Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: Liberty on March 11, 2019, 06:41:32 AM

Title: BA - Boeing
Post by: Liberty on March 11, 2019, 06:41:32 AM
Doesn't look like we had a Boeing thread. Today's big story is about China and Indonesia grounding 737 MAX 8s after crashes:

https://www.reuters.com/article/us-ethiopia-airplane/china-indonesia-ground-boeing-737-max-8-fleets-after-ethiopia-crash-idUSKBN1QS15F

Stock down 10%+
Title: Re: BA - Boeing
Post by: Castanza on March 11, 2019, 07:14:33 AM
Is this juicy yet?
Title: Re: BA - Boeing
Post by: Liberty on March 11, 2019, 07:19:33 AM
Is this juicy yet?

I have no opinion either way at this point ¯\_(ツ)_/¯
Title: Re: BA - Boeing
Post by: tombgrt on March 11, 2019, 07:29:46 AM
Slightly off-topic but I was on a flight from Addis with Ethiopian Airlines scheduled to depart 2min later than the crashed plane. Small delay and news got to us when we landed. Stewardesses obviously broke down when we got out at destination. Very odd and a good reminder of the value of life, even when considering the unlikeliness of dying in a plane crash.
Title: Re: BA - Boeing
Post by: Liberty on March 11, 2019, 07:35:49 AM
Slightly off-topic but I was on a flight from Addis with Ethiopian Airlines scheduled to depart 2min later than the crashed plane. Small delay and news got to us when we landed. Stewardesses obviously broke down when we got out at destination. Very odd and a good reminder of the value of life, even when considering the unlikeliness of dying in a plane crash.

Glad you were on a different flight and all right, Tom. Life shouldn't be taken for granted. It's so unlikely that we even exist... There's an unbroken line from us through our ancestors to the very primordial first replicating RNA billions of years ago. Any of our millions of ancestors (including pre-human) dies from some infection or a club to the head or gets eaten by a predator, and we vanish. Any other egg or sperm gets through at that time, and we vanish.

Anyway, sorry to get philosophical in a Boeing thread...
Title: Re: BA - Boeing
Post by: gary17 on March 11, 2019, 10:30:29 AM
Slightly off-topic but I was on a flight from Addis with Ethiopian Airlines scheduled to depart 2min later than the crashed plane. Small delay and news got to us when we landed. Stewardesses obviously broke down when we got out at destination. Very odd and a good reminder of the value of life, even when considering the unlikeliness of dying in a plane crash.

Glad you were on a different flight and all right, Tom. Life shouldn't be taken for granted. It's so unlikely that we even exist... There's an unbroken line from us through our ancestors to the very primordial first replicating RNA billions of years ago. Any of our millions of ancestors (including pre-human) dies from some infection or a club to the head or gets eaten by a predator, and we vanish. Any other egg or sperm gets through at that time, and we vanish.

Anyway, sorry to get philosophical in a Boeing thread...

Tom - glad to hear you are not on that flight.   A bit off topic but I remember my math 101 teacher who used to tell us he has to make the course tough, because he's afraid some one us will actually become engineers and it scares him when he flies.   
Not good news for Boeing. I am a shareholder .

Liberty-  the fact we are here under such a low probability outcome would lead some to suggest we were created...  debate for another time !   
Title: Re: BA - Boeing
Post by: Liberty on March 11, 2019, 11:55:27 AM
Liberty-  the fact we are here under such a low probability outcome would lead some to suggest we were created...  debate for another time !

Created, by evolution through natural selection. Low probability events can happen (possibly frequently) in universes that have billions of galaxies that each have billions of stars with multiple planets and moons, over billions of years (with the possibly of even multiple parallel universes) on planets will thousands of not millions of ecosystem niches with slightly different local conditions... You just need a few primordial animo acids to combine into a barely adequate RNA replicator once in the chemical soup that is an ocean for the process to get started and for time and iteration and selection pressures to do their work. And the very fact that we're here wondering about it shows it's possible, it's the anthropic principle (if it hadn't happened, we wouldn't be here talking about it).

