Boeing Posts Quarterly Loss on Strike Impact and Charges
Fourth-quarter revenues declined to $12.7 billion from $17.5 billion as labor
strike pushed airplane deliveries out of the quarter
Fourth-quarter EPS declined to loss of $0.08 per share, reduced by an estimated
total of $1.79 due to strike, 747 charge and litigation-related reserve
Backlog grew 8 percent in 2008 to a record $352 billion
2009 EPS guidance of $5.05 to $5.35 underpins a solid foundation in challenging
times
CHICAGO, Jan. 28, 2009 – The Boeing Company’s [NYSE: BA] fourth-quarter net income declined to a loss of $56 million, or $0.08 per share, reflecting the now-settled machinists' strike (EPS impact estimated at $1.09 per share), a charge related to the 747 ($0.61 per share) and a litigation-related reserve ($0.09 per share).
Revenues for the quarter declined 27 percent to $12.7 billion, due primarily to the effects of the strike which reduced commercial airplane deliveries by approximately 70 units and revenues by an estimated $4.3 billion (Table 1).
For the full year of 2008, net income fell 34 percent to $2.7 billion, EPS was $3.71 per share, and revenue fell 8 percent to $60.9 billion. Full-year results were impacted by the strike, the 747 charge, the litigation-related reserve, and higher costs for AEW&C announced in the second quarter, which together reduced full-year EPS by an estimated $2.56 per share. This was partially offset by lower pension and deferred compensation expenses.
"The progress we made in many areas of Boeing during 2008 was outweighed by the impact of the strike and our performance on some key development programs," said Chairman, President, and Chief Executive Officer Jim McNerney. "Our imperative going forward is improving execution where it needs to be improved, maintaining strong performance across all our production programs, and preserving our financial strength to grow in these challenging economic times."
Fourth-quarter operating cash outflow was $1.6 billion, primarily reflecting the effects of the strike (Table 2). Operating cash outflow for the year was $0.4 billion, and free cash flow* was negative $2.1 billion. Total company backlog at year-end was a record $352 billion, up 8 percent in 2008 driven by commercial airplane orders and new IDS contract awards.
Showing posts with label Boeing. Show all posts
Showing posts with label Boeing. Show all posts
Wednesday, January 28, 2009
Thursday, December 11, 2008
Boeing Announces 787 Dreamliner 1st Flight
Boeing Schedules 787 Dreamliner First Flight for Second Quarter 2009; First Delivery for First Quarter 2010
Schedule change driven by impact of Machinists' strike and fastener replacement work
Schedule change driven by impact of Machinists' strike and fastener replacement work
EVERETT, Wash., Dec. 11, 2008 -- Boeing [NYSE: BA] today announced an updated schedule for its all-new 787 Dreamliner program that moves the commercial jet's first flight into the second quarter of 2009 and first delivery into the first quarter of 2010. The new schedule reflects the impact of disruption caused by the recent Machinists' strike along with the requirement to replace certain fasteners in early production airplanes.
"Our industry team has made progress with structural testing, systems hardware qualification, and production, but we must adjust our schedule for these two unexpected disruptions," said Boeing Commercial Airplanes President and CEO Scott Carson.
Prior to the strike that halted much of the company's commercial airplane work from early September into November, the 787 was to make its first flight late in the fourth quarter of 2008. First delivery was slated for the third quarter of 2009.
"We're laser focused on what needs to be done to prepare for first flight," said Pat Shanahan, 787 program vice president. "We will overcome this set of circumstances as we have others in the past, and we understand clearly what needs to be done moving forward."
Included in the preparations for first flight, Shanahan said, are finalizing and incorporating remaining engineering changes and completing systems testing, qualifications and certification.
Boeing is evaluating the specific impact of this delay on customer delivery dates and will provide customers with updated schedules once completed. The company is also determining any financial impact from this schedule change and will incorporate that into updated financial and overall airplane delivery guidance that will be released at a later date.
Monday, November 17, 2008
Boeing's Strike Is Officially Over
SEATTLE, Nov. 14, 2008 -- The tentative agreement reached today between Boeing [NYSE: BA] and the Society of Professional Engineering Employees in Aerospace (SPEEA) offers market-competitive wages and improved benefits over the four-year duration of the proposed contracts.
SPEEA is recommending that nearly 21,000 employees in Washington, Oregon, California and Utah vote to ratify the agreement.
"Our goal was to negotiate contracts that reward our employees for their hard work and the success they helped create," said Doug Kight, Boeing vice president of Human Resources. "This agreement provides market-competitive pay and benefits that enable us to attract and retain the best talent, remain on the leading edge of technology and continue to win business in uncertain times."
The proposed contracts reward engineering and technical employees for their role in the company's success with:
SPEEA is recommending that nearly 21,000 employees in Washington, Oregon, California and Utah vote to ratify the agreement.
"Our goal was to negotiate contracts that reward our employees for their hard work and the success they helped create," said Doug Kight, Boeing vice president of Human Resources. "This agreement provides market-competitive pay and benefits that enable us to attract and retain the best talent, remain on the leading edge of technology and continue to win business in uncertain times."
The proposed contracts reward engineering and technical employees for their role in the company's success with:
>Five percent annual salary adjustment funds in each year of the contract.
>Continued participation in the Employee Incentive Plan (EIP), which paid individual employees >41 days of extra pay over the past three years.
>Health care benefit improvements, including enhanced wellness and preventive care coverage at slight cost increases.
In addition, Boeing addressed SPEEA concerns about the use of non-Boeing labor and subcontracting, while providing the company flexibility to make business decisions.
"We recognize that Boeing's direct technical and engineering team is the foundation of our competitiveness, and we've agreed that it is in the best interest of the company, the union and employees to understand the nature of Boeing's business strategies and plans regarding the use of non-Boeing labor and subcontracting," said Kight.
If ratified, the new contracts will go into effect Dec. 2, 2008, and will expire Oct. 6, 2012.
Boeing 3rd Quarter 2008 Earnings
Boeing Posts Lower Third-Quarter Results on Reduced Commercial Deliveries
Third-quarter revenues declined to $15.3 billion from $16.5 billion as labor strike
and supplier production problems pushed airplane deliveries out of the quarter
EPS declined to $0.96 per share, reduced by an estimated $0.60 on the lower
deliveries and by $0.08 due to tax adjustments
Backlog grew to a record $349 billion as near-term demand remains strong
Updated financial guidance to be provided after strike concludes
The Boeing Company’s [NYSE: BA] third-quarter net
income declined 38 percent, to $695 million, while earnings per share declined 33
percent to $0.96 per share, both reflecting an ongoing machinists' strike and supplier
production challenges on customer-furnished galleys for certain wide-body airplanes.
Those items reduced third-quarter commercial airplane deliveries by approximately 35
units and net earnings by an estimated $0.60 per share. Revenues for the quarter
declined 7 percent, to $15.3 billion.
The 787 Dreamliner made progress during the quarter despite the labor strike.
Key milestones included a successful hydraulic system test, landing gear test, and
pressurization test of the static airframe – the last, a key step in validating the structural
integrity of the airplane. The program also began testing the flight controls and began
final assembly of the fourth flight-test airplane. To date, the program has won 895 net
airplane orders from 58 customers.
Key milestones included a successful hydraulic system test, landing gear test, and
pressurization test of the static airframe – the last, a key step in validating the structural
integrity of the airplane. The program also began testing the flight controls and began
final assembly of the fourth flight-test airplane. To date, the program has won 895 net
airplane orders from 58 customers.
