AIR ANALYST NOTES

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Big politics will shape the next 30 years, just as Boeing’s operational execution will determine its viability as a competitive force over the same period. In our opinion, the “too big to fail” argument no longer holds water, especially in a market environment where threatening DC regulatory overreach needs tempered by sound economic and financial principles.

We have often mentioned JetZero in our notes over the years, and we now believe it is appropriate to dedicate another analysis to the startup company. In this analysis, we will go deeper into the potential of the organization and its designs, assess the challenges ahead, and better situate the market potential for both military operators and commercial airlines. Full disclosure: we have visited JetZero twice and have seen its promise firsthand. As always, we will strive to remain balanced in our assessment. Simply put, this is the most exciting aircraft program since the A320 some 40 years ago.

There is an abundance of conversation about the current issues plaguing the Boeing 737 and 787, but little is being said about Boeing Defense, except that it is in an equally poor situation (notably with the KC-46 and VC-25B). This is particularly evident in lesser publications that seem to automatically denigrate Boeing at every opportunity.

Boeing’s defense slump was primarily concentrated in the late 2000s and early 2010s, with a significant reduction in output from St. Louis, despite the strong performance of Boeing Field with E-7 and P-8 sales and production.

In today’s hyper-focused discussions, an underlying question often remains unvoiced: “What is happening to our industry?” What are the root causes of the current turbulence? Which are external, driven by macro and industry-wide factors, and which stem from internal forces?

The aerospace ecosystem is undeniably complex and one of the most regulated industries globally. It is also a place where aerospace engineering miracles occur daily. The pressing questions are: How did we reach this point? How can we address the issues at hand? Most importantly, what lies ahead, and what will the future landscape look like?

While many advanced supply chain participants have embraced Industry 4.0 and are advancing towards Industry 5.0, most lower-tier suppliers are just beginning to explore these areas. Technologies like additive manufacturing, IoT, and cloud computing are becoming more widespread at all levels. This is partly driven by upper-tier requirements, but it is also largely due to a natural transition and adoption of these established standards and technologies. However, Industry 5.0 aims for new…

And so it unfolds, after months of a deftly orchestrated, amplified media campaign, we arrive at an unavoidable denouement: the leadership of the Boeing company has been dealt a decapitation strike.

While we do not disagree about the rationale and the ultimate need of replacing some of the C-Suite leaders, we are questioning the timing and the execution of this decision. This event leaves us grappling with more questions than answers, indeed marking a pivotal  point in our questioning of Boeing’s management approach of the past three to four decades. This even is akin to a message written in the sky in Boeing’s case,  also prompting us to ponder the benefits of replacing executives with others who show no discernible degree of differentiating competences compared to those they replace.  This decision is a no slam dunk case.

Occasionally, it is necessary to pause and contemplate the journey ahead, questioning its alignment with our expectations and needs as we enter a year that has already generally been characterized as pivotal. This reflection mirrors Frodo and Sam’s awareness of the perilous nature and distinct outcomes of their journey. In 2024, we indeed confront a year laden with potential challenges, potentially one of the most precarious since 1982. Evaluating the external forces that will profoundly impact our industry this year is crucial, aiming to draw conclusions that serve as guidelines and means to preempt unpleasant surprises. This time, this outlook is different.  The concentration of risks is higher than desirable ,  and we thus decided to limit detailed discussions about specific programs or companies. Instead, we now address these matters on a weekly basis.

Here is our presentation at the 2024 Bank of America Aerospace & Defense forum last week.   The near term production analysis is provided by our partner at Aero Analysis Partners, while we included the market dynamics and long term Boeing outlook.
We expect little to no significant impact from the Alaska MAX9 event at this stage,  but the situation remains fluid and conclusions are premature to a degree.

We are hosting Glenn Farley, the former aviation journalist with King 5 TV in Seattle, for a “fireside” chat about Boeing. The topics we will cover are plentiful, including production issues, the transformation of the Puget Sound Cluster, the risks it has created for Boeing, workforce concerns, next year’s contract negotiation, and the future of Boeing’s airplane production in Seattle. While we remain cautious about the chances of a future final assembly line (FAL) in Everett, we are not entirely dismissive.

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JetZero’s blended wing design has generated positive conversations in the aviation industry. However, the transition from concept to industrialization poses significant challenges for startups like JetZero. In this note, we will explore the top challenges that JetZero may face during the BWB development.

We examine the Boeing 777 market segment and its likely evolution to 2040 – An increase in competitive fragmentation will move the 777X up market while the bulk of the segment will be controlled by the Airbus A350 family.

As for their fame, the popular expression, “not to know your Champagne fairs'” meant not to know what everyone else knew. They were a rendez-vous for the whole of Europe, for the offerings of both North and South. The trade caravans would converge on Champagne and Brie in assembled and guarded convoys, not unlike the other caravans with their camels which crossed the great deserts of Islam on their way to the Mediterranean.

Fernand Braudel, CIVILIZATION AND CAPITALISM 15th-18th Century, Vol III

Airshows are too often where great expectations fall short.  For the so-demanding and…

Sheriff Rosco Coltrane: Well listen, let me tell ya the story. See, if you rub this lamp, if it’s Aladdin’s, then the smoke comes out, hits the fan and then the genie pops out and gives you all sorts of wishes.
Boss Hogg: Oh, that lamp, the one with the genie. Oh I know all about that anyhow. Yeah, but you gotta be touched in the head to believe a fairy tale like that.

The discussion about the environment and the impact of aviation on planet Earth can be at times as confusing as the people forcing their ideologies for and against stronger initiatives (and penalties) for some of the more negatively impactful human activities. We will not engage in a debate about global warming, global cooling or global idiocy (for the latter,  we would gladly provide ample dissertation efforts if asked) but this note will rather focus on the realizable (viable) vs the ideology (Genie) and what it means for the future aerospace supply chain.

This analysis is an update of our business aviation forecast. The exit from the pandemic, together with financial and geopolitical instabilities are likely to soften demand for business aircraft over the next three years. However, we do not anticipate the abrupt decline experienced in the late 2000s at this point.

This is our update for Airbus.  The document can be viewed full page by using the button in the lower right corner. 

“There is in fact no such thing as the future, singular; only futures, plural. There are multiple interpretations of history, to be sure, none definitive – but there is only one past. And although the past is over, for two reasons it is indispensable to our understanding of what we experience today and what lies ahead of us tomorrow and thereafter.”
Niall Ferguson