But yeah, let's move on!
Title: Re: BA - Boeing
Post by: Gamecock-YT on March 11, 2019, 01:17:42 PM
This is pretty powerful, former FAA chief of staff says they should ground all the MAX aircraft:

https://twitter.com/KateAFarrell/status/1105191919037173761
Title: Re: BA - Boeing
Post by: rb on March 11, 2019, 05:36:03 PM
I don't think this is that bad for Boeing. Does it make for bad press? Yes. But these sort of, let's call them teething problems, are not uncommon for new aircraft models. Off the top of my head i can think of the 787 (catching fire and fuel leaks) - did not crash, and the DC-10 (doors blowing off) - did crash. They fixed them and the companies were fine.

The fact that Boeing's stock looks pretty overvalued is another issue and probably a bigger one for investors.
Title: Re: BA - Boeing
Post by: Spekulatius on March 12, 2019, 04:08:42 AM
Hmm, the US mandates design changes for the 737:
https://finance.yahoo.com/news/morning-brief-us-to-mandate-design-changes-on-boeing-737-max-8-after-crashes-101822601.html (https://finance.yahoo.com/news/morning-brief-us-to-mandate-design-changes-on-boeing-737-max-8-after-crashes-101822601.html)

I think this will cost Boeing, directly and indirectly. It will also cost LUV, which owns the most 737 max planes.
Title: Re: BA - Boeing
Post by: Liberty on March 12, 2019, 10:36:39 AM
More groundings:

https://www.cnbc.com/2019/03/12/uk-has-grounded-all-boeing-737-max-aircraft.html
Title: Re: BA - Boeing
Post by: perulv on March 12, 2019, 10:40:43 AM
EASA suspends all Boeing 737 Max operations in Europe: https://www.easa.europa.eu/newsroom-and-events/press-releases/easa-suspends-all-boeing-737-max-operations-europe

I was actually on a 737-max yesterday, flying home from a weekend vacation. I have never been scared of flying, but during the take-off I was really nervous. I have never given a second thought to the make/model of an airplane in my life, assuming (correctly I think) that all planes and companies that fly in Europe/US etc are safe. This is of course just anecdotal, but I wonder how big long-term impact this will have, even if it turns out the two crashes are not related, issues fixed etc. Not sure how cool I will be with flying a 737-max in a month or two, if the suspension is lifted.
Title: Re: BA - Boeing
Post by: Spekulatius on March 12, 2019, 12:07:04 PM
EASA suspends all Boeing 737 Max operations in Europe: https://www.easa.europa.eu/newsroom-and-events/press-releases/easa-suspends-all-boeing-737-max-operations-europe

I was actually on a 737-max yesterday, flying home from a weekend vacation. I have never been scared of flying, but during the take-off I was really nervous. I have never given a second thought to the make/model of an airplane in my life, assuming (correctly I think) that all planes and companies that fly in Europe/US etc are safe. This is of course just anecdotal, but I wonder how big long-term impact this will have, even if it turns out the two crashes are not related, issues fixed etc. Not sure how cool I will be with flying a 737-max in a month or two, if the suspension is lifted.

Correct. I believe a lot of people will cancel or change flights once they now they are flying in a 737max plane. I think LUV will be hardest hit, since they have the most 737max planes, at least in the US. I think it will also cost Boeing a few billion to address the findings.
I am surprised that BA isn’t down more. The Stock is a high flier ( pun) and still up ~15% YTD.
Title: Re: BA - Boeing
Post by: Liberty on March 13, 2019, 08:54:37 AM
Canada:

https://www.cbc.ca/1.5054234

"Canada closes airspace to the #737MAX8, based on new information it received on Wednesday"

https://twitter.com/carlquintanilla/status/1105859314487578624
Title: Re: BA - Boeing
Post by: rb on March 13, 2019, 09:51:02 AM
I guess now they're gonna have to fix the jet.

As an aside I was surprised that Air Canada flew 737 Max to London.
Title: Re: BA - Boeing
Post by: Castanza on March 13, 2019, 10:09:03 AM
To me this whole situation is way overblown.