Tuesday, October 28, 2008
Boeing Settles Strike
SEATTLE, Oct. 27, 2008 -- Boeing [NYSE: BA] and the International Association of Machinists and Aerospace Workers today reached tentative agreement on a new four-year contract covering 27,000 employees in Washington, Oregon and Kansas. Union leadership is recommending that employees vote to ratify the contract.
The company retained the flexibility necessary to manage its business, while making changes to the contract language to address the union's issues on job security, pay and benefits. The offer provides general wage increases every year and increases pension benefits. In addition, Boeing is proposing no changes to the cost share employees currently pay for a selection of outstanding health care plans.
"This is an outstanding offer that rewards employees for their contributions to our success while preserving our ability to compete," said Scott Carson, president and CEO of Boeing Commercial Airplanes. "I thank both negotiating teams and the federal mediator for their hard work and commitment in reaching this agreement. We recognize the hardship a strike creates for everyone -- our customers, suppliers, employees, community and our company -- and we look forward to having our entire team back."
By mutual agreement, details of the agreement will be released first by the union. If employees vote to approve the offer, it will end the strike by approximately 27,000 employees in Washington, Oregon and Kansas.
The company retained the flexibility necessary to manage its business, while making changes to the contract language to address the union's issues on job security, pay and benefits. The offer provides general wage increases every year and increases pension benefits. In addition, Boeing is proposing no changes to the cost share employees currently pay for a selection of outstanding health care plans.
"This is an outstanding offer that rewards employees for their contributions to our success while preserving our ability to compete," said Scott Carson, president and CEO of Boeing Commercial Airplanes. "I thank both negotiating teams and the federal mediator for their hard work and commitment in reaching this agreement. We recognize the hardship a strike creates for everyone -- our customers, suppliers, employees, community and our company -- and we look forward to having our entire team back."
By mutual agreement, details of the agreement will be released first by the union. If employees vote to approve the offer, it will end the strike by approximately 27,000 employees in Washington, Oregon and Kansas.
Wednesday, October 22, 2008
Boeings 3rd Qtr 2008 Earnings Misses
Boeing Posts Lower Third-Quarter Results on Reduced Commercial Deliveries
Third-quarter revenues declined to $15.3 billion from $16.5 billion as labor strike
and supplier production problems pushed airplane deliveries out of the quarter
EPS declined to $0.96 per share, reduced by an estimated $0.60 on the lower
deliveries and by $0.08 due to tax adjustments
Backlog grew to a record $349 billion as near-term demand remains strong
Updated financial guidance to be provided after strike concludes
Third-quarter revenues declined to $15.3 billion from $16.5 billion as labor strike
and supplier production problems pushed airplane deliveries out of the quarter
EPS declined to $0.96 per share, reduced by an estimated $0.60 on the lower
deliveries and by $0.08 due to tax adjustments
Backlog grew to a record $349 billion as near-term demand remains strong
Updated financial guidance to be provided after strike concludes
Thursday, September 11, 2008
Tanker Deal In Limbo For Boeing, Northrop
DoD Announces Termination of KC-X Tanker Solicitation
Today, the Department of Defense notified the Congress and the two competing contractors, Boeing and Northrop Grumman, that it is terminating the current competition for a U.S. Air Force airborne tanker replacement.
Secretary Gates, in consultation with senior Defense and Air Force officials, has determined that the solicitation and award cannot be accomplished by January. Rather than hand the next Administration an incomplete and possibly contested process, Secretary Gates decided that the best course of action is to provide the next Administration with full flexibility regarding the requirements, evaluation criteria and the appropriate allocation of defense budget to this mission.
Secretary Gates stated, “Over the past seven years the process has become enormously complex and emotional – in no small part because of mistakes and missteps along the way by the Department of Defense. It is my judgment that in the time remaining to us, we can no longer complete a competition that would be viewed as fair and objective in this highly charged environment. The resulting “cooling off” period will allow the next Administration to review objectively the military requirements and craft a new acquisition strategy for the KC-X.”
In making this decision, it was concluded that the current KC-135 fleet can be adequately maintained to satisfy Air Force missions for the near future. Sufficient funds will be recommended in the FY09 and follow-on budgets to maintain the KC-135 at high-mission capable rates. In addition, the Department will recommend to the Congress the disposition of the pending FY09 funding for the tanker program and plans to continue funding the KC-X program in the FY10 to FY15 budget presently under review.
Today, the Department of Defense notified the Congress and the two competing contractors, Boeing and Northrop Grumman, that it is terminating the current competition for a U.S. Air Force airborne tanker replacement.
Secretary Gates, in consultation with senior Defense and Air Force officials, has determined that the solicitation and award cannot be accomplished by January. Rather than hand the next Administration an incomplete and possibly contested process, Secretary Gates decided that the best course of action is to provide the next Administration with full flexibility regarding the requirements, evaluation criteria and the appropriate allocation of defense budget to this mission.
Secretary Gates stated, “Over the past seven years the process has become enormously complex and emotional – in no small part because of mistakes and missteps along the way by the Department of Defense. It is my judgment that in the time remaining to us, we can no longer complete a competition that would be viewed as fair and objective in this highly charged environment. The resulting “cooling off” period will allow the next Administration to review objectively the military requirements and craft a new acquisition strategy for the KC-X.”
In making this decision, it was concluded that the current KC-135 fleet can be adequately maintained to satisfy Air Force missions for the near future. Sufficient funds will be recommended in the FY09 and follow-on budgets to maintain the KC-135 at high-mission capable rates. In addition, the Department will recommend to the Congress the disposition of the pending FY09 funding for the tanker program and plans to continue funding the KC-X program in the FY10 to FY15 budget presently under review.
Tuesday, August 12, 2008
Boeing Tanker News
Boeing may opt out of bidding for tankers
BY DION LEFLER
The Wichita Eagle
BY DION LEFLER
The Wichita Eagle
A Boeing Co. team will meet today with government procurement officials to discuss specifications for the Air Force's next-generation tanker, against a backdrop of reports that Boeing may drop its bid for the $100 billion contract.
Aviation Week magazine reported that Boeing was considering withdrawing from the bidding process over concerns that project specifications favor a competing bid built around an Airbus model. Airbus' parent company -- the European Aeronautic Defence and Space Co. --and Northrop Grumman Corp. are competing with Boeing for the contract.
Boeing's options
But Boeing will wait to see what the Pentagon's final requirements are before making a decision, people familiar with the company's thinking said. If Boeing opts not to bid for the disputed tanker deal, it would leave the Pentagon little choice but to award a sole-source contract to Northrop, or to change its tanker requirements or the timetable for picking the winner. If the Pentagon awarded the lucrative deal to Northrop without a competition, it could face a backlash in Congress.
Boeing's other options are either to protest the Pentagon's final tanker proposal, once it is issued, on grounds that it is not fair, or go ahead and bid and then decide whether to protest the contract award if Northrop wins.
By refusing to bid, Boeing would be hoping to force the Pentagon to change the requirements and level the playing field between the 767 and A330, or delay the competition until Boeing has more time to make a competitive bid with a bigger plane, either the 767-400 or 777, according to sources.
Tiahrt weighs in
Rep. Todd Tiahrt, R-Goddard, said he met with Boeing executives and told them "one of the options they have to consider is just walking away from the deal." Tiahrt said the bidding process needs to be fair in order to repair problems cited by the Government Accountability Office, which found serious flaws in an earlier process that forced the contract to be rebid.
If that does not happen, he said he would expect some serious pushback from Congress.
The bill authorizing the new tanker requires approval from both House and Senate defense appropriation committees before the Department of Defense can spend the money, Tiahrt said.
"We could just cut the funding off until they do it right," he said.
