Boeing is in a vicious circle

Seeing what’s happening to Boeing, it’s hard to stay silent. Falling revenues, and stock prices are in my focus as an investor. The story behind the scandalous 737 Max planes is interesting and disturbing at the same time as an avid aviation fan.

I already wrote about the Boeing scandal in August. I wrote “Boeing’s current situation, however, is more dire than it first seemed”. Since then, things only gone from bad to worse for the aviation company.

Revenues (and stocks) got hit really badly

During the summer we already knew that Boeing had to face serious losses due to the 737 Max scandal. The two deadly accidents had 346 victims. These and the grounding of the airplanes added up to billions of losses. But some weeks ago, the company disclosed their Q3 revenue and it was worse than many had expected. It has fallen 95% in the first 9 months of 2019. According to Business Insider, they also have to face billions of lawsuits.

Seeing this, it’s not surprising that the company’s stocks are stagnating, and are becoming rather volatile. Some analysts believe that prices may go further down before they have a chance to rebound.

Confidence — the most important thing of all was lost

But before a rebound can happen, Boeing will have to rebuild trust. This won’t be easy since it must be done in two separate ways. They will have to convince their direct customers (airlines) that they’re trustworthy, and it’s not a mistake to buy and use their planes.

Boeing will also have to regain the trust of the customers of said airlines. At the end of the day, passengers are the end-users, and they will have to board those flights. If they don’t (or do it in fear), airlines will not use Boeing planes. It’s a weird situation where a traditionally B2B company will have to consider the customers, too.

The importance of trust was also underlined in a new The Guardian article about how Dennis Muilenburg, Boeing’s chief executive, won’t resign after the scandal. This is an especially serious problem as more and more news are surfacing about how the company knew that the 737 Max may have problems, and how they tried to silence whistleblowers before (and after) the disasters happened. They are in a vicious circle: after all this, it’s hard for them to admit everything, but if they don’t admit anything, they’ll just further lose confidence.

Good for investors, bad for everyone else

I mentioned analysts who believe Boeing prices may fall further. I also work closely with one of them. We just had a conversation last week; he said that he believes prices would fall, before they can rise again. He also expressed his belief that the US will not let the company default, just as I wrote it in my earlier post.

So, the question is not really what will happen to Boeing on the long-term. It’s also a great opportunity for many: a well-prepared (and risk taking) investor can profit from this volatile situation. But everyone else loses: the company, the whole industry, and (most importantly) the passengers.

To end this rather harmful cycle, Boeing will really have to face itself. The sooner the better.

This post was first published on my personal blog at andrejsztojanov.com.