Facing the Crisis Aftermath: Boeing and the Airlines

Then there’s Air France-KLM, with two governments squabbling over bailouts and acting like they want a divorce.

By MC01, a frequent commenter on WOLF STREET:

On April 25, Boeing announced that the deal under which it would have bought an 80% stake in Embraer’s commercial aircraft division is off. According to the press release, “Boeing exercised its rights to terminate after Embraer did not satisfy the necessary conditions.” Boeing will pay penalties worth approximately $75 million and will wave all rights on the new turboprop regional airliner Embraer is currently developing.

Embraer Commercial had been valued at $5 billion when the deal was originally signed in 2019. But delays in getting the deal approved by antitrust authorities around the world (especially in Asia) and the present worldwide healthcare crisis have sunken its value. Was it wise for Boeing to spend billions of dollars in an M&A deal when it’s facing enormous challenges?

The Covid-19 pandemic hasn’t made the 737MAX fiasco go away. The aircraft still needs to be re-certified and fixed, and many airlines still haven’t negotiated compensation deals with Boeing. Costs are estimated to run at $19 billion. By comparison, developing the new 777X (in the flight and static test phases) has so far cost Boeing about $5 billion.

Boeing has already been urged by Akbar al-Baker, the Qatar Airways CEO, to develop a 777X freighter variant. In light of the high demand for freighters of all kinds in the present crisis and lack of interest by airlines for the passenger variant of the 777X (309 orders, of which 115 are from Emirates), Boeing had better listen to Mr. al-Baker.

Boeing is also reported to be working on two new aircraft: a modest upgrade of the venerable 767 (still in production as a freighter) and an aircraft dubbed “757-Plus,” which would be similar to the Airbus A321XLR. Neither is exactly bold, and neither has analysts nor airlines jumping up and down with excitement.

In the first quarter, Boeing delivered just 50 airliners, of which 29 were 787 and 10 were 767 freighters. These are not pretty numbers: By comparison in Q4 2019, the company delivered 45 787 alone.

The two chief causes for this fiasco were the stop in new deliveries to Chinese customers during Q1 2020 (they have since started accepting new aircraft again except for those airlines tied to effectively bankrupt HNA Group) and the shutting down of several key vendors around the world, especially Alenia of Italy.

Financials for Q1 2020 are horrible. Revenues fell 26% year-over-year to $16.9 billion. It booked a net loss of $641 million and an operating cash flow of a negative -$4.3 billion

This makes the recent bond offering by Boeing all the more stunning. Boeing was able to raise an $25 billion on security markets and has announced it won’t seek any more funds from the Federal government nor from capital markets for the time being. The details of these bond issues will be released this week, but it seems Boeing was able to sell several maturities, the craziest being a 40-year note with a 4.625% yield above Treasuries.

At least Boeing can console itself that domestic air traffic in China is picking up at a careful albeit steady pace, that demand for their 737-800 freighter conversion is white-hot, and that countries like Australia, Thailand and Brazil are cautiously increasing the numbers of domestic flights.

European airlines have no such luxury; the IATA (International Air Transport Association) estimated they will lose $89 billion in revenues in 2020. This is due to two chief factors.

The first is a 90% drop in traffic all over Europe since the beginning of the Covid-19 crisis.

The second is uncertainty. EASA (European Aviation Safety Agency, the counterpart to the US FAA) is supposed to have a set of post-emergency rules ready next week, rules that would allow airlines to restart some regular services at first and that should be progressively amended as we leave the emergency behind us. But these rules are not ready yet, and to make matters worse, the EU, Norway, Switzerland and other European countries still haven’t agreed on how and when to reopen their borders.

Preparing for a new set of rules requires time, money and effort. For example, airlines would need to adapt their pricing to reduced capacity to be still able to break even. The more these new rules are delayed, the worse the situation will become when airlines are allowed to fly again.

Airlines are using desperate measures to force legislators and regulators into action, such as SAS threatening to “cut its workforce by up to 5,000 full-time workers.” SAS has no intention of firing 45% of its full-time employees just like that; even Ryanair, a company notorious for poor employee relationships, is looking at a 10-15% workforce reduction at most right now. But this is a stern warning: the more the new rules are delayed, the more catastrophic the damages. If European authorities and national governments continue to waste time, the damages may be even more serious than SAS has threatened.

And what better symbol for this Pan-European chaos than the conundrum faced by Air France-KLM? The two airlines merged in 2004 but their partnership was never easy, and in recent years relationships soured as KLM kept on becoming more profitable while Air France has struggled to keep costs under control.

And now, the two halves of the airline group and the Dutch and French governments are squabbling over bailouts.

The French government has extended to Air France, and Air France only, a €7 billion emergency loan without first consulting with the Dutch government and even the KLM management. The terms of this loan are not clear but it has been reported Air France will have to pay back €4 billion by June 2021. This looks to be impossible even in the best-case scenario and raises all sorts of questions, questions that neither Air France nor the French government seem keen to answer.

Dutch finance minister Wopke Hoestra decided to escalate the matter by saying that if the French government will only bail out Air France, so his own government will only bail out KLM. The bailout package for KLM is being negotiated but is rumored to be a State-backed loan in the €2-4 billion range, and to come with some iron clauses, such as resuming “at least 80% of pre-emergency flights” by Q4 2021 and penalties in case the airline cannot become at least financially independent over the following 2-3 years.