Aviation Week magazine reported that Boeing was considering withdrawing from the bidding process over concerns that project specifications favor a competing bid built around an Airbus model. Airbus' parent company -- the European Aeronautic Defence and Space Co. --and Northrop Grumman Corp. are competing with Boeing for the contract.
Boeing's options
But Boeing will wait to see what the Pentagon's final requirements are before making a decision, people familiar with the company's thinking said. If Boeing opts not to bid for the disputed tanker deal, it would leave the Pentagon little choice but to award a sole-source contract to Northrop, or to change its tanker requirements or the timetable for picking the winner. If the Pentagon awarded the lucrative deal to Northrop without a competition, it could face a backlash in Congress.
Boeing's other options are either to protest the Pentagon's final tanker proposal, once it is issued, on grounds that it is not fair, or go ahead and bid and then decide whether to protest the contract award if Northrop wins.
By refusing to bid, Boeing would be hoping to force the Pentagon to change the requirements and level the playing field between the 767 and A330, or delay the competition until Boeing has more time to make a competitive bid with a bigger plane, either the 767-400 or 777, according to sources.
Tiahrt weighs in
Rep. Todd Tiahrt, R-Goddard, said he met with Boeing executives and told them "one of the options they have to consider is just walking away from the deal." Tiahrt said the bidding process needs to be fair in order to repair problems cited by the Government Accountability Office, which found serious flaws in an earlier process that forced the contract to be rebid.
If that does not happen, he said he would expect some serious pushback from Congress.
The bill authorizing the new tanker requires approval from both House and Senate defense appropriation committees before the Department of Defense can spend the money, Tiahrt said.
"We could just cut the funding off until they do it right," he said.
Pentagon officials will meet separately with Boeing and Northrop executives today to go over in detail its draft tanker requirements. The Pentagon has said it hopes to be ready to issue a final request for proposals by the end of this week and pick the winner by the end of the year.
The contract would allow the Air Force to replace 179 aging refueling tankers. The deal is worth $35 billion and, with options, as much as $100 billion over the next 30 years.
If Boeing lands the deal, it is expected to create between 300 and 500 jobs at the company's Wichita facility and another 500 for local parts suppliers, including Spirit AeroSystems.
Boeing stock dropped $1.24, or 1.83 percent, in trading Monday after the report that it was considering dropping out of the running for the tanker contract. The company's shares closed at $66.62
Proposal revisions
Boeing spokesman Dan Beck said the company wants the contract, but would not comment on any internal deliberations about it.
He said about 10 Boeing executives and engineers will meet with officials at Wright-Patterson Air Force Base in Ohio today to suggest changes in the draft request for proposals.
The Northrop-EADS team will get the same opportunity.
The contract would allow the Air Force to replace 179 aging refueling tankers. The deal is worth $35 billion and, with options, as much as $100 billion over the next 30 years.
If Boeing lands the deal, it is expected to create between 300 and 500 jobs at the company's Wichita facility and another 500 for local parts suppliers, including Spirit AeroSystems.
Boeing stock dropped $1.24, or 1.83 percent, in trading Monday after the report that it was considering dropping out of the running for the tanker contract. The company's shares closed at $66.62
Proposal revisions
Boeing spokesman Dan Beck said the company wants the contract, but would not comment on any internal deliberations about it.
He said about 10 Boeing executives and engineers will meet with officials at Wright-Patterson Air Force Base in Ohio today to suggest changes in the draft request for proposals.
The Northrop-EADS team will get the same opportunity.
Boeing 2nd Qtr 2008 Earnings
Boeing Reports Second-Quarter Financial Results, Reaffirms Guidance
>Second-quarter revenues steady at $17.0 billion
>Net income was $0.9 billion with EPS of $1.16 per share, including a previously disclosed charge of $0.22 per share
>First-half EPS grew 13 percent to $2.79 per share as revenue grew 2 percent to $33.0 billion
>Backlog at record $346 billion
>2008 and 2009 financial guidance reaffirmed
>Second-quarter revenues steady at $17.0 billion
>Net income was $0.9 billion with EPS of $1.16 per share, including a previously disclosed charge of $0.22 per share
>First-half EPS grew 13 percent to $2.79 per share as revenue grew 2 percent to $33.0 billion
>Backlog at record $346 billion
>2008 and 2009 financial guidance reaffirmed
Thursday, July 10, 2008
Two Go In, One Comes Out - Maybe?
The Associated Press
Boeing and Northrop Grumman will submit new offers for a disputed $35 billion Air Force tanker contract, and the Pentagon will pick a winner by the end of the year.
Defense Secretary Robert Gates said Wednesday that his office — not the Air Force — will oversee the competition between Boeing and the team of Northrop and Airbus parent European Aeronautic Defence and Space Co.
The plan, which hands control to the Pentagon acquisition chief John Young and sets up a dedicated source-selection committee, shows that senior civilians at the Defense Department have lost confidence in the Air Force's ability to manage the contract.
"I think it's better," said Rep. Norm Dicks, D-Wash. "No one has any faith in the Air Force."
The Government Accountability Office last month detailed "significant errors" the Air Force made in the original award to the Northrop team. The GAO said Chicago-based Boeing might have won the contract had the service not made mistakes in evaluating the bids.
The Pentagon will conduct a limited rebid that looks only at eight issues where government auditors found problems in the initial process, Gates said.
Sen. Richard Shelby, a Republican from Alabama, where the Northrop Grumman team would assemble its plane, called it "the best of all options" that would address the "minor procedural flaws" the GAO cited.
Lawmakers from Washington state and Kansas, where Boeing employs thousands of workers, have put considerable pressure on the Air Force to reopen the bidding process and cancel the contract with the Northrop team.
The deal has emerged as the latest black eye for the service, which is trying to rebuild a tattered reputation after a procurement scandal in 2003 sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.
The Air Force in February selected the Northrop team to replace 179 Eisenhower-era aerial refueling planes. Boeing filed its protest in March.
The deal — one of the largest in Pentagon history — is the first of three contracts worth up to $100 billion to replace nearly 600 refueling tankers over the next 30 years.
Shares of Boeing added 61 cents to $66.53 in afternoon trading, while Los Angeles-based Northrop Grumman fell 10 cents to $66.07.
Boeing and Northrop Grumman will submit new offers for a disputed $35 billion Air Force tanker contract, and the Pentagon will pick a winner by the end of the year.
Defense Secretary Robert Gates said Wednesday that his office — not the Air Force — will oversee the competition between Boeing and the team of Northrop and Airbus parent European Aeronautic Defence and Space Co.
The plan, which hands control to the Pentagon acquisition chief John Young and sets up a dedicated source-selection committee, shows that senior civilians at the Defense Department have lost confidence in the Air Force's ability to manage the contract.
"I think it's better," said Rep. Norm Dicks, D-Wash. "No one has any faith in the Air Force."
The Government Accountability Office last month detailed "significant errors" the Air Force made in the original award to the Northrop team. The GAO said Chicago-based Boeing might have won the contract had the service not made mistakes in evaluating the bids.
The Pentagon will conduct a limited rebid that looks only at eight issues where government auditors found problems in the initial process, Gates said.
Sen. Richard Shelby, a Republican from Alabama, where the Northrop Grumman team would assemble its plane, called it "the best of all options" that would address the "minor procedural flaws" the GAO cited.
Lawmakers from Washington state and Kansas, where Boeing employs thousands of workers, have put considerable pressure on the Air Force to reopen the bidding process and cancel the contract with the Northrop team.
The deal has emerged as the latest black eye for the service, which is trying to rebuild a tattered reputation after a procurement scandal in 2003 sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.
The Air Force in February selected the Northrop team to replace 179 Eisenhower-era aerial refueling planes. Boeing filed its protest in March.