- We have people with no engineering credentials saying to ground the planes (Mitt Romney)

- No evidence has been shown

- Black Box is being shipped to another "country"

- SW pilots just came out and backed the 737

- It's documented that since the LION Air crash US pilots have been briefed on changes and trained properly. It is interesting to note that individual airlines are responsible for the training and briefing. These other countries Don't have nearly the same standards as the FAA.

- People suggest the FAA is in the pocket of Boeing. I agree with this slightly, however they have grounded many of beings planes in the past. See 787 in 2013. So to me this doesn't fit the narrative.

Personally I believe the FAA is simply standing up for and behind their strict regulations, policies, guidelines, protocols, and exhaustive list of specifications. Could there be an issue? Absolutely, But there isn't anything to suggest that yet.

Either way, I'm long BA. This whole thing will blow over just like the Talc powder thing for JNJ two months ago. Plus it helps my DCA is low 200's  :)
Title: Re: BA - Boeing
Post by: sleepydragon on March 13, 2019, 10:43:49 AM
Seems to me: It’s a hardware bug fixed by software which has a new bug.
Not easy to fix but they will fix it. But they better do more testings this time.i
Title: Re: BA - Boeing
Post by: wabuffo on March 13, 2019, 11:45:34 AM
US orders all 737 Max 8,9s parked.

wabuffo
Title: Re: BA - Boeing
Post by: walkie518 on March 13, 2019, 12:17:22 PM
US orders all 737 Max 8,9s parked.

wabuffo
24 planes w/AAL... say that's 48 flights per day and each flight has 200 passengers paying $250/ride that's $876m of lost revenues over the course of the year

Southwest would lose $1.24B of revenues using the same metrics

maybe this mess lasts a quarter at worst?
Title: Re: BA - Boeing
Post by: Castanza on March 13, 2019, 12:28:10 PM
US orders all 737 Max 8,9s parked.

wabuffo
24 planes w/AAL... say that's 48 flights per day and each flight has 200 passengers paying $250/ride that's $876m of lost revenues over the course of the year

Southwest would lose $1.24B of revenues using the same metrics

maybe this mess lasts a quarter at worst?

Boeing was already working on a solution after LION Air. If this issue is the same, then I can't imagine this lasting very long. I wonder if other airlines will gouge customers on pricing due to supply/demand.
Title: Re: BA - Boeing
Post by: KFRCanuk on March 13, 2019, 12:50:00 PM
US orders all 737 Max 8,9s parked.

wabuffo
24 planes w/AAL... say that's 48 flights per day and each flight has 200 passengers paying $250/ride that's $876m of lost revenues over the course of the year

Southwest would lose $1.24B of revenues using the same metrics

maybe this mess lasts a quarter at worst?

Two flights per day per plane seems low. In the US I would expect 6 to 8 flights. Canada 2 to 5.
Title: Re: BA - Boeing
Post by: walkie518 on March 13, 2019, 05:34:28 PM
US orders all 737 Max 8,9s parked.

wabuffo
24 planes w/AAL... say that's 48 flights per day and each flight has 200 passengers paying $250/ride that's $876m of lost revenues over the course of the year

Southwest would lose $1.24B of revenues using the same metrics

maybe this mess lasts a quarter at worst?

Two flights per day per plane seems low. In the US I would expect 6 to 8 flights. Canada 2 to 5.

ok, triple the number then divide by 4 and that's a better number...
Title: Re: BA - Boeing
Post by: doc75 on March 13, 2019, 05:44:25 PM
US orders all 737 Max 8,9s parked.

wabuffo
24 planes w/AAL... say that's 48 flights per day and each flight has 200 passengers paying $250/ride that's $876m of lost revenues over the course of the year

Southwest would lose $1.24B of revenues using the same metrics

maybe this mess lasts a quarter at worst?

Two flights per day per plane seems low. In the US I would expect 6 to 8 flights. Canada 2 to 5.

ok, triple the number then divide by 4 and that's a better number...

