A Longtime Aerospace Analyst Questions Boeing's Future

Joe Weisenthal (0:03)

Thank you.

Tracy Alloway (0:20)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:24)

And I'm Joe Weisenthal.

Tracy Alloway (0:26)

Boeing, have you, Boeing.

Joe Weisenthal (0:27)

Well, keep that in.

Tracy Alloway (0:29)

Don't keep that in.

Joe Weisenthal (0:30)

No, keep that in. Now you gotta keep it in.

Tracy Alloway (0:32)

I said before, I have a soft spot for Boeing, so that's why I'm mixing Boeing and Joe up. Okay, Joe, have you seen Boeing shares recently?

Joe Weisenthal (0:41)

Actually, I haven't looked at a while, except, you know, like we did an episode on Boeing about three or four weeks ago. So not good, yeah, and they have not recovered much, so not good.

Tracy Alloway (0:52)

So shares are down 20% since the start of the year, which is never a good sign when you lose a fifth of your market value in about six weeks. But probably one of the more damning things that has happened recently in terms of the share price is, do you remember when the company announced it was pausing 737 production for a day and the shares went up like 6%?

That seems bad when the market is rewarding you for not making your signature product.

Joe Weisenthal (1:22)

There's two funny things to me. And again, funny, you know, all the caveats that it entails. It's funny that Boeing has the reputation of being the company that's obsessed with its share price and pleasing shareholders.

Airbus doesn't. And of course, Airbus has a much better share performance than Boeing. It's done phenomenally well over the years.

And it's also just kind of crazy, setting aside competition, that Boeing is still nowhere near its peak in 2019 Despite what we know to be a booming global market for aviation. That's one thing we know. Pre-pandemic, post-pandemic, just absolute boom. You always hear about this expansion of new airlines in the Middle East, in Asia, and et cetera. And so we know that there's this huge general bull market going on, and Boeing doesn't seem to have capitalized on any of it.

Tracy Alloway (2:07)

Well, not just a booming market in commercial aircraft, which you're totally correct, as you observe, it has been a busy few years. But also, we've had so much defense spending.

And things like the IRA and things like that. And even with that happening in the background, America's premier aerospace and defense company just doesn't seem to have benefited from it. The share price has basically been flat for the past three years. Kind of amazing.

Joe Weisenthal (2:37)

And I think it's worrisome, right? Because setting aside the concerns of Boeing shareholders and they're probably pretty unhappy, like if the US wants to be a big manufacturing powerhouse and again, or be able to build more complex stuff domestically, it's really a bad sign that the sort of premier domestic manufacturer for global markets, one of only two companies that basically controls the commercial jet industry, like is getting worse at building plants.

Tracy Alloway (3:09)

Yes, absolutely. So we have previously recorded an episode on Boeing with our Bloomberg colleague, Peter Robinson. He's also the author of Flying Blind, the 737 Max tragedy and the fall of Boeing.

And we talked about what the Alaska Airlines door blowout actually meant for the company. And also the emphasis that Boeing seemed to place on financial performance and ironically, its stock price versus a culture of safety and engineering. But I feel like there is so much more we can say about this topic and so much more to dig into. And I'm really happy that we do in fact, have the perfect guest for today's episode.

This is the guy, the aerospace guy, back when I was covering airlines and aerospace in like 2006 He was the expert back then. And in 2024, almost two decades later, he is still the guy to talk to on aerospace. So I am very happy to say that we're gonna be speaking with Richard Aboulafia, again, a long time aerospace analyst and managing director at AeroDynamic Advisory. So Richard, thank you so much for coming on Odd Lots. It's good to talk to you again.

Richard Aboulafia (4:18)

Yeah, same here, Tracy. Thanks so much for having me on. Thrilled to be here.

Tracy Alloway (4:22)

You know, I should say in addition to being the aerospace guy and just an all round expert on this industry, you also have a reputation for telling it like it is.

And I think at this point, a lot of the cultural changes at Boeing are probably well known, but you pointed to a pretty interesting development that I will confess I hadn't even noticed. It happened late last year where the current Boeing CEO, David Calhoun, basically dissolved the company's strategy department. What was that about?