The deal — one of the largest in Pentagon history — is the first of three contracts worth up to $100 billion to replace nearly 600 refueling tankers over the next 30 years.
Shares of Boeing added 61 cents to $66.53 in afternoon trading, while Los Angeles-based Northrop Grumman fell 10 cents to $66.07.
Of course maybe they will split the contract for political expediency (Tim)
Boeing Back In The Game
Boeing Statement on Defense Department Decision to Reopen KC-X Tanker Bid
ST. LOUIS, July 09, 2008 -- Boeing [NYSE: BA] today released the following statement in response to the U.S. Defense Department's decision to reopen the KC-X aerial refueling tanker competition following the company's successful protest of the original $35 billion contract award:
"We welcome the decision by Defense Secretary Robert Gates not to proceed with the contract award to Northrop Grumman/EADS and to reopen the KC-X tanker competition. However, we remain concerned that a renewed Request for Proposals (RFP) may include changes that significantly alter the selection criteria as set forth in the original solicitation. As the Government Accountability Office reported in upholding our protest, we submitted the only proposal that fully met the mandatory criteria of the original RFP.
"We look forward to working with the new acquisition team as it reopens the competition, but we will also take time to understand the updated solicitation to determine the right path forward for the company.
"It's encouraging that the Defense Department intends to take steps to ensure a fair and open competition that, among other things, fully accounts for life-cycle costs, such as fuel, to provide the most capable tanker at the best value for the American taxpayer."
ST. LOUIS, July 09, 2008 -- Boeing [NYSE: BA] today released the following statement in response to the U.S. Defense Department's decision to reopen the KC-X aerial refueling tanker competition following the company's successful protest of the original $35 billion contract award:
"We welcome the decision by Defense Secretary Robert Gates not to proceed with the contract award to Northrop Grumman/EADS and to reopen the KC-X tanker competition. However, we remain concerned that a renewed Request for Proposals (RFP) may include changes that significantly alter the selection criteria as set forth in the original solicitation. As the Government Accountability Office reported in upholding our protest, we submitted the only proposal that fully met the mandatory criteria of the original RFP.
"We look forward to working with the new acquisition team as it reopens the competition, but we will also take time to understand the updated solicitation to determine the right path forward for the company.
"It's encouraging that the Defense Department intends to take steps to ensure a fair and open competition that, among other things, fully accounts for life-cycle costs, such as fuel, to provide the most capable tanker at the best value for the American taxpayer."
Friday, June 20, 2008
Deal Or No Deal - Boeing/Northrop
By Keith Epstein, with Carol Matlack in Paris
BW Magazine
The dogfight is only going to get worse between the two aerospace titans vying for one of the 21st century's most lucrative, delayed, and politically contentious military contracts. But when it's over, both Boeing (BA) and rival Northrop Grumman (NOC) could emerge as winners.
Back on Feb. 29 the U.S. Air Force had awarded Northrop—teamed with the Franco-German European Aeronautic Defence & Space Co. (EADS)—the entire $35 billion order for 179 tankers capable of refueling fighter jets in the air. But Boeing protested, and on June 18 the Government Accountability Office, a congressional watchdog, backed its claim that the Air Force skewed the contest in favor of Northrop.
Even Northrop didn't expect a slam dunk. But the unexpectedly strong ruling lashed the Air Force for making "significant errors" that "could have affected the outcome" of the competition. The Air Force now has 60 days to decide whether it will stick with its original decision or reopen the competition.
Whichever way the Air Force goes, the GAO ruling gives Boeing and its backers powerful new ammunition in their bid to gain the contract. "We're going to the mat," vows Representative Norm Dicks (D-Wash.). Their quest: Round up enough congressional votes to stymie funding for the tankers unless Boeing gets the deal.
But there is another way. Behind the scenes on Capitol Hill, there's talk of a brokered deal that would split the contract—an idea first raised in 2007 by Northrop and the Air Force but rejected by Boeing. A day before the ruling, Boeing Vice-President Mark McGraw, who heads the tanker program, told BusinessWeek that if a deal were offered, "we'd certainly be in listening mode." Now? McGraw won't say.
For years, ongoing turbulence over the tankers has thwarted Air Force attempts to replace its aging fleet. Alaskan Ted Stevens, the top Republican on a U.S. Senate defense appropriations subcommittee, is quietly pushing to divvy up production between Boeing and Northrop to get the deal moving. The Air Force, too, could decide that compromise is the fastest way out of the current mess rather than letting the fight drag on. That could also ease political controversy over the deal, which has become a flashpoint in the coming election. Critics of the Northrop-EADS bid dispute the companies' claim that their deal would sustain more U.S. jobs.
The stakes go well beyond the initial contract. The winning manufacturer and its subcontractors are likely to have an edge in bidding for the $100 billion the U.S. will eventually spend to replace the entire aerial-refueling tanker fleet. A cut of the current deal would help Boeing stabilize its slipping military business; moreover, other nations probably won't buy Boeing tankers if the U.S. doesn't. And for EADS, half a deal would give it a U.S. foothold—better, perhaps, than continued skirmishing amid uncertainty. Would Northrop now be willing to split the difference? If so, it's keeping mum. All three companies say they'll study the ruling before deciding on their next steps.
Any perception abroad that the U.S. is bending rules for Boeing could hurt projects such as the F-35 Lightning II aircraft, which the U.S. is building with help from Britain and others. "It would have very negative consequences on international programs," warns Robbin Laird, president of Arlington (Va.) defense consultant International Communications & Strategic Assessments. "F-35 partners are already nervous."
BW Magazine
The dogfight is only going to get worse between the two aerospace titans vying for one of the 21st century's most lucrative, delayed, and politically contentious military contracts. But when it's over, both Boeing (BA) and rival Northrop Grumman (NOC) could emerge as winners.
Back on Feb. 29 the U.S. Air Force had awarded Northrop—teamed with the Franco-German European Aeronautic Defence & Space Co. (EADS)—the entire $35 billion order for 179 tankers capable of refueling fighter jets in the air. But Boeing protested, and on June 18 the Government Accountability Office, a congressional watchdog, backed its claim that the Air Force skewed the contest in favor of Northrop.
Even Northrop didn't expect a slam dunk. But the unexpectedly strong ruling lashed the Air Force for making "significant errors" that "could have affected the outcome" of the competition. The Air Force now has 60 days to decide whether it will stick with its original decision or reopen the competition.
Whichever way the Air Force goes, the GAO ruling gives Boeing and its backers powerful new ammunition in their bid to gain the contract. "We're going to the mat," vows Representative Norm Dicks (D-Wash.). Their quest: Round up enough congressional votes to stymie funding for the tankers unless Boeing gets the deal.
But there is another way. Behind the scenes on Capitol Hill, there's talk of a brokered deal that would split the contract—an idea first raised in 2007 by Northrop and the Air Force but rejected by Boeing. A day before the ruling, Boeing Vice-President Mark McGraw, who heads the tanker program, told BusinessWeek that if a deal were offered, "we'd certainly be in listening mode." Now? McGraw won't say.
For years, ongoing turbulence over the tankers has thwarted Air Force attempts to replace its aging fleet. Alaskan Ted Stevens, the top Republican on a U.S. Senate defense appropriations subcommittee, is quietly pushing to divvy up production between Boeing and Northrop to get the deal moving. The Air Force, too, could decide that compromise is the fastest way out of the current mess rather than letting the fight drag on. That could also ease political controversy over the deal, which has become a flashpoint in the coming election. Critics of the Northrop-EADS bid dispute the companies' claim that their deal would sustain more U.S. jobs.
