The Business of Boeing: How Did It Go So Wrong?

Hello and welcome back to this very special episode of The Market Maker podcast. This is the second part of our up in the air mini-series. Remember, go back, check out the first episode. Some stuff on SpaceX there you won't want to miss as well. But today we are taking a deep dive into the business model of one of the world's most famous or infamous companies, Boeing. And I would love to say, and this is when I slide in, this episode's been sponsored by Netflix. That is not the case. We I didn't actually I don't think even you and I registered that there's a new Boeing uh documentary on Netflix just dropping as we're releasing this episode. So hopefully actually it's going to be quite interesting to get into the nuts and bolts of the business of Boeing as it stands alongside some of the scandals that I'm sure the Netflix documentary will cover. So good chance for us to talk about the mechanics of a long-standing business in the public domain at the moment Netflix. So Stephen, why don't you give us a bit of a a whistle-stop tour, the brief history of Boeing, if you can. >> Yeah, absolutely. Thank you so much, Ant. And yeah, it's a brilliant opportunity to do this double double header up in the air, combining it with the Netflix documentary. By the way, if there are any inconsistencies from a fact-checking perspective between the documentary and our podcast episode, it's Netflix's fault. You know, we've double, triple, quadruple checked our facts. So please write into them and not us. But anyway, Boeing, what a fascinating company. And it's a great case study for so many business lessons, but also we can get really into the financial machinations and mechanisms that really really make Boeing tick, or maybe even the opposite. So let's start right at the beginning. So Boeing was founded in 1916 by William Boeing, who was captivated by the rise of aviation. These were very much fabric planes, I think they used to call them. And he started out delivering mail and then obviously the World Wars came along and really got into shift a shifting from wooden and fabric to metal aircraft and then supporting the government in a World War II effort. And I think it's it's really really important as we go through this episode to understand the hand in glove relationship between Boeing and the US government, the sovereign interest of the US government in the you know, in one half of the duopoly that is Boeing and we'll talk about Boeing versus Airbus later on. So really really came to prominence after World War II and made its name commercially. I think the regular person on the street would start to hear more about Boeing in the what you would call the jet age, right? So this is the late 1950s into the '60s and '70s. The kind of sexy time to be in the world of aviation, right? You know, to be a pilot in the 1960s and '70s touching down at these great exotic locations. There is something very authentically American about the Boeing experience and we all know the names of some of the aircraft, right? The 707 was their big breakthrough, but then famously the 747 which most of us would have flown in at some point and has only recently been discontinued after 40-plus years of manufacturing and therefore this company became a household name and it became a household name throughout the '60s, '70s and '80s because of its commitments to engineering, right? So, Boeing was making breakthroughs, creating new aircraft types, short-haul, long-haul, narrow-bodied, all of this different stuff. And out of its Seattle headquarters and engineering facilities, it was the place that you wanted to go. If you were an engineer and you cared about aircraft, Boeing was the number one, right? Attention to excellence above profitability, that is what we saw in the '70s, '80s, and '90s. And then it all started to change in the late or in the mid to late 1990s with a probably what we would now call an ill-fated merger with an another commercial aviation company called McDonnell Douglas. I'll leave it there for now. >> Okay. Well, that's a That's a good setup here. Uh cuz I remember seeing uh I think the initial documentary, the filmmaker Rory Kennedy. That was 2022 when Netflix originally did Downfall: The Case Against Boeing, and I think it very much centered on where you ended there. Um but let's just talk about the business in itself because I think like you were just explaining, a lot of people think Boeing and they think about the commercial side of the business. But I know that there's more than commercial. There's defense, space, security, other services that they run. So, how is this business segmented in that way? >> Yeah, it's a really really good question, and it's such an interesting business model. So much to kind of dive into here. So, as you right you mentioned, the business is formed of three sections, three operating segments. Commercial airplanes, so what we travel in day to day, defense, space, and security, and then global services. So, we'll take one by one. So, firstly, commercial airplanes or airplanes, 45% of the company's 2025 full year revenue. However, and that's, by the way, $42 billion. However, this unit makes a loss from operations of about $7 billion, right? So, you think the things that are being manufactured at great cost up in the sky, hopefully not falling out of it, that loses quite a significant amount of money. So, just bear that in mind. On the other On the flip side, there is a significant backlog for these commercial airplanes, right? So, remember the