Re: What is going on here?
Well, the Peak Oil scam isn't over yet -- the mere threat of more hurricanes in the Gulf has driven oil prices up again. That horse might be a better investment than you know, Minuteman. I hope you invested in a buggy, too.
This AP article about the non-reaction of Boeing to seeing two of its best customers heading into bankruptcy leads me to believe that something global may be in the works for the airline industry...will America lose yet another major industry to outsourcing?
Why airline bankruptcies mean little to Boeing
SEATTLE - In most industries, news that two of your customers are seeking bankruptcy protection would be chilling, if not downright jarring.
But when you’re aerospace giant Boeing Co., and the customers are stalwart U.S. airlines, a week like the last one, while not exactly something to shrug off, is also far from a reason to panic.
Delta Air Lines Inc. and Northwest Airlines Corp. are the latest major U.S. airlines to head to bankruptcy court, hampered by high labor and fuel costs that make it tough to compete with more nimble discount carriers.
Both airlines are Boeing customers: Delta has 55 airplanes on order, and Northwest is set to be the first U.S. carrier to put the company’s new 787 airplane into service. But analysts say neither airline is key to Boeing’s most important growth plans, which center on winning customers in growth markets such as India, China and other countries that are fast developing a flying middle class.
“In the past, it would’ve been much more important, but as the roster of customers becomes more and more international, what happens here becomes comparatively less important,” said analyst J.B. Groh with D.A. Davidson.
Of course it’s never good news when a customer heads to bankruptcy court. But analyst Howard Rubel with Jefferies & Co. said another reason Boeing isn’t terribly affected is because worldwide demand for airplanes is continuing to improve.
“The ultimate customer is the flying public, and as long as you have more demand for seats than you do supply of seats, then the production of jetliners is going to go up,” Rubel said.
Delta Air Lines has not placed a Boeing order since 2000; the planes that are still to be delivered are left over from orders placed five years ago or more. Northwest had not ordered a Boeing plane in nearly four years before agreeing to buy 18 of the new 787s in May.
Other U.S. carriers that were once Boeing’s most prized customers also have fallen from prominence in recent years. United Airlines, whose parent UAL Corp. has been operating in bankruptcy since 2002, hasn’t placed a new order since 1999.
In their place are promising overseas carriers and U.S. discounters. Southwest Airlines, one of the few U.S. carriers to weather the aftermath of the 9/11 attacks, economic downturn and high fuel costs without major problems, remains a reliable customer for 737s, the only airplane the carrier flies. And when Boeing launched its new 787, it was with an initial order from Japan’s All Nippon Airways.
Boeing said it expects no immediate economic impact from the two bankruptcies. Spokesman Nicolaas Groeneveld-Meijer said the company has not heard from either airline that they plan to cancel any orders.
That’s partly because there’s no immediate time crunch. Northwest isn’t expected to get its first 787s until 2008, he said, and the airline and Boeing discussed the possibility of bankruptcy when they made the deal.
The jet maker also has already been working with Delta to reschedule orders in the face of that airline’s financial hardships, Groeneveld-Meijer said. Its airplanes are currently scheduled to be delivered through 2010.
But even if either airline does cancel orders, Groeneveld-Meijer said Boeing can easily fill any open slots with another customer who is farther down on the waiting list, and eager to get planes into service more quickly.
“Boeing is having a very good year regardless of that,” he said, adding: “It obviously would be extremely helpful if the U.S. carriers were in better health.”
Of course, Boeing isn’t delivering any airplanes right now — the Chicago company’s Seattle-based commercial jet plants are shuttered because its Machinists are on strike over issues including pension increases and health care costs.
Boeing spokesman Charles Bickers said the bankruptcies serve as a reminder that the company must keep labor and other costs down in order to provide a good deal for increasingly tight-fisted airlines, and beat competitors such as Airbus SAS.
“It clearly underlines how important it is for us to provide airplanes that deliver exceptional value,” he said.
Connie Kelliher, spokeswoman for Machinists District Lodge 751 responded by noting Boeing’s 2004 earnings.
“They are competitive; $1.87 billion after-tax profits is pretty competitive,” she said.
\"...if the American people ever find out what we have done, they will chase us down the streets and lynch us.” George H. W. Bush, Sr., 1992.