The stakes go well beyond the initial contract. The winning manufacturer and its subcontractors are likely to have an edge in bidding for the $100 billion the U.S. will eventually spend to replace the entire aerial-refueling tanker fleet. A cut of the current deal would help Boeing stabilize its slipping military business; moreover, other nations probably won't buy Boeing tankers if the U.S. doesn't. And for EADS, half a deal would give it a U.S. foothold—better, perhaps, than continued skirmishing amid uncertainty. Would Northrop now be willing to split the difference? If so, it's keeping mum. All three companies say they'll study the ruling before deciding on their next steps.
Any perception abroad that the U.S. is bending rules for Boeing could hurt projects such as the F-35 Lightning II aircraft, which the U.S. is building with help from Britain and others. "It would have very negative consequences on international programs," warns Robbin Laird, president of Arlington (Va.) defense consultant International Communications & Strategic Assessments. "F-35 partners are already nervous."
Boeing Valueline Outlook
Some investors are concerned about the effect of the surging price of oil on demand for Boeing’s airliners. As a result, when petroleum’s price soared $10.75 on June 6th, this stock’s price dropped $4.15, or 5.4%. We don’t take the surge lightly, since the weight of higher prices
for this key commodity seems likely to broaden the economic slump and widen airline losses. In fact, there have already been a few airliner-order postponements and cancellations for both Boeing and Airbus Industrie, its European competitor. Even so, a countervailing factor is that aircraft now on order are more efficient than current fuel guzzlers. And much of the company’s huge backlog is from foreign airlines, many of which are backed by their governments. As a result, we haven’t cut our share-earnings estimates, and continue to look for big gains in both 2008 and 2009.
There is a huge backlog for the 787 Dreamliner, which is still under development. At the end of May, management cited firm orders for 896 airliners from 58 customers. Boeing, relying on outside contractors for many components, had numerous production problems that resulted in
rescheduling deliveries three times. In early May, however, a company spokeswoman said there have been no further delays. Accordingly, the first delivery is scheduled for the third quarter of 2009, with the average delay figured by Boeing at 20 months. Currently, the company anticipates a production rate of 10 a month in 2012. This would seem to mean that any
cancellation would quickly be filled in by waiting customers, since at the 12-amonth rate, the backlog amounts to 7.5 years of production.
Boeing’s finances are very strong. Its ‘‘Cash Flow’’ in excess of current needs has permitted it to raise its dividend regularly, steadily pay down debt, and retire its common stock at a good pace.
This stock retains above-average capital gains potential over the 3- to 5- year pull. We assume good gains for worldwide demand for its commercial aircraft for years to come. And if the USAF’s decision not to award a new flying tanker contract to Boeing is overturned, our
projections would probably be enhanced.
Morton L. Siegel June 20, 2008
for this key commodity seems likely to broaden the economic slump and widen airline losses. In fact, there have already been a few airliner-order postponements and cancellations for both Boeing and Airbus Industrie, its European competitor. Even so, a countervailing factor is that aircraft now on order are more efficient than current fuel guzzlers. And much of the company’s huge backlog is from foreign airlines, many of which are backed by their governments. As a result, we haven’t cut our share-earnings estimates, and continue to look for big gains in both 2008 and 2009.
There is a huge backlog for the 787 Dreamliner, which is still under development. At the end of May, management cited firm orders for 896 airliners from 58 customers. Boeing, relying on outside contractors for many components, had numerous production problems that resulted in
rescheduling deliveries three times. In early May, however, a company spokeswoman said there have been no further delays. Accordingly, the first delivery is scheduled for the third quarter of 2009, with the average delay figured by Boeing at 20 months. Currently, the company anticipates a production rate of 10 a month in 2012. This would seem to mean that any
cancellation would quickly be filled in by waiting customers, since at the 12-amonth rate, the backlog amounts to 7.5 years of production.
Boeing’s finances are very strong. Its ‘‘Cash Flow’’ in excess of current needs has permitted it to raise its dividend regularly, steadily pay down debt, and retire its common stock at a good pace.
This stock retains above-average capital gains potential over the 3- to 5- year pull. We assume good gains for worldwide demand for its commercial aircraft for years to come. And if the USAF’s decision not to award a new flying tanker contract to Boeing is overturned, our
projections would probably be enhanced.
Morton L. Siegel June 20, 2008
Thursday, June 19, 2008
Boeing Wins Round #1
Boeing Statement on Tanker Protest Ruling
ST. LOUIS, June 18, 2008 -- Boeing [NYSE: BA] was informed today that the Government Accountability Office (GAO) found in Boeing's favor on a number of issues related to its protest of the U.S. Air Force's award of a $35 billion contract to supply the service with its next-generation aerial refueling aircraft -- or KC-X tankers -- to begin replacing the current fleet of KC-135 tankers.
In response to the ruling, Boeing released the following statement from Mark McGraw, vice president, Tanker Programs:
"We welcome and support today's ruling by the GAO fully sustaining the grounds of our protest.
"We appreciate the professionalism and diligence the GAO showed in its review of the KC-X acquisition process. We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."
ST. LOUIS, June 18, 2008 -- Boeing [NYSE: BA] was informed today that the Government Accountability Office (GAO) found in Boeing's favor on a number of issues related to its protest of the U.S. Air Force's award of a $35 billion contract to supply the service with its next-generation aerial refueling aircraft -- or KC-X tankers -- to begin replacing the current fleet of KC-135 tankers.
In response to the ruling, Boeing released the following statement from Mark McGraw, vice president, Tanker Programs:
"We welcome and support today's ruling by the GAO fully sustaining the grounds of our protest.
"We appreciate the professionalism and diligence the GAO showed in its review of the KC-X acquisition process. We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."
WASHINGTON (Reuters) - U.S. auditors urged the Air Force Wednesday to rerun its competition for a $35 billion refueling-aircraft order, upholding a protest by losing bidder Boeing Co (BA.N: Quote, Profile, Research) and breathing life into a Pentagon fiasco.
The Government Accountability Office found the Air Force made "a number of significant errors that could have affected the outcome of what was a close competition."
The contract was awarded on February 29 to a team made up of Northrop Grumman Corp (NOC.N: Quote, Profile, Research) and Europe's EADS (EAD.PA: Quote, Profile, Research), corporate parent of Boeing's passenger-jet maker rival Airbus.
GAO, a nonpartisan arm of Congress that reviews federal contract bidding disputes, faulted the Air Force for seven specific reasons, including "misleading and unequal discussions with Boeing."
The GAO's ruling is a recommendation to the Air Force, which has 60 days to respond. It was an uncommonly harsh rebuke to the service, which lists the tanker as its top acquisition priority.
Sue Payton, the Air Force's top weapons buyer, said the service was reviewing the decision and would spell out its response as soon as possible.
"The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability," she said in a statement. "The Air Force will select the best value tanker for our nation's defense, while being good stewards of the taxpayer dollar."
The GAO criticism may give Boeing another chance at what is likely to be one of the biggest contracts in Pentagon history, potentially swelling to $100 billion with follow-on orders.
The Government Accountability Office found the Air Force made "a number of significant errors that could have affected the outcome of what was a close competition."
The contract was awarded on February 29 to a team made up of Northrop Grumman Corp (NOC.N: Quote, Profile, Research) and Europe's EADS (EAD.PA: Quote, Profile, Research), corporate parent of Boeing's passenger-jet maker rival Airbus.
GAO, a nonpartisan arm of Congress that reviews federal contract bidding disputes, faulted the Air Force for seven specific reasons, including "misleading and unequal discussions with Boeing."
The GAO's ruling is a recommendation to the Air Force, which has 60 days to respond. It was an uncommonly harsh rebuke to the service, which lists the tanker as its top acquisition priority.
Sue Payton, the Air Force's top weapons buyer, said the service was reviewing the decision and would spell out its response as soon as possible.