dynamics of this industry. Boeing receives orders from commercial airlines around the world, and effectively, they raise money to build these aircraft based on the commitments of these commercial airlines. So, one of the key metrics in the world of Boeing and Airbus is their backlog. How many planes are on order that they have not yet taken delivery of or that the commercial airlines have not yet taken delivery of, and therefore, they haven't yet got paid certainly 2/3 of the payment. >> Payment on delivery. And I was just looking at the the share price of Boeing. And it's a it's an interesting chart, cuz it it kind of picks up it breaks through a significant level really around 2013. It breaks through its all-time high of really to late 2006, 2007. And then it just rockets from like 120 to plus $400 in kind of 2019. And I just had a you know, I was looking pre-the-episode of some of the rationale there. And yeah, big feature of that is exactly what you were just saying. At the time, massive emphasis on this high-volume production 737 program and this massive multi-year order backlog that they had. Is kind of stock-induced share buybacks as well, engineering a bit of a reward for shareholders. >> Yeah, absolutely. There was there was definitely the kind of the share buyback, the shareholder primacy piece that maybe we'll discuss in a little bit. But the business fundamentals in the in the mid-2010s pre-COVID and pre-737 Max were really, really strong. You had a huge backlog. I mean, the backlog today is over $700 billion. So, that is that is remarkable, right? >> I I don't I'd love to know, I don't know if you have any stats or if you've read anything about it, of that, how much of it actually gets realized? So, what you know, I think Piers and I were looking at the uh order backlog for Core Weave. And they had a really neat bar chart, and it had well, what's pending in the next 12 months, 24 months, and then a longer-term commitments, like order commitments. So, you could kind of see that oh, it's actually quite positive cuz most of them are clustered they're committed in the next 12 months. So, it gives it a bit more confidence. With the 700 billion, for example, like how far out are some of these commitments? >> Yeah, it's a really, really good it's a really good question, and it it goes to the heart of the commercial airplane business model that Airbus and Boeing basically monopolize. These things take years and years and years to build. They take 10, 15, 20 years to to create, you know, a new airplane. Even just to you know, to do the R&D and to do the development and all of that stuff takes a long period of time. At that point they are starting to take orders and that order book will last 10, 15, 20 years out into the future. And there will be certain conditions by which that order can be broken. And again, on the on the on the on the part of the buyer, they can break it, but there will be a significant fee. And quite frankly, they will have their business model. There needs to be a COVID type moment to to to maybe break that backlog credibility. But this is, you know, 700 billion of backlog. That is a number that Boeing can borrow against and can set set share price expectations against as well. So you've got that as part of the business model, right? Or part of the shareholder story. You've You've then got the second division, which is defense, space, and security, which is 32% of the company's revenue. But again, it's very, very slightly loss-making. So at the end of 2025, revenues are 27 billion, but it made a loss of just over 100 million dollars. So again, we're thinking to ourselves we've got their two biggest divisions, commercial airplanes and defense and military are both loss-making divisions. So what the heck is going on? And it's answered it's answered by global services. >> So I was just about to jump in there. I was going to say, you said global services was the third division, but that the other two make explicit sense of like, okay, by title I understand what we're talking about. What What in heck is global services? >> So, the best way to describe global services is there's a business case study called the razor and blade business model, which many business students would have heard of. So, you sell the razor at a loss in order to keep people buying the blades, and that's where the profit comes from, right? And >> [laughter] >> the lifespan of a Boeing aircraft, about 30% and again, this is industry standard, it's not Boeing standard, about 30% of the value of the aircraft is realized when you sell it. And the 737 might sell for 50 or 60 million dollars. But then 70% is in the servicing and the upkeep and the maintenance that is a necessary part of that post care, that sale agreement. So, breaking down the service division, it's a $21 billion revenue division, but it's operating margins are 65%. So, earnings from operations are over 13 billion. So, when you tot it all up together, you've got commercial airplanes losing 7 billion, defense losing 100 million, negligible, but then the service department with 13.5 billion dollars of profit, it's almost that kind of recurring mandatory subscription revenue that investors tend to quite like. >> Yeah, my brain kind of gravitates towards percentages. So, I was just looking at your your notes here. So, the operating margin on the the services side 64.4% you said. So, just to recap then, in defense, space, and security, it's minus 0.5. Uh and then in the the kind of primary one people think about more, commercial airplanes, the