FWIW: Air Canada has 24 Max 8's and reportedly handle 9000 to 12000 passengers per day (quote from an AC spokesman in an article I read earlier today).   
Title: Re: BA - Boeing
Post by: augustabound on March 13, 2019, 06:21:22 PM
To me this whole situation is way overblown.

- We have people with no engineering credentials saying to ground the planes (Mitt Romney)

FWIW, our Minister of Transportation in Canada is a former NASA astronaut.
Title: Re: BA - Boeing
Post by: walkie518 on March 14, 2019, 07:54:26 AM
US orders all 737 Max 8,9s parked.

wabuffo
24 planes w/AAL... say that's 48 flights per day and each flight has 200 passengers paying $250/ride that's $876m of lost revenues over the course of the year

Southwest would lose $1.24B of revenues using the same metrics

maybe this mess lasts a quarter at worst?

Two flights per day per plane seems low. In the US I would expect 6 to 8 flights. Canada 2 to 5.

ok, triple the number then divide by 4 and that's a better number...

FWIW: Air Canada has 24 Max 8's and reportedly handle 9000 to 12000 passengers per day (quote from an AC spokesman in an article I read earlier today).

that verifies the 2 KFR noted

less certain about US figures then? 
Title: Re: BA - Boeing
Post by: Spekulatius on March 14, 2019, 04:55:35 PM
Anyone went through BA‘s 10-k with a fine comb? Interesting read - their accounts payable exceed their receivables by far and advanced billings finance their 80% of their inventory. (60% of the annual revenue. $120B in purchase obligation (probably long term supply contracts. if a major program blows up, the CFO‘s job could become very interesting quickly, it seems.

Looks like they can float their inventory through offloading the balance sheet to their suppliers and getting advances from their customers, which means they generate more cash flow when they ramp up. The reverse should be true when business slows down.

Then they use „program accounting“ as I learned from another forum, probably to smooth out earnings. All this you can buy for 22x earnings. Interesting.

Maybe I am über sceptical as they sure have done this for quite some time.
Title: Re: BA - Boeing
Post by: Gamecock-YT on March 17, 2019, 11:07:39 AM
Flawed analysis, failed oversight: How Boeing and FAA certified the suspect 737 MAX flight control system

https://www.seattletimes.com/business/boeing-aerospace/failed-certification-faa-missed-safety-issues-in-the-737-max-system-implicated-in-the-lion-air-crash/


Quote
Both Boeing and the FAA were informed of the specifics of this story and were asked for responses 11 days ago, before the second crash of a 737 MAX last Sunday.
Title: Re: BA - Boeing
Post by: Liberty on March 19, 2019, 01:51:08 PM
Sully op-ed:

https://www.marketwatch.com/story/capt-sully-sullenberger-where-boeing-and-the-faa-went-wrong-in-this-ugly-saga-2019-03-19
Title: Re: BA - Boeing
Post by: cherzeca on March 19, 2019, 04:13:59 PM
isn't Boeing=J&J Tylenol?  wait it out, then assess whether discount justifies buying?
Title: Re: BA - Boeing
Post by: Spekulatius on March 19, 2019, 06:24:05 PM
isn't Boeing=J&J Tylenol?  wait it out, then assess whether discount justifies buying?

Except that BA is expensive to begin with (still trades around 20x earnings) and the potential downside scenario that’s more than a slap on the hand is nowhere priced in. If it were going for 12x earnings,  I would be all over it, but for 20x, I gladly watch this from the sidelines.
Title: Re: BA - Boeing
Post by: LR1400 on March 19, 2019, 09:15:45 PM
Why do people hold stocks as a long term investment when there are
liquid markets for shares on a daily basis?

Seriously.

I continue to doubt buy and hold for businesses placed in an auction house.

Title: Re: BA - Boeing
Post by: Liberty on March 20, 2019, 04:47:39 AM
https://www.cnbc.com/2019/03/20/lion-air-boeing-737-saved-by-off-duty-pilot-a-day-before-crash-report.html

Yikes