The Dutch government owns 14% of KLM (like the French government owns 14% of Air France), and it’s well possible that stakes will increase in the future. But a split between the two airlines in case of an outright nationalization will have to be carefully negotiated: Air France is dependent on KLM for services such as IT and maintenance of several models. The Dutch airline has also set up a French low-cost subsidiary, Transavia France, after Air France’s attempts ended in embarrassment such as JOON, which shut down in January 2019.

As more and more parts of the world enter post-emergency or “Phase 2,” the need for swift and bold decisions is becoming all the more evident: the world will belong to those that can make those decisions. By MC01, a frequent commenter, for WOLF STREET

The megaships of cruise lines turned from a revenue-generating asset into an expensive-to-maintain nightmare. Read…  What U.S. Cruise Lines Are Up Against. And No Bailout Money

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  99 comments for “Facing the Crisis Aftermath: Boeing and the Airlines

  1. Joe says:

    Our Prime Minister in Canada has already getting ready to bail out the Canadian Airline Industry.
    If they don’t nationalize it, it will be a constant bailout. They have already lost a billion this year.

    • nicko2 says:

      Re-nationalized, air canada/canadian was government owned thirty years ago.

      • Joe says:

        He is hoping to restart the global trade and spending like crazy all over with free money and charging its citizens to borrow it. Imposed a gun law and natives are exempt from this new law.

        • Shiloh1 says:

          Chicago has very strict gun laws. Even with social distancing, 44 shot and wounded and 4 shot and killed this past weekend.

        • Harrold says:

          Gun controls don’t really help Chicago when you can cross the street and buy a gun.

        • nick kelly says:

          I guess the norm for social distancing, 6 ft, is still in range.

  2. Wisdom Seeker says:

    So, airlines need to raise prices in order to cope with reduced passenger loads required to mitigate the health risks of flying.

    Passengers must also absorb a second, hidden cost – the increased health risk of spending hours among strangers inside what is basically a super-spreading machine. (Adverse selection bias kicks in too – passengers manifests will be overpopulated with people who ignore all the precautions.)

    Basically ain’t nobody sane gonna fly unless it’s really, really worth it.

    Therefore demand for new aircraft is going to be really soft.

    But if only jet fuel costs would spike negative like oil futures did recently … if the fuel price were sufficiently negative, airlines could finally pay passengers for the hassle and peril of being on their planes!

    • MCH says:

      It’s insane what this little virus is doing to the world economy. I wonder if the Spanish flu was as devastating to the world wide economy in 1918 as this is, surely there are some comparisons.

      I wonder how much of the impact is accounted for by the force multiplier called globalization.

      • Gerrard White says:

        your language! it’s not the bug it’s the over heavy handed government stuff what is doing the doing

        look how in some countries the bug is barely there, Vietnam pop 100m, deaths zero

        you know what – this bug has got good logistics, it travels to spots where the locals did put out the welcome mat, no down payment, no utilities, just pay what you want when you can

        it’s settling in for a long vacation, get used to it sooner rather than later, and stop annoying him with hostile vaccine chatter which’ll never work just make him a worse house guest

      • Cas127 says:


        “if the Spanish flu was as devastating to the world wide economy in 1918 as this is,”

        That is a very good question.

        Wikipedia and Barro say yes,


        • MCH says:

          It would be interesting from a scientific standpoint to see what happens with a full lock down that suppressed the virus and then see what the true damage to the economies of the world is like. I suppose the one difference is that the ratio of working adults who might be able to return to work this time round is much higher, but then the economy is different from what it was then. So, still many differences.

        • char says:


          Information about the Spanish flu was suppressed. Many people who would have gone in quarantine didn’t because they didn’t know it was coming.


          You mean state enforced lockdown. Cause people will go into voluntary quarantine anyway and that is the bigger creator of economic damage.See Sweden where a lot of restaurants are closed even though there is no official lockdown.

    • Tim says:

      Actually, airflow and air filtering systems are pretty sophisticated in most wide bodied jet aircraft.

      It could well be possible to effectively manage virus airborne spread risk.

      But I defer to any engineers reading this.

      • Tim says:

        …and generally travel by sleeper trains in my own cabin anyhow…


      • People used to smoke on airplanes…

        • Tinky says:

          Yes, and countless crew members developed cancer as a result.

        • Tim says:

          Not easy to prove that the causality was the passengers smoking around them as opposed to they themselves smoking when not on duty…

        • Dan Romig says:

          Smoking on airplanes? Paul Westerberg of the Replacements, who’s sister was a flight attendant, had this to say:

          She don’t wear no pants and she don’t wear no tie
          Always on the ball, she’s always on strike
          Struttin’ up the aisle
          Big deal, you get to fly

          You ain’t nothing but a waitress in the sky

          Paid my fare, don’t wanna complain
          You get to me, you’re always outta champagne
          Treat me like a bum, don’t wear no tie

          ‘Cause you ain’t nothing but a waitress in the sky

          And the sign says, ‘Thank you very much for not smoking’
          My own sign says, ‘I’m sorry, I’m smoking’
          Don’t treat me special, oh, don’t kiss my ass
          Treat me like the way they do in first class

          Sanitation expert and a maintenance engineer
          Garbage man, a janitor and you, my dear
          A reunion flight attendant, my oh my

          You ain’t nothing but a waitress in the sky

          Thank you MC01 for this report, and thank you for the response to my comment in Wolf’s last post regarding Boeing.

