Michel Merluzeau

“This is a very interesting situation!”

Brig Gen James “Jimmy” Stewart (George Bailey – It’s a Wonderful Life) 

In 2024, a crucial year looms for the industry and the economy. Our intention in this note is not to delve into the forthcoming US presidential election, a critical event promising new standards of absurdity and intelligence vacuousness from both sides of the aisle. We may, however, address the prospect of Trump/Biden II administrations on geopolitics and defense procurement in our 2024 forecast early next year. We contemplated titling it after Edgar A. Poe’s short story: “The System of Doctor Tarr and Professor Fether,” but we have made that point before (an asylum where lunatics run the show) and will spare you the validity of the story at this point.

“So, in conclusion and caveat emptor for investors: Dear investors, do enjoy this dead cat bounce and bear market sucker’s rally…don’t wait too long until you jump ship while the financial Titanic hits the next financial iceberg: you may get squeezed and crashed in the rush to the lifeboats.”

Professor Nouriel Roubini , NYU, 2009

Our team “enthusiastically” navigated the bustling streets of Manhattan in New York City last week, despite the established chaos caused by construction, oversized limos, delivery trucks, and other customary nuisances. The holiday season is indeed upon us. Moving from one meeting location to another over three hectic days reminded us that the spirit of the season is present. European tourists are flocking to New York City, where the “true meaning” of the season can be experienced on the busy sidewalks of 5th and Madison Avenues.

Sorry Dorothy, but no. The economy continues to perplex us. To paraphrase Sir Winston, it remains “a riddle wrapped in a mystery inside an enigma” as we approach the conclusion of the 2023 fiscal year.

We assert that the economy is in a worse state than it appears, despite optimistic forecasts and the dismissal of recession indicators. Our primary focus centers on US and EU debt levels and labor market indicators. As debt continues to rise, job data still reveals a significant gap, indicating that the recovery from the 2020 government lockdowns has been insufficient. Even after the pandemic ended, millions of people have not returned to the labor force. In the past, we have criticized the U-3 as the official measure of unemployment. For us, U-6 remains the only measure providing a truer reflection…

The week was replete with what we would term “revealing tidbits” that point toward either program-impacting events or the identification(s) of  emerging trends indicative of a given OEM outlook,  particularly Sierra Nevada and Boeing for the SAOC program.  This program will be discussed in a separate note soon.

We have had concerning economic news over the past few weeks, yet we remain uncertain about the overall direction of the US economy, there are negatives and some positives, today’s factory orders should be another interesting indicator. However, as we have often mentioned, US

It was a brief yet eventful week, brimming with noteworthy developments as we approach the final five weeks of 2023. Despite a wave of somewhat unfavorable economic news and data, a moment of reckoning is upon us. Ignoring the inevitable consequences while running the basement printer far too long is no longer an option.

The San Francisco Fed weighed in on the Bureau of Economic Analysis’ revised estimates, revealing lower household disposable income and higher personal consumption than initially reported for the fourth quarter of 2022 and the first quarter of 2023. These adjustments led to a significant decrease of over $50 billion in the Bureau’s measure of aggregate personal savings. Accumulated excess savings, which peaked

For AirIntelPro research customers: the next AeroSeven will be on November 27

As mentioned last week, we happily skipped the painful trip to Dubai for a quick visit to our nation’s capital for ATRIF. Once again, it was a very productive session. Additionally, while waiting for a flight at Pittsburgh airport this morning, we were attentively listening to Bloomberg news. Economist…

This week, let’s shift our focus away from the world of finance and delve into the tangible realm of program execution, examining the current status of aerospace programs and deliveries. As Norm Augustine aptly put it, “If stock market experts were so expert, they would be buying stock, not selling advice.” #22

Airbus looks like they might make it – Airbus reported delivering 71 aircraft in October, marking an 18% year-on-year increase and bringing the 2023 year-to-date total to 559. The company aims for 720 deliveries in 2023, with 161 planes left to achieve this target.

Again, lots of quarterly results this week – Spirit AeroSystems was a highlight as a nothing burger. Therefore, we won’t reexamine Pat Shanahan’s first outing as CEO, which was akin to an hesitant performance from Punxsutawney Phil, lacking any substantial guidance. Here’s what we retained from the week:

Major quarterly results all this week – we won’t cover what the banks do exceedingly well and what we excel at even more profoundly here and here. We will stick to more industry focused topics.

Southwest Airlines (SWA) announced that it has ordered an additional 108 737 MAX aircraft. The airline unsurprisingly opted for the smaller -7 variant, which is intended for its single class short-haul network.

Today’s Boeing Q3 conference provided the following interesting tidbits that retained our team’s attention:

737 MAX Production Issues and Recovery

The initial plan was to reach a production rate of 38 aircraft per month by August. However, this goal was not met due to the APB and other issues.  Boeing’s leadership emphasizes that the company must listen to constraints, particularly in the context…

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We discuss Boeing’s positive results for Q2 2023 with AIR’s partner Jean-Pierre Picchiottino of Aero Analysis Partners. Overall, we are very encouraged by both the financial results and the delivery outlook for 2023. That said, there are some unknowns that should get to resolution by end of the year and/or the first half of 2024. We did not discuss the Space and Defense segments for this quarter. It is safe to say that F-18 is on the way out following the Indian Air Force decision to proceed with Dassault Rafale for its Navy, while T-7 is crawling towards IOC by 2027. The BDS portfolio is strong but is a financial drain at this juncture.

This is our 1st half 2023 selected commercial and defense program status overview. Our next one will be in January 2024.