BA clocked in with another loss this morning, $425M after an income tax credit, so the financial wires are touting revenue, which was “better than expected” by a narrow margin. Mr Market is taking that top line beat, rather than the bottom line miss, and CEO assurances of increased 73 production rate, although production continues to be dogged by parts shortages and poor build quality, and bidding BA up by 6 points today.
Personally i would be looking closely at long term debt and interest cost. They borrowed heavily to keep building planes and retain skilled labor when planes could not be sold. Rising interest rates must be painful. Have all those planes been sold?
Don’t know about any individual planes but “Sales are up 28% year-on-year, including the recent bumper order from Air India for 190 737 MAX, 20 787s and 10 777Xs. The manufacturer now has an order backlog of over 4,500 airplanes, valued at US$334 billion.”
Can the company build them on schedule? The first major fubar that Phil Condit presided over, in the late 90s, was the company selling more planes that it could build. The company lost money, when it should have been making record profits, due to late delivery penalties paid to airlines, overtime labor, expediting payments to vendors, out of sequence assembly due to inability of vendors to make delivery. Are we sure that sales book isn’t as much vapor as a lot of high tech startup’s claims 25 years ago?
My concern: did BA promise such low pricing that they will never profit?
The more important question is how much flexibility is built into the delivery schedule? And if you are an airline at the end of a 4500 queue, what are your expectations? It would be hard to switch to Airbus as they have a 7,200-long queue.
The deal is worth $40 billion at list prices…