        • second hand smoke says:

          Most people smoked in that era, just go watch an old movie.

        • VintageVNvet says:

          AB and others commenting above:
          Yes, we all smoked, or almost all; both my parents heavy smokers of cigs, and dad of pipe and cigars too; i started age 8, with the rules, could not open cartons, etc., but could help myself to either mom’s or dad’s, which i did, a lot.
          My 12th BD present from dad was my own pipe and all the gear for it, including tobacco, so I would quit using his, LOL.
          Stopped at age 32, so “only” 24 years.
          And BTW, both parents died young from smoking, et cetera.
          Helps to remember that cigs were included in K-rations, etc., to all the troops in WW2, and were 10 CENTS per pack on ship, PX overseas, etc., during the VN war.

      • Willy Winky says:

        Doesn’t matter – one of the main methods of contracting a virus is someone with the virus sneezes or coughs or touches something then you touch it and put your fingers in your mouth, nose or eyes.

        This is why the CDC highly recommends face coverings.


        Yet most governments are not recommending them.

        I do not anticipate many people boarding planes if Covid is not eliminated.

        And re China domestic flights – how many of those are flying near empty?

        Ghost Towns … Ghost Flights?

        • MC01 says:

          It may be interesting to know that domestic air traffic in Korea is picking up far faster than in China, albeit flight and passenger volume is a small fraction. Flights from the mainland to Jeju (a popular resort island) have literally exploded over the past two weeks.

          The present consensus in the industry is that domestic flights worldwide will pick up relatively fast over the Summer and Fall as individual governments release new set of rules putting an end to the present climate of uncertainty. International flights are another matter completely and we can only wait and see but both Emirates and Qatar Airways are experimenting post-emergency rules other may be interested in adopting.

          The biggest problem right now is Europe, chiefly because governments are still stuck in their confort zone, meaning refusing to even think about the future.
          To five an idea France, Italy and Switzerland still haven’t tackled the issue of trans-border workers, meaning people who live in France or Italy but cross the border every day to go and work in Switzerland. There are 56,000 of them in my region alone. As manufacturers in Switzerland have already started to re-open these folks are stuck in limbo: they have a job to return to but cannot cross the border because it’s closed. Kafka couldn’t have dreamed up stuff like this.

        • char says:

          Domestic air traffic in Korea? Jeju island and for people who don’t want to take the train between Seoul and Busan. Yes, the one that stops in Daegu. Exploding visitors to Jeju seeing that people can’t/won’t go to any of the nearby countries for vacation. I doubt you will see that in countries were domestic flights are a much higher percentage of total flights.

          Swiss/France/Italian boarder traffic will be solved by time. Give it a month and you can travel again from Portugal to Italy with a pitstop in Belgium. Obvious countries ruled by incompetent governments like Holland can forget about their summer holiday in Spain.

    • char says:

      New aircraft take years to deliver. By that time C19 will have been exterminated in he civilized world by public health policy and in the less developed world like Brasil an the US by vaccines.

    • polecat says:

      Just you wait ! Some hi-tech wunderkind engineer will unvail the ‘aero-placenta’ .. or some such, to fully encase the passenger in a bio-shield for just the kind of problem the airlines are facing.

      Big Bucks will rain hard!

      • WES says:


        When folks start arguing about whether the glass is half full or half empty, an engineer will say the glass is twice as big as it needs to be!

    • MC01 says:

      Hey, modern aircraft have exactly the same air filtration system as hospitals! Which given what we know on how the virus spread here in Northern Italy is not exactly encouraging.

      Joking aside the big problem both Airbus and Boeing have right now is the wave of deferrals that is hitting their order books. Using their force majeure clauses customers are moving deliveries due for 2020 and 2021 to 2022 and beyond. This means a lot of redundant capacity short- and mid-term, especially on widebodies: domestic flights are already slowly resuming in several countries but international flights are going to be in complete chaos until there are some well defined rules.
      And when many countries will realize they have ordered far far more medical supplies than they can adequately store (like we have already found out), demand for emergency freighter conversions will sink like the proverbial stone, meaning more widebodies will return to storage.

  3. Realist says:

    What about pilots’ certifications for different types of aircraft ? I have understood that those certifications have to be renewed once a year and if the pilots are grounded long enough, what will then happen ? I suppose the airlines won’t pay for all of their pilots’ renewals.

    • Paulo says:

      You just do recurrent training and go for ‘a ride’. All aircraft, both fixed wing and rotary require it and many if not most re-certifications are done in simulators and ‘in house’. Often, the training is contracted out to speciality companies. The more sophisticated the ac, the harder the exams and more rigorous are the ‘in flight’ simulated emergencies.

      The airlines pay for re-certification if they want pilots to work for them. No one has that kind of coin to pay for their own, and any company too cheap or shaky to provide training isn’t worth working for.

