Boeing: Turbulent Times - [Business Breakdowns, EP.129]

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Sep 27, 2023

Jon Ostrower, founder and editor-in-chief of The Air Current, dives into the turbulent world of Boeing. He discusses the high costs of aircraft production, revealing expenses that can soar between $15 billion to $20 billion. The impact of the 737 MAX disaster on Boeing's strategy and operations is also explored. Ostrower highlights the long-term economic life of planes, lasting up to 30 years, and draws parallels between Boeing's evolution and Apple's journey in innovation. Tune in for insights into the future of commercial aviation amidst fierce competition.

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INSIGHT

Boeing and Airbus: Instruments of National Power

Boeing and Airbus are less like companies and more like extensions of their national patrons (US and EU, respectively).
They're instruments of soft power in a global competition for commercial dominance.

INSIGHT

Shifting Focus in Aerospace

The aerospace industry's focus shifted from "higher, faster, farther" to "faster, better, cheaper" with the jet age.
Lower operating costs (fuel burn, maintenance) are airlines' main concern, not performance.

INSIGHT

Boeing's Cyclical Business Model

Boeing's traditional business model involves riding demand waves, leading to production fluctuations and potential layoffs.
They primarily profit from building and delivering planes, with about two-thirds of the price paid on delivery.

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This is Zack Fuss, an investor at Irenic Capital, and today we’re breaking down Boeing. Founded in Seattle in 1916 by William Boeing, the company has produced thousands of commercial and military aircraft over the past century. It is an important national and global asset and one-half of arguably the most famous duopoly in business, alongside Airbus.

To break down Boeing, I’m joined by Jon Ostrower, founder and editor-in-chief of The Air Current. You can split Boeing’s business into three segments: commercial, defense, and services. For this discussion, we focus mostly on Boeing’s commercial business, which accounted for nearly 40% of its revenues last year. We talk about the cost and complexity of building new airplanes, how the 737 MAX disaster changed the business, and why the future of commercial planes may look radically different. Please enjoy this business breakdown of Boeing.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

(00:02:38) - (First question) - An introduction to the aerospace industry and Boeing's role in it

(00:05:41) - Boeing's business model today

(00:09:52) - How the aerospace industry settled into a duopoly

(00:12:30) - Costs associated with airplane manufacturing

(00:14:02) - The life expectancy of an aircraft

(00:14:46) - Dealing with the supply coordination problem

(00:17:39) - The Boeing and McDonnell Douglas merger

(00:20:51) - Problems Boeing has faced over the past five years

(00:25:44) - How leadership turnover has permeated through Boeing

(00:28:03) - Competitive headwinds Boeing can face

(00:33:10) - How Boeing will grow in the aerospace industry

(00:37:39) - Boeing's eVTOL strategy

(00:41:42) - What is impacting the profitability of the business

(00:43:38) - The biggest challenge facing the aerospace industry

(00:44:57) - Lessons learned from studying Boeing