"The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability," she said in a statement. "The Air Force will select the best value tanker for our nation's defense, while being good stewards of the taxpayer dollar."
The GAO criticism may give Boeing another chance at what is likely to be one of the biggest contracts in Pentagon history, potentially swelling to $100 billion with follow-on orders.
Tuesday, June 17, 2008
Boeing And Northrop Duke It Out
A $30 billion U.S. defense acquisition—one of the modern military's most lucrative, most needed, and most tinged by delay, controversy, and politics—now comes down to the assessment of a single arbiter: the head of a small, behind-the-scenes, 9-to-5 team of bureaucrats at the Government Accountability Office (GAO), the investigatory arm of Congress. This anonymous adjudicator is an unassuming, friendly man who travels to and from work at around the same time each day on a Northern Virginia commuter train.
The fortunes of three major contractors—to say nothing of a bevy of hundreds of global subcontractors and suppliers—hinge on the imminent determinations of this man's tiny secretive group, which has been holed up for weeks in a Washington office perusing thousands of pages of documents and data on numerous disks. Those proprietary documents detail the unexpurgated story of how, on Feb. 29, the U.S. Air Force chose Northrop Grumman (NOC) rather than Boeing (BA) to replace 179 refueling tanker aircraft.
Boeing, stunned by the Air Force decision, protested formally (BusinessWeek.com, 3/18/08) in March, complaining that the Air Force skewed the contest unfairly in favor of Northrop. The GAO, following the first step in any appeal of a federal contracting decision, is expected to say this week whether it finds any merit in Boeing's position. The announcement, among the business world's most closely watched developments this week, could be made any time between now and June 19. It might come in the form of a detailed report, or a single summary sentence.
The Air Force then may take a month or two deciding what, if anything, it will do as a result of the GAO's findings. Among the possibilities: a new competition for the lucrative award, the first of three for which the Air Force is expected to spend $100 billion over 30 years to replace its antiquated refueling tanker fleet. Such a competition could take place by next February, and permit Boeing to offer an aircraft modified in a different way, or even a different aircraft. In any event, the GAO tends to rule narrowly, basing its decisions on whether federal agencies comply with procurement regulations, so the long-awaited verdict is unlikely to signal an end to the matter.
The GAO might raise questions about the process that not only gives weight to Boeing's argument but questions how the military chooses what to buy and from whom. Boeing contends the aircraft chosen by the Air Force—a modified Airbus A330 made in France to be adapted and assembled in Alabama—is very different from what the Air Force said it wanted. Otherwise, say Boeing executives, they would have offered a modified 777 rather than a 767, which is smaller and can carry less cargo and fuel than the A330-based tanker. Boeing also complains about European subsidies that the company asserts gave Northrop/EADS a cost advantage.
"The Air Force says its process for picking the tanker was transparent and fair, but it sure looks murky to me," says Loren Thompson, a Lexington Institute defense analyst with close ties to the military. "It's hard to have confidence in a process that repeatedly confounds warfighters and technical experts." Thompson, once dismissive of Boeing's complaints, now views them as having possible merit.
Beginning or End of Competition
For Boeing and its backers, any GAO criticism can help. If Boeing's complaints are sustained, "we'll end up in a recompetition" for the contract, predicts Boeing Vice-President Mark McGraw, who heads its once sure-bet tanker program. But as uncertain as the GAO verdict is, the Air Force response to it is even less known. And without sufficient criticism from the GAO, Boeing supporters in Congress may be unable to muster sufficient votes to follow through on threats to withdraw spending on the tankers. "We'll listen to the Air Force throughout the process and take our position accordingly," McGraw says. "How they want to go at it and how the Congress weighs in will drive a lot of this."
Criticism of the Air Force for making a few small, insignificant mistakes could make it an uphill climb for any further action by Boeing, whose lawyers have contemplated a challenge to the U.S. Court of Administrative Appeals, or by members of Congress who have tried to force the Air Force to redo its competition for the tankers.
"If GAO finds minor errors in the process but nothing significant, this could be over, because I don't see how Boeing proponents in Congress will put together the kind of majority they need to block funding of the Northrop plane," Thompson says. "On the other hand, if major problems are identified, it's certain there would be a recompetition. And that would leave the whole award up in the air for another year." Aerospace analyst Paul Nisbet of JSA Research doubts a favorable outcome for Boeing. "I don't think there's enough to derail this," he says.
Much More at Stake
There's more at stake than the $35 billion contract. The winning aircraft manufacturer and its subcontractors will likely have an edge on the entire $100 billion replacement of the U.S. aerial refueling tanker fleet, and the military in other countries likely will favor the manufacturer as well. For EADS (EAD.PA), the contract could mean an all-important first step toward ambitions in North America—a threat to long-dominant aerospace player Boeing.
"The Boeing protest has less to do with the tanker than it does with EADS getting a toehold" in the U.S., says Scott Hamilton, who runs the Leeham consulting outfit in Issaquah, Wash. That means not only a toehold in the U.S defense business, but also a factory in Alabama that could easily be ramped up to build Airbus A330 passenger jets. That would give Airbus big relief on the euro-dollar exchange rate—and a competitive challenge to Boeing.
For now, both contractors are operating in the dark. Under terms of a protective order, even executives of the major corporations involved are barred from communicating with the GAO's procurement law division, which reports to the federal government's comptroller general, or from seeing many of the documents turned over to the office. Corporate lawyers are not supposed to share with their clients what they hear.
For the small GAO staff, whose caseload usually involves protests over smaller government contracts—two February, 2008, decisions, for instance, involved the use of appropriations for bottled water, and on the U.S. Forest Service's payment for light refreshments on "National Trails Day"—Boeing v. Northrop has proven unusually overwhelming. The chief arbiter assigned to the case has told associates of the heavy workload and of the many gigabytes of data on his computer.
The fortunes of three major contractors—to say nothing of a bevy of hundreds of global subcontractors and suppliers—hinge on the imminent determinations of this man's tiny secretive group, which has been holed up for weeks in a Washington office perusing thousands of pages of documents and data on numerous disks. Those proprietary documents detail the unexpurgated story of how, on Feb. 29, the U.S. Air Force chose Northrop Grumman (NOC) rather than Boeing (BA) to replace 179 refueling tanker aircraft.
Boeing, stunned by the Air Force decision, protested formally (BusinessWeek.com, 3/18/08) in March, complaining that the Air Force skewed the contest unfairly in favor of Northrop. The GAO, following the first step in any appeal of a federal contracting decision, is expected to say this week whether it finds any merit in Boeing's position. The announcement, among the business world's most closely watched developments this week, could be made any time between now and June 19. It might come in the form of a detailed report, or a single summary sentence.
The Air Force then may take a month or two deciding what, if anything, it will do as a result of the GAO's findings. Among the possibilities: a new competition for the lucrative award, the first of three for which the Air Force is expected to spend $100 billion over 30 years to replace its antiquated refueling tanker fleet. Such a competition could take place by next February, and permit Boeing to offer an aircraft modified in a different way, or even a different aircraft. In any event, the GAO tends to rule narrowly, basing its decisions on whether federal agencies comply with procurement regulations, so the long-awaited verdict is unlikely to signal an end to the matter.
The GAO might raise questions about the process that not only gives weight to Boeing's argument but questions how the military chooses what to buy and from whom. Boeing contends the aircraft chosen by the Air Force—a modified Airbus A330 made in France to be adapted and assembled in Alabama—is very different from what the Air Force said it wanted. Otherwise, say Boeing executives, they would have offered a modified 777 rather than a 767, which is smaller and can carry less cargo and fuel than the A330-based tanker. Boeing also complains about European subsidies that the company asserts gave Northrop/EADS a cost advantage.