    • MC01 says:

      That’s a very good question, and a question thousands of pilots and cabon crews around the world would love to be answered.
      So far the EASA (Europe), FAA (US) and CAA (UK) have all granted extensions medical certificates and ratings (the extension to the commercial license that allows to fly different types of aircraft) but everybody knows this is just an emergency solution.
      Technically speaking one pilot could keep his license and all extensions valid by taking enough time on a certified “Level D” simulator, but these simulators are not merely expensive to operate but in many countries they have long been shut down as “non essential” and are being brought back on line only now.

      While several of these issues are affecting domestic operations in China, it needs to be once again reminded that in February already CAAC had sent airlines and commercial pilots a detailed plan for licenses, medical certificates, extensions, simulator time etc. It’s not perfect but it’s a whole lot more than what we have right now.

    • Vic says:

      I earned a half dozen type ratings on my ATP certificate (it’s not a license BTW) over a 21 year career with a major US airline. Only one at a time is in use – the one for the aircraft an individual pilot has bid for and is assigned to. The initial and recurrent training programs are quite complex.

  4. Just Some Random Guy says:

    People are starting to fly again. Slowly but surely getting back to normal. Below are TSA Screening Numbers for the past 4 Sundays. Yesterday was almost double the number from a month ago, which was the lowest Sunday this year. This is yet another in a series of data points that are all saying the same story. Everyone panicked and froze in mid to ate March. Stopped buying houses, stopped flying, stopped buying cars. Just stopped period and sat at home watching the news and scaring themselves needlessly for 2-3 weeks.

    Then when it appeared that the world wasn’t about to end after all, despite the MSM scaremongering, people slowly started getting back to their lives around mid April.





    • Wolf Richter says:

      Just Some Random Guy,

      Yes, but somehow you forgot to list how many screenings there were a year ago. So here it is:

      Sunday 5/3/2020: 170,254

      Sunday a year ago: 2,512,598

      Yes, travel numbers have ticked from almost nothing to slightly above nothing, but they’re still down 93.2% year-over-year!!

      So even if they multiply by a factor of 10 from May 3, 2020, the screening numbers will still be down 32%!!!

      • Just Some Random Guy says:

        Obviously it’s less now than a year ago. But my point is the worst is behind us. The numbers also didn’t tick up. They doubled in 3 weeks.

        • Escierto says:

          Saying it’s less is an understatement. How about less than 10% of what it was a year ago. Always trying to put lipstick on a pig but it’s still a pug!

        • MCH says:

          I think double of what is essentially zero is still zero.

          The worst (of C19) is not obviously behind us. You have people quarantined to a degree never seen before right now. But if it flares up again as states open, then it’s going to cause some pretty major negative reaction. That near zero number is going to go right back down to zero.

          Looking at this same coin, the problem is that even if everything on the planet opened up right this minute, and the curve continues to flatten without re-emergence of C19. The demand is just not going to be there, why?

          Because of the fear that has been gradually instilled over the course of the past two months. That fear alone is going to ensure that the air travel is going to suffer. If passenger volume gets back to a quarter of what it was pre C19 before the end of this year, it’ll be a miracle.

          Think about it. Would anyone want to risk sitting next to a total stranger for two to three hours, or longer if one going transcontinental or intercontinental? People will still have this image in their head of packed airplane with wailing kids, and sniffing adults. Good luck convincing people that this is no longer the case.

          I wouldn’t be surprised if a few of the smaller US airlines go away before the end of the year. It will be a tragedy, but it’s going to be economic reality.

        • second wave says:

          Behind ‘us’ is where you have to study the 1918-flu

          First wave was just the flu, on return in 1919 from the trenches the flu could kill in one day, and especially attacked the young&strong.

          All these pandemics in history have 3 waves, so ‘worst is over’ is meaningless in the first wave, when you see plummeting deaths in the second-wave, then you can talk about ‘its over’.

          For those who dispute the ‘second-wave’ in this case, just look at China, or Singapore, or Japan, or Korea; Everywhere they let people go back to ‘normal’, the pandemic returned. But what we really need here is a ‘war’ or some hell-hole where the virus can mutate and maximize its hosts. Then it will return to USA, just like it did in 1919 ( second-wave ).

        • char says:

          @Second wave

          Hellhole? You mean Georgia? It is already part of the US

      • Philip says:

        As far as risk from Covid 19 it is not just the airplane itself. How about the airport? The logistics of setting up the security screenings will be virtually impossible. Just the line up for one full plane carrying let’s say 330 passengers, at a one meter social distancing space, would be a third of a kilometre. Where is the space in airports to do this? It might be possible to screen less than ten percent of the regular numbers, but physically impossible to do so with anything remotely approaching normal numbers.

  5. MCH says:

    Airlines are going to be a mess for a while, over the weekend, Warren Buffet confirmed he dumped his stakes in the US airlines in April. But when there are jobs at stake, governments has to step in.

    I have seen mock up drawings on line of new economy class seats with essentially a plastic drop down around one’s head… I think this is going to take some getting used to if it is really deployed, and there is a part of me that wonders how much extra labor will be involved in cleaning such a cone of silence.

    • qt says:

      Don’t be in the Window seat. That will be a pain to get in and out unless they add more room between the rows.

