boeing to increase production to 14 per month for the Dreamliner.

Rate cut means that profits will be pushed beyond 2020.

The Boeing (NYSE:BA) 777 Classic is facing a significant production gap. Despite this not being a new thing, there has been at least one strong pointer that Boeing is eyeballing and actually preparing for a further rate cut. I expect that Boeing will be announcing a rate cut within the next six months. The reason for eyeballing this rate cut is the fact that the Boeing 777 is making up for a significant portion of the earnings of Boeing's Commercial Airplanes department.

In a previous article I zoomed out a bit: From just looking at the order book and rate adjustments I have looked at not the entire dynamic competitive and economic environment that the Boeing 777 is placed in, but I did focus more on the broader picture rather than viewing the program as a machine where Boeing executives are adjusting rates up and down based on backlogs and prospects. If you are interested in a somewhat broader view I would recommend you reading Part 1 of the series.

In this article I will be having a look at a letter that might be surprising to some and actually can be seen as a sign that Boeing is seriously considering reducing production rates even further meeting production rate cuts that I have previously indicated.

Letter

Earlier in August a letter that Ray Conner, CEO of Boeing Commercial Airplanes, wrote surfaced. In the letter Conner addresses the Prime Minister of Pakistan. You can read the letter for yourself, but...


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