"The Air Force says its process for picking the tanker was transparent and fair, but it sure looks murky to me," says Loren Thompson, a Lexington Institute defense analyst with close ties to the military. "It's hard to have confidence in a process that repeatedly confounds warfighters and technical experts." Thompson, once dismissive of Boeing's complaints, now views them as having possible merit.
Beginning or End of Competition
For Boeing and its backers, any GAO criticism can help. If Boeing's complaints are sustained, "we'll end up in a recompetition" for the contract, predicts Boeing Vice-President Mark McGraw, who heads its once sure-bet tanker program. But as uncertain as the GAO verdict is, the Air Force response to it is even less known. And without sufficient criticism from the GAO, Boeing supporters in Congress may be unable to muster sufficient votes to follow through on threats to withdraw spending on the tankers. "We'll listen to the Air Force throughout the process and take our position accordingly," McGraw says. "How they want to go at it and how the Congress weighs in will drive a lot of this."
Criticism of the Air Force for making a few small, insignificant mistakes could make it an uphill climb for any further action by Boeing, whose lawyers have contemplated a challenge to the U.S. Court of Administrative Appeals, or by members of Congress who have tried to force the Air Force to redo its competition for the tankers.
"If GAO finds minor errors in the process but nothing significant, this could be over, because I don't see how Boeing proponents in Congress will put together the kind of majority they need to block funding of the Northrop plane," Thompson says. "On the other hand, if major problems are identified, it's certain there would be a recompetition. And that would leave the whole award up in the air for another year." Aerospace analyst Paul Nisbet of JSA Research doubts a favorable outcome for Boeing. "I don't think there's enough to derail this," he says.
Much More at Stake
There's more at stake than the $35 billion contract. The winning aircraft manufacturer and its subcontractors will likely have an edge on the entire $100 billion replacement of the U.S. aerial refueling tanker fleet, and the military in other countries likely will favor the manufacturer as well. For EADS (EAD.PA), the contract could mean an all-important first step toward ambitions in North America—a threat to long-dominant aerospace player Boeing.
"The Boeing protest has less to do with the tanker than it does with EADS getting a toehold" in the U.S., says Scott Hamilton, who runs the Leeham consulting outfit in Issaquah, Wash. That means not only a toehold in the U.S defense business, but also a factory in Alabama that could easily be ramped up to build Airbus A330 passenger jets. That would give Airbus big relief on the euro-dollar exchange rate—and a competitive challenge to Boeing.
For now, both contractors are operating in the dark. Under terms of a protective order, even executives of the major corporations involved are barred from communicating with the GAO's procurement law division, which reports to the federal government's comptroller general, or from seeing many of the documents turned over to the office. Corporate lawyers are not supposed to share with their clients what they hear.
For the small GAO staff, whose caseload usually involves protests over smaller government contracts—two February, 2008, decisions, for instance, involved the use of appropriations for bottled water, and on the U.S. Forest Service's payment for light refreshments on "National Trails Day"—Boeing v. Northrop has proven unusually overwhelming. The chief arbiter assigned to the case has told associates of the heavy workload and of the many gigabytes of data on his computer.
Thursday, June 12, 2008
Boeing Dreamliner Back In The Game
Tanker Costs Don't Add Up For Air Force
Posted By:Jane Wells
Boeing confirms to CNBC that the Air Force has admitted it got its math wrong on how much Boeing's tanker would cost over the long haul.
Boeing says this validates what it's been saying for months in challenging the $35 billion contract award to Northrop Grumman and the European parent of Airbus. Reuters reports the Air Force now admits it was wrong in originally saying the Boeing tanker would cost $34 million more over its lifecycle than the Northrop/EADS entry. Instead, Boeing's plane will cost slightly less.
Talk about timing. We've got a week before the Government Accountability Office rules on whether Boeing's challenge is legit or not. Boeing hopes the math errors call into question the Air Force's entire credibility in awarding the contract. Maybe the Air Force just needs a new calculator.
Northrop Grumman sent me a statement CONFIRMING the Air Force made five math errors but dismissing them:
"The 25 year most probable life cycle cost (MPLCC) was a dead heat: $108.010B for the KC-45 versus $108.44B for the KC-767, a difference of $34m or 3/100 of a percent. The lower development and acquisition costs of the KC-45 were balanced out by the slightly lower operating costs of the less capable KC-767. Perfection, while an admirable goal, is rarely achieved in human affairs and particularly not in something as complex as the KC-X evaluation."
Even after correcting the math, Northrop says the two tankers are now basically the same price, adding that the Air Force chose the KC-45 for other reasons: better capabilities and combat performance (Boeing strongly disagrees).
Northrop says the bottom line is this: "Despite any minor inaccuracies in the process, the tanker providing the most capability at the best overall value is still the Northrop Grumman KC-45."
Fasten your seatbelts. It's going to be a bumpy week.
Posted By:Jane Wells
Boeing confirms to CNBC that the Air Force has admitted it got its math wrong on how much Boeing's tanker would cost over the long haul.
Boeing says this validates what it's been saying for months in challenging the $35 billion contract award to Northrop Grumman and the European parent of Airbus. Reuters reports the Air Force now admits it was wrong in originally saying the Boeing tanker would cost $34 million more over its lifecycle than the Northrop/EADS entry. Instead, Boeing's plane will cost slightly less.
Talk about timing. We've got a week before the Government Accountability Office rules on whether Boeing's challenge is legit or not. Boeing hopes the math errors call into question the Air Force's entire credibility in awarding the contract. Maybe the Air Force just needs a new calculator.
Northrop Grumman sent me a statement CONFIRMING the Air Force made five math errors but dismissing them:
"The 25 year most probable life cycle cost (MPLCC) was a dead heat: $108.010B for the KC-45 versus $108.44B for the KC-767, a difference of $34m or 3/100 of a percent. The lower development and acquisition costs of the KC-45 were balanced out by the slightly lower operating costs of the less capable KC-767. Perfection, while an admirable goal, is rarely achieved in human affairs and particularly not in something as complex as the KC-X evaluation."
Even after correcting the math, Northrop says the two tankers are now basically the same price, adding that the Air Force chose the KC-45 for other reasons: better capabilities and combat performance (Boeing strongly disagrees).
Northrop says the bottom line is this: "Despite any minor inaccuracies in the process, the tanker providing the most capability at the best overall value is still the Northrop Grumman KC-45."
Fasten your seatbelts. It's going to be a bumpy week.
Monday, June 9, 2008
Boeing Dreamliner On Time
MOSCOW (Reuters) - Boeing Co said on Monday its 787 Dreamliner would make its first flight in the fourth quarter of 2008, repeating the revised schedule for the new airplane's launch announced in April.
Dmitry Krol, director of communications for Boeing in Russia and the CIS, said first deliveries of the plane were scheduled for the third quarter of 2009, also as previously stated.
"There is no change to the schedule for the 787 that we announced in April, which has us achieving power on by the end of June, first flight in the fourth quarter of 2008 and first delivery in the third quarter of 2009," said Krol.
The company clarified its schedule after Mike Bair, vice-president of business strategy and marketing at Boeing Commercial Airplanes, said on Sunday the plane would fly "by the end of summer".
Bair was speaking to Reuters on the sidelines of the St Petersburg Economic Forum. He did not say that the schedule had changed.
The fuel-efficient 787 smashed early sales records for Boeing and is seen by some analysts as key to the company's financial future.
(Reporting by Robin Paxton; editing by Sue Thomas)
Dmitry Krol, director of communications for Boeing in Russia and the CIS, said first deliveries of the plane were scheduled for the third quarter of 2009, also as previously stated.