    • Paulo says:

      Current air travel in this virus environment is a good reason to plan a road trip and sleep in the car. Overseas? Stay home. I wonder if ocean liners will make a return with private cabins and room service? Or long distance train travel with berths?

      We usually have quite a few Germans who come over here every summer. Not this year and not one is planning to come. I am sure this is the same all over.

      You know in the movie Jaws, the next day after the shark attack and no one will go in the water? The mayor is urging everyone to go swimming but…..

      Home looks better and better every day, imho.

      • Bob says:

        Thanks for the Jaws analogy. Without it I would never have understood what people not wanting to do something would look like.

    • Dale says:

      Air travel in the future should be done within the protection of your personal environment pod (PEP).
      The PEP will put you to sleep before liftoff, and bring you to full wakefulness after touchdown. All physical and mental needs will be met, including dream generators and exercise via electrical stimulation. You will be spruced up, scented, fed and ready to go.

      Capacity will be doubled, as the pods are stackable.

      And, should there happen to be an accident, no more digging around for body parts. Modular disposal.

      • MCH says:

        Heh, you mean you don’t even physically get on the airplane… you get into a pod at the airport, you are knocked out. Then loaded like cargo onto a 777 freighter piloted by robots to deliver you across the skies. Hey, the airlines will save a ton of money, no need for pilots or flight attendants, just software to monitor you. Just mechanics for the plane and gate agents to knock you out and wake you up.

        The pods can be stacked and racked like a bunch of coffins.

  6. 2banana says:

    There is really only one airline, IMHO, that everyone loves, that is well run, treats it customers/staff well and that nearly always makes a profit.

    Southwest Airlines (LUV).

    They just suspended their dividend and are trading at five year lows.

    This is the only airline that I would “roll the dice” with some mad money.

    • Harrold says:

      Of all the airlines, the 737Max debacle hits them the worst.

      Their all 737 fleet has quickly become an albatross around their neck.

    • char says:

      LCC who fly a320’s can cross the Atlantic with a321XLR’s. Before Corona it was expected that Easyjet & Wizz would use those XLR’s to enter the American market. Start an American sister company and start to compete with the American LCC’s

      Now everything is up in the air with C19.

  7. char says:

    Dutch & French governments own each 14% of AirFranceKLM. Not 14% of Air France or KLM. National airlines also need to be 50% owned by their nation nationals but i don’t know how Air France and KLM handle that. Than there is also Transavia, their low cost airline, which is original Dutch but has been operating also from France from 2006 and is almost completely separate financially

    • char says:

      Transavia France is financially and operational almost completely separated from Dutch Transavia. They share the website/sales office but those can be operated cooperatively in a future split.

      KLM is one of the biggest private employers in the Netherlands. For this reason alone it will likely be saved by the Dutch government. Another big industry in the Netherlands is flowers and to sell those all over the world you need airplanes. a second reason to save KLM

  8. Tim says:

    On a different note,

    How Sadly predictable it is that at the first whiff of economic grapeshot previously civilized nations become protective and start to bicker.

    It sets things neatly up for what will be round after round of escalating rhetoric that enables, and mark that word carefully, enables plausible excuses for bad decisions that are to come.

    • 2banana says:

      Just a FYI.

      Give them “a whiff of grapeshot”
      – Then Brigadier General Napoleon Bonaparte on dispersing/repulsing a Royalist rebel mob who, in 1795, took to the streets of Paris

    • MC01 says:

      As soon as the governments of tourism-heavy countries like Italy ( tourism is 13.2% of GDP), Spain (14.6%), Austria (15.4%), Portugal (19.1%), Thailand (21.6%) and Iceland (32.6%) realize the enormity of the crisis they have contributed creating by leaving their own countries in the most miserable uncertainty they will be performing feats of acrobatics worthy of Shaolin monks to mend international relationships and bring back at least a small part of that sweet foreign cash.

      Just give them enough time to emerge from under their beds and stop threatening their own citizens and they’ll become the most ardent supporters of “international co-operation”.

      • char says:

        Tourism in the EU countries is predominant inter European. Will come back as soon as countries have Covid under control

        Iceland, maybe they should fish and waive the Eastern Europeans goodbye. Employment problem solved.

        Thailand tourism is largely Asian and/or people who travel for many hours inside a plane. I doubt the second part will come back soon. Especially if they come from a underdeveloped country like Sweden. I doubt the guest from Korea, Japan and China want to be near them

  9. Stuart says:

    I’m sick of these corporations bleeding Uncle Sucker every few years. The prospect of nationalization rather than “ bailout “ must be considered. Must they impoverish all of us for the sake of a few already fabulously wealthy individuals ? What have we done wrong to deserve this ? If you think Pelosi or McConnell are on your side you are insane.

    • 2banana says:

      Why can’t the prospect of bankruptcy not be considered?

      • Wisdom Seeker says:

        Remember that chapter 11 keeps the business operating!

        It just frees the shareholders and execs from their misery and gives the bondholders a chance to do a better job.

        We should be doing far, far more Chapter 11s to clean house. Need to realign management incentives so long-term shareholder preservation becomes a thing again.

        Nationalization would be awful under current cronyist government paradigm. And probably under any other paradigm too. Incentives go all wrong.

        • Normansdog says:

          Wisdom Seeker….”Nationalization would be awful under current cronyist government paradigm. And probably under any other paradigm too. Incentives go all wrong.”

