Boeing CEO Says the ‘Drip, Drip, Drip’ of Bad News Should Stop. Investors Don’t Believe It.
Boeing CEO Dave Calhoun expects air travel demand to stay.
Dreamstime
Boeing CEO Dave Calhoun spoke Wednesday at an conference in Qatar arranged by Bloomberg. For investors, there was some good news and some bad news.
The Boeing (ticker: BA) CEO spoke on a panel along with Luis Gallego, who runs British Airways parent International Consolidated Airlines Group (IAG.U.K.). Topics ranged from demand to sustainability to the current operating environment.
The good news from both executives is that demand for travel is solid and both expect that trend to remain in place.
“We still see high demand [for] bookings,” said Gallego. Calhoun reiterated that point on the panel and in a subsequent interview with Bloomberg. “It’s really supply trying to keep up with demand,” said the Boeing CEO.
Calhoun had one more piece of good news for Boeing investors that, if true, will provide a lot of relief. “I think the drip, drip, drip” of bad news coming out about the company is coming to an end, he said.
Boeing investors, however, don’t appear convinced. Boeing stock was down about 0.9% in recent trading Wednesday. That isn’t out of line with what’s going on in the broader market. S&P 500 and Dow Jones Industrial Average futures are off about 0.3% and 0.5%, respectively.
Strong demand for any industry is a good thing. But demand has also helped sow the seeds of some of the more troubling trends facing the industry. The entire aerospace value chain is struggling to keep up.
“We do have supply problem,” said Calhoun. He was talking about the entire value chain and sees airlines struggling to staff up with enough maintenance people and pilots.
On “the manufacturing side, we have a big, complicated supply chain with a lot of fragility built into it,” continued Calhoun. Finding “supply constraints and dealing with them when they appear has been a real issue.” He sees the manufacturing supply-chain issues lasting until the end of the year—at least.
Looking down the road, both men believe the trend toward sustainable aviation will define products for decades to come. “The [subject] that is becoming as important as the efficiency of an airplane is the emissions of an airplane,” said Calhoun. “When we think about fleet planning today, it’s almost becoming equal parts efficiency and emissions …the pressures are going to get more severe, not less.” That’s a longer-term issue for investors to digest.
Calhoun, however, is still realistic about the challenges faced by his firm. “Yes we have to deliver 787s, yes we have to certify the 777x, and I believe we will.”
787 jets aren’t being delivered as Boeing works through manufacturing quality issues discovered several quarters ago. The 777x jet is the newest version of its popular 777 jet. It isn’t certified yet and customers are anxious to have the plane in their fleets.
Coming into Wednesday trading, Boeing stock is down about 32% year to date, worse than the 21% and 16% comparable, respective returns of the S&P 500 and Dow Jones Industrial Average. Stock in Boeing peer Airbus (AIR.France) is down about 17% year to date.
Write to Al Root at [email protected]