"There is no change to the schedule for the 787 that we announced in April, which has us achieving power on by the end of June, first flight in the fourth quarter of 2008 and first delivery in the third quarter of 2009," said Krol.
The company clarified its schedule after Mike Bair, vice-president of business strategy and marketing at Boeing Commercial Airplanes, said on Sunday the plane would fly "by the end of summer".
Bair was speaking to Reuters on the sidelines of the St Petersburg Economic Forum. He did not say that the schedule had changed.
The fuel-efficient 787 smashed early sales records for Boeing and is seen by some analysts as key to the company's financial future.
(Reporting by Robin Paxton; editing by Sue Thomas)
Thursday, May 22, 2008
Boeing Dreamliner 787 Back On Track
CHICAGO (AP) - Boeing Co. CEO Jim McNerney on Wednesday defended the company's reliance on overseas suppliers in building its 787 jetliner despite admittedly "big stutter steps," saying the new plane's innovations give the company a five-year lead over rival Airbus.
His remarks came as Boeing executives provided assurances to investors that the 787 program is sticking to the latest timetable after numerous delays over the past year.
Pat Shanahan, vice president and general manager of the program, reiterated that the first plane is on track for the "power on" milestone by the end of next month.
"We have made great progress since March and we're on track to make these commitments," he said at the company's annual investors meeting in Seattle, which was broadcast over the Internet.
Despite the reassurances, Boeing shares tumbled $3.95, or 4.6 percent, to $81.19 on Wednesday, hurt by the steep drop of stocks of its airline customers amid ever-rising oil prices.
McNerney said Boeing's new strategy of using outside contractors for the bulk of its airplane manufacturing needs refinement but will continue for future aircraft.
"We're going to learn from it, move on and do it better next time, because it's the right model," he said.
Fifty-eight airline customers have placed 896 orders for the much-anticipated 787. Boeing touts the plane for its greater fuel-efficiency potential since it's the first large jetliner to be built mostly from lighter, carbon-fiber composites.
But the Chicago-based company has lost credibility, and billions of dollars in expected additional costs and penalties, with three delays in the 787's delivery schedule that leave it more than a year behind the original schedule.
The initial test flight now isn't expected to take place until the fourth quarter, with the first delivery to All Nippon Airways targeted for the third quarter of 2009.
McNerney said that while there have been problems in carrying out the global supply chain strategy, the company is now working more closely with suppliers and removing the bottlenecks on its final assembly line, which got bogged down as Boeing employees had to tie up loose ends caused by suppliers.
The supply-chain glitches notwithstanding, he said, "We have gotten the innovation piece of it right. ... In fact, we believe the design innovations embedded in the 787 has given us roughly a five-year lead on the competition." Besides its fuel savings, Boeing says the 787 will be cheaper to maintain than planes of comparable size and will have passenger-friendly features such as bigger windows and a more comfortably pressurized cabin.
His remarks came as Boeing executives provided assurances to investors that the 787 program is sticking to the latest timetable after numerous delays over the past year.
Pat Shanahan, vice president and general manager of the program, reiterated that the first plane is on track for the "power on" milestone by the end of next month.
"We have made great progress since March and we're on track to make these commitments," he said at the company's annual investors meeting in Seattle, which was broadcast over the Internet.
Despite the reassurances, Boeing shares tumbled $3.95, or 4.6 percent, to $81.19 on Wednesday, hurt by the steep drop of stocks of its airline customers amid ever-rising oil prices.
McNerney said Boeing's new strategy of using outside contractors for the bulk of its airplane manufacturing needs refinement but will continue for future aircraft.
"We're going to learn from it, move on and do it better next time, because it's the right model," he said.
Fifty-eight airline customers have placed 896 orders for the much-anticipated 787. Boeing touts the plane for its greater fuel-efficiency potential since it's the first large jetliner to be built mostly from lighter, carbon-fiber composites.
But the Chicago-based company has lost credibility, and billions of dollars in expected additional costs and penalties, with three delays in the 787's delivery schedule that leave it more than a year behind the original schedule.
The initial test flight now isn't expected to take place until the fourth quarter, with the first delivery to All Nippon Airways targeted for the third quarter of 2009.
McNerney said that while there have been problems in carrying out the global supply chain strategy, the company is now working more closely with suppliers and removing the bottlenecks on its final assembly line, which got bogged down as Boeing employees had to tie up loose ends caused by suppliers.
The supply-chain glitches notwithstanding, he said, "We have gotten the innovation piece of it right. ... In fact, we believe the design innovations embedded in the 787 has given us roughly a five-year lead on the competition." Besides its fuel savings, Boeing says the 787 will be cheaper to maintain than planes of comparable size and will have passenger-friendly features such as bigger windows and a more comfortably pressurized cabin.
Wednesday, April 23, 2008
Boeing Takes Off
Boeing Reports Double-Digit First-Quarter Earnings Growth and Record Backlog
First-quarter EPS grew 43 percent to $1.62 per share as net income rose 38
percent to $1.2 billion
Operating margin expanded to 11.3 percent as revenue rose to $16.0 billion
Operating cash flow more than doubled to $1.9 billion
Backlog reached a record $346 billion
2008 EPS guidance reaffirmed at between $5.70 and $5.85 per share
2009 EPS expected to grow approximately 20 percent to between $6.80 and
$7.00 per share
First-quarter EPS grew 43 percent to $1.62 per share as net income rose 38
percent to $1.2 billion
Operating margin expanded to 11.3 percent as revenue rose to $16.0 billion
Operating cash flow more than doubled to $1.9 billion
Backlog reached a record $346 billion
2008 EPS guidance reaffirmed at between $5.70 and $5.85 per share
2009 EPS expected to grow approximately 20 percent to between $6.80 and
$7.00 per share
CHICAGO, April 23, 2008 – The Boeing Company’s [NYSE: BA] first-quarter 2008
earnings per share increased 43 percent to $1.62 as net income rose 38 percent to $1.2
billion and operating margin rose to 11.3 percent, driven by solid overall execution in both
its commercial airplane and defense businesses as well as lower unallocated costs (Table
1).
Boeing’s quarterly revenue rose 4 percent to $16.0 billion while its operating cash
flow more than doubled to $1.9 billion reflecting the strong operating earnings and higher
commercial airplane orders. Free cash flow* increased to $1.5 billion (Table 2).
Boeing reaffirmed its 2008 earnings per share guidance at between $5.70 and
$5.85. For 2009, Boeing expects EPS between $6.80 and $7.00 per share on strong
production program performance and decreases in R&D and pension expense.
Wednesday, April 9, 2008
Boeing - Flying Low
Boeing is expected to announce that its 787 Dreamliner has been delayed by 18 months, a setback that will cost the company billions of dollars in compensation to airlines, according to The Times in London website.
The Times in London said the American aerospace giant will admit that the revolutionary aircraft is unlikely to enter service until the end of 2009.
The Dreamliner has taken orders worth more than $150 billion. It was scheduled to enter commercial service next month but this initially slipped to early 2009 and has now been delayed again.
Boeing is also thought to be ready to postpone or even scrap one of the three variants of the aircraft to enable its engineers to focus on solving existing problems.
The delay is actually 6-12 months. (Tim)
The Times in London said the American aerospace giant will admit that the revolutionary aircraft is unlikely to enter service until the end of 2009.
The Dreamliner has taken orders worth more than $150 billion. It was scheduled to enter commercial service next month but this initially slipped to early 2009 and has now been delayed again.
Boeing is also thought to be ready to postpone or even scrap one of the three variants of the aircraft to enable its engineers to focus on solving existing problems.
The delay is actually 6-12 months. (Tim)
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