          That would be compared to the most excellently aligned incentives of the current paradigm?Shareholder value driven by share buybacks using borrowed money?
          Hmmm, I see.

        • 2banana says:

          A chapter 11 bankruptcy has to filed and approved at the federal level and typically:

          1. Wipes out the shareholders or

          2. Drastically reduces their ownership/wealth when exchanging for new shares

          And all this happens after the company’s stock has tanked.

          There is no “freeing from misery” for the shareholders.

          It is misery through the entire process.

          And FYI – top management is usually fired by the bankruptcy judge.

        • Wisdom Seeker says:

          @Normans: I’m thinking more of the incentives in world of the 1980s, where bankruptcy law actually gets used for everyone, there are no bailouts or too-big-to-fail, share buybacks are illegal, excess debt is likely to result in management expulsion in the next recession, Glass-Steagall preventing banking abuses… Maybe toss in management living in fear of bonus-clawbacks if performance falls within several years of their departure, a much higher effective tax rate on unearned income…

        • Wisdom Seeker says:

          P.S. Bankruptcies could become genuinely trendy, if shedding onerous debt results in organizations which can afford to charge lower prices – since they don’t need to shovel cashflow back to lenders…

        • Wisdom Seeker says:

          @2Banana – “freeing from misery” was tongue-in-cheek, like when Dr. Kevorkian might free a dying person from misery by killing them sooner… yes, shareholders get zero or nearly zero and execs typically get booted from the firm they (likely) mismanaged in order to give the firm a fresh start.

    • dr spock says:


    • dr spock says:


  10. Earl Smith says:

    I noticed that Boeing has a negative book value. Last year it was minus $14 a share. Who is the one propping up the company. This is before any government bailout.

    • Wisdom Seeker says:

      Negative interest rates – check
      Negative oil prices – check
      Negative book value – check

      I guess all that’s left is negative share prices and negative dividends!

      “Boeing today traded at $-10, as the CEO offered to pay investors to take an ownership stake in advance of their next dividend pay-up…”

    • Dan Romig says:

      If I recall correctly, a year ago Boeing stock traded in the mid $300 range with a PE in the high 30’s. That was after the two 737 MAX crashes no less???

  11. David Hall says:

    US airline passenger volume was down 95% recently. Many planes are grounded. A recent traveler reported no lines at TSA airport security screening.

    Boeing has seen order cancellations. The FAA has not approved a 737 Max stall prevention patch. The system is in efficient.

    • MC01 says:

      David: Transport Canada suggested last year an excellent solution to fix the 737MAX. Completely remove MCAS, the software which caused the two deadly crashes, and implement aerodynamic improvements and pilot training to deal with the aircraft tendency to pitch up at high angle of attack. This is the solution originally suggested to Boeing by Ray Craig, one of their senior and most trusted test pilots, which was passed over in favor of MCAS.
      Boeing has been wasting time and money tinkering with MCAS instead, and the only thing they obtained is that everybody has become aware of how poorly designed that thing is as new deficiencies are discovered on a seemingly monthly basis. That is because MCAS has gone from being a simple (and easy to de-activate) flying aid to an emulator of the 737NG flying characteristics.

      A $19 billion bill and still no fix is something that should have Boeing executives literally lose their sleep on how to cut their losses, not in the post-emergency world but right now. The FAA won’t help them by turning a blind eye because Congress is breathing down the FAA’s neck and, much more critically, right now is in no mood for backroom deals.
      The 737MAX owned by Boeing and used in the re-certification process returned airborne just yesterday, meaning work is ongoing, but how much progress is being made by throwing money and manhours at a deeply flawed system remains to be seen.

  12. BuySome says:

    There’s an infection among the animal cages. Park visitors are staying home and staff is being reduced. The zoo keepers are losing control and need to decide which animals to keep alive and which to kill. Predators under pressure will seek to get out and roam the countryside, terrorizing towns at will to feed their insatiable appetites. (Hey, hey..come out and play. You gotta keep ’em separated.) The heads of the aviation industry have never in it’s entire history acted like tame gazelles grazing on grasses. They want meat in quantity! Anyone got a dart gun to selectively administer the neccessary fluid and bring the rest of the animals back to a relative state of calm?

  13. Michael Engel says:

    1) Where are the new orders.
    2) Bombardier CSeries 300 proceed the Boing 737 MAX fiasco.
    3) Airbus impressive backlog will be shaved by the virus.
    4) On their books, Airbus open orders look impressive. On Mar 31 2020 it stood at : 7,650 ==> 6,220 x A320 // 529 x Canadian A220 // 323 x A330 // 569 x A350 // and 9 xA380.
    5) In the next few years demand for regional flights will exceed the demand for international flights.
    6) Jet fuel price plunged. Pilots on furlough. Old rusty planes will be plucked from their grave yards and enter service, replacing open orders on the books.
    7) Military orders will takeoff like a rocket on the launch pad.
    8) Boing will fly higher without the MAX. Boing produce planes and missiles for US & friends.
    9) Airbus military production in the back of the line. Rafale (Dassault) is invisible in comparison to F35.
    10) Canada will assemble US military air planes and bare bone Global /6000 AWACS.

    • Wisdom Seeker says:

      Not sure what you mean by “regional”. I’d figure many flights under 1-2 hours will be replaced by driving, on a road network that is suddenly not congested, by people who would now prefer 4-6 hours of germ-free privacy in their own “safe” vehicle, over 3-4 hours of airports and airlines plus even more in potentially-contaminated rental cars.

      • Just Some Random Guy says:

        2 hours of flying covers around 1000 miles. That’s 15 hours of driving, not 4-6. So really the choice is spend 4 hours on a plane 2 hours at the airport (one hour each way) vs spend 30 hours driving. You’re talking 4 days of driving with an overnight stay.

        That’s not a feasible alternative. Either people will fly or they’ll stay home. But they’re not driving instead.

        • Paulo says:

          Two hours of flying, BUT you forgot to add the trip to the airport, parking, 2 hour screening and security hassles, etc etc. No thanks.

          People could just slow down and enjoy the trip, and if not possible, always next year and plan for it.

        • Fly TSA says:

          Yes, as a pilot we used to have that joke.

          If your in a hurry drive. If you got time on your hands, then fly.

          If you have lots of time, then ‘fly’ going to the airport ( always traffic ), trying to find parking, paying for long-term parking, wait for flight, getting through TSA gauntlet, delays, equipment fails, arrival, baggage collection, transportation hassles, your 1 hour flight, always add’s 4 hours to both in&out of the airports. ( 1hr flight really 9 hr loss )

          Thus you only fly if, the drive is over 6-8 hours, which is about 300-400 miles

          People got around fine before ‘airplanes’, they didn’t become common until 1980’s for little-people, before that they were ‘business’, people flew when somebody else was paying.

          People can return quickly to pre-airplane mode, and survive just fine.

          The entire reason flying took-off was ‘cheap’ now they’re talking +80% increase to cover seat distancing, and that’s just the beginning. We all know that TSA was hell before, so it will even be a bigger hell in the future.

          Flying will most likely be something for the ‘rich’, post virus the GOV really doesn’t want the Plebes mobile.

        • Wisdom Seeker says:

          People are on the plane far longer than the flight time. Your “one hour each way” airport time is a gross underestimate. There’s boarding time, sitting on the runway not moving time, landing and taxiing time, debarring time. Those add up to a lot.

          There is absolutely a range at which it makes more sense to drive than to fly, and no it’s not 1000 miles. But most “regional” flights are far shorter than that, particularly in the Northeast.

        • Wisdom Seeker says:


          When I flew in February, I had to leave for the airport 2-3 hours before the flight time. Another 30-45 minutes to get off the plane, exit airport, pick up rental car. And the “flight time” quoted by the airline was about 30 minutes larger than the actual time in the air. IF the flight was on time.

          So today, if I wanted to fly 400-500 miles, like San Fran to LA, I’d be better off driving for 7 hours rather than taking 5 hours of my time to do the airport thing.

        • Just Some Random Guy says:


          I said 1 hour at the airport each way. I don’t know how you fly, but when I have a 7am flight, my Uber/Taxi pulls into the airport parking at 6am. Get yourself TSA pre check, best $100 you’ll ever spend, trust me.

          Even if it’s 90 minutes, you’re squabbling over minutiae. A 2 hour flight (3 hours with airport time) is the equivalent of 15 hours of driving. Most people won’t drive 15 hours in one day, they’ll stay somewhere overnight. Which means it’s more like a 25-30 hour trip each way including the overnight stay.

          3 hrs vs 30 hours. That’s the calculus, each way.

        • Just Some Random Guy says:

          If it takes you 5 hours to get from LA to SF by plane you’re doing flying wrong my friend. In the greater LA area there are 5 airports to choose from. And in the SF area there are 3 airports as well. No way on earth you need to leave 2-3 hours before your flight on either end.

          I lived in San Diego for a while and worked for a company in San Mateo. I would fly up for the day, often. I had it down to a science. Leave home at 6:30, in the office around 9:30-9:45. Then leave the office at 3, home around 6:30.

          Only old ladies spend time waiting in an airport.

        • VintageVNvet says:

          Some folks will continue to drive across the USA each year, as I have done 10 times since spring of 2016; and I would have left last month if this virus did not appear to be as deadly as it is clearly proving to be. Hoping to go in late summer or early fall, but ”we shall see.”
          While I have mostly driven lately because of a long standing problem with sinuses, etc., it is also true that in the ten years before that, I came home from flying, each time, with some sort of pulmonary challenge that sometimes took weeks to eradicate. In those days it was biz requirement to travel more frequently and more rapidly.
          Going forward, we will be traveling mostly to see family and friends all over USA, as well as the beautiful countryside, parks, forests, etc., most parts of which still having close resemblance to their original beauty.

      • char says:

        This will be forgotten in 2 months in most of Europe. I expect those plains to be filled. But outside regional to still suffer.

    • char says:

      3) And open slots will be used to build XLR’s

      4) They have already started building those 9 A380’s or they would have been canceled.

      6) Jet fuel is now cheap but with no new drilling etc. will it be cheap in 18 months?

      8) America does not have friends. It has lackies.

      9)Buying local military product is good for the economy according to military goods producers. Buying foreign is never good for the economy

  14. NewGuy says:

    U.S. airlines have already stated that they will be down sizing by 750-1000 aircraft. Unless Boeing comes up with a fix, you can bet your last dollar that the “parked” 737Max aircraft will be the first to go, and I doubt anyone will be buying anymore. Hopefully, this will be the end of the line for the Max for once and for all.
    The aircraft shouldn’t have ever been built. Boeing should have upgraded the 757 with new wings, engines, and cockpit like the 787. But airlines like as few different “type” aircraft to save on training and parts. Especially SouthWest.

    • WES says:


      The 737Max is what you get when accountants design airplanes!

      I hear Congress is planning a new “clunkers” program to buy airplanes that can’t fly anymore!

      • Paulo says:

        I used to work for a float airline that had a bunch of junker twin Beech around. Bushes started growing up through them. Good scrap. Next great invention idea? Mobile jet crusher. Cut the rig in bits with jaw mount and excavator thumb, then feed it into the crusher. Since they’re parked in the desert you could offer solar power smelting.

        Drop the engines for the special metal blades and parts, but the seats and plexi will just burn up in the melt.

  15. Ryan the Investor says:

    The good news is that Boeing wasn’t bailed-out by the government and instead they accessed the capital markets as they should.

    My concern is that China’s state-owned airline manufacturer COMAC is going to use the opportunity of Boeing being down to seize market share.

  16. Michael Engel says:

    1) A380 open orders : 8 x Emirates ; 1 x ANA.
    2) NYC to Chicago 850 miles ==> a 2 days trips. Add : one night hotel expenses, food, fuel and tolls.
    3) NYC to Dallas 1,600 ==> 3.5 days trip. When done, visit your Dr and mechanic. If the car is leased, 1/3 of your annual millage allowance is gone.
    4) Demand for regional flight will recover. Demand for international flights will stay low for years.
    5) Airlines will charge fee for safe spacing. Airlines will reduce the size of their fleet.
    6) Excess inventory will either be on the market for discounts, or dump in a graveyards.
    7) Scavengers will open new graves to trade.
    8) US isn’t an evil empire. US never carved China, Africa, or Europe
    to extract minerals or slaves. US transferred capital, jobs and knowledge
    to upgrade China and the rest of the world.
    9) We don’t drive on the left side of the road.

  17. bishie says:

    In China the government is in charge of deciding which planes to purchase for several airlines. So they can mandate purchasing COMAC aircraft for a portion of the fleet. Chinese airlines themselves would love to buy less types of aircraft.

    China Southern’s fleet:
    Plane Type In Service Parked Total
    Airbus A320 125 22 147
    Airbus A321 89 38 127
    Airbus A330 32 14 46
    Airbus A350 XWB 4 2 6
    Airbus A380 3 2 5
    Boeing 737 181 32 213
    Boeing 747 1 1 2
    Boeing 777 14 13 27
    Boeing 787 Dreamliner 16 9 25
    Embraer ERJ-190 5 6 11

    I’m sure they would love to operate either the 737 or A320 but not both. The government on the other hand likes seeing purchases from both Europe and America to ameliorate the trade deficit.

  18. nick kelly says:

    ‘US never carved Africa to extract slaves’

    Funny. Sort of.

    BTW: number one power fighting slavery: British Empire. Slavery Abolition Act 1833 freed about 800K in colonies.

    • Tonymike says:

      Yes, after only 300 plus years of chattel slavery. Not to mention, the colonies in India, South East Asia, the Opium Wars 1&2 (which the Chinese still teach their children today and is part of the 100 Years of Humiliation). So your point is?

      • VintageVNvet says:

        That’s correct as far as you go TM, but really just the beginning:
        NO country/ethnic group that I have heard of yet is innocent of ”slavery”or similar if you go back far enough into human history or herstory.
        While some in all countries/ethnic groups want only others to be named and shamed for slavery/genocide/ethnic cleansing — whatever you want to call it — sooner or later, when digging deeply, it certainly appears all modern humans are the products of some kind of intentional intraspecies selection/elimination process, at least as far back as any records/knowledge exists.
        I would like to hear from any of the many intelligent and well informed folks who comment on Wolf’s wonderful forum if any have information indicating or proving otherwise.
        BTW, I am NOT suggesting any ”Mea Culpa” is needed by anyone; on the contrary, I AM suggesting it is disingenuous for anyone from any human group to suggest it is only ”others” who have enslaved people.

        • char says:

          Innuit? Are they guilty of slavery? Slavery makes only sense in a farming culture.

  19. Mike says:

    Hi Wolf,
    How about American companies, such as American Airlines, SouthWest, Delta, Alaska, United airlines.
    Now Buffet has sold them in April and they are going down constantly so far, Should I sell? I am down 25%.
    Or should I keep hoping about the starting the flights (even with limited capacity) and wait for a rebound in 6 month?

    • Wolf Richter says:


      Whether or not to sell the airlines… well, let me just put it this way: it is very late in the game to be asking this question. The time to sell was before they crashed, not afterwards. Buffett sold during the crash. That’s an option too. You don’t want to sell at the bottom. But where the heck is the bottom? For some airlines, the bottom may be zero, for others it won’t be, and eventually, they’ll bounce. So this is a really tough call. The good options are no longer available.

Comments are closed.