operating margin is a loss or negative 17.1%. So, yeah, quite quite incredible. So, who who's buying these services then? I guess is is the question. If this is where all the money is to be made, and you mentioned there about this uh relationship with the US government. So, yeah, who who are the main contracts with here? >> Yeah, so obviously from from a commercial airline perspective, and we'll go and dive it a little bit into the duopoly and and and the fact that Boeing is so entrenched with its customers, you've got as Boeing a decades decades decades-long relationship with your commercial airline partners, the likes of Southwest or British Airways or whatever it might be. So, you know them extremely well, and that relationship is just so so so so tight. You are going to build your goal is to build the best spec plane, you know, most fuel-efficient, e- easiest to maintain, easiest to run plane in competition with the equivalent-size plane from Airbus. And you've got to price it competitively. Remember though, that this almost feels like a loss leader, right? It's the pricing of a Kindle at £30 so that people buy lots of Kindle books, right? The most important thing is what's called the MRO contract, the maintenance, repair, and operations contract. So, the list price for a 737 is $100 million per plane, per plane, but the average plane gets sold for about $50 million cuz because the relationships are so long-standing that you go, "Hey, British Airways, I'll give you a a juicy discount, but I'm not going to give you a discount on the service, right? The service and maintenance. And this is where, you know, this is the pilot training, this is the software upgrades, this is the modifications, this is the maintenance. It's such a captive market when you've got one of these planes that lasts for what, 25, 30 years useful life, then you've got a yearly contract to service these planes and you make a massive ass amount >> And in your notes, when I was kind of going through this in advance, you mentioned something called program accounting, which I've not heard about before. So, yeah, what is program accounting? What's that about? Why does it matter in the context of what we're what we're talking about here? >> Yeah, this is really, really weird and it's a little bit technical, uh but I think it's worth talking about because it helps us understand the financials of Boeing. So, what Boeing does, and this is unlike Airbus, by the way. So, what Boeing does is they use a thing called program accounting, which spreads its estimated average cost of a new plane being developed, manufactured, tested across all of the potential units that they are going to sell. So, for example, let's give an example of the 787, which is a great plane. So, the 787 launched, the total cost was about 25 to 27 billion dollars to create, manufacture, develop this plane, and that got spread, instead of that being pure R&D, cap you know, cap ex, whatever it might be at the front end, and then each and every individual plane that was created just had the cost of goods sold, the cost of actually creating that plane as opposed to developing that plane. what Boeing's done is it said, "No, that $27 billion to create the 787, we think we're going to sell 1,200 of them. So, we're going to divide that $27 billion by 1,200 and a portion that cost years out into the future, right?" So, it's almost a little bit like that kind of depreciation or amortization schedule. >> Can I ask then when they're constructing these forecasting these models, do they have to sanity check it with Wall Street analysts to sort of get a litmus test of You're just going to say I I'm assuming you can calculate the future demand by looking at historical demand and talking to customers to get an idea so it's an accurate as figures can possibly be, but how do you sense check that in reality? >> Yeah, it's a really good question and and this is why we have Wall Street analysts that are specialists at airlines but also specialists at the manufacturers as well. And these accounting quirks can really really >> [laughter] >> to a casual observer, you might not be able to read underneath the superficial accounting. But if I'm a analyst that knows a lot about this industry, I would be looking I'd be doing I'd be taking the numbers from Boeing's 10-K and going, "All right, I know that they do this program accounting method and they spread the cost out and when they realize that they're going to you know, they might make a bit of a loss, they'll potentially invent some more planes that they're going to sell out into the future so that $27 billion can be spread across more planes. I know what they're doing here. So, I'm going to take their numbers, but then I'm also going to look at look at this on a cost per plane basis and on a pure cogs basis, and on a most importantly, on a cash flow basis as well. Because it's all well and good saying that you're going to a portion that 27 billion of cost 10 years out into the future because because you are going to be selling planes 787s out into the future. You're incurring the cash expenditure today, right? So, you need and if I'm an analyst, I'm thinking cash flow, I'm thinking creditworthiness, I'm thinking how much debt do they need to take out to fund the development of the 787, you know, notwithstanding all of this accounting jiggery-pokery. And in fact, this got so significant that there was a potential SEC inquiry in 2016. It didn't come to anything, but basically to say, "Look, this program accounting thing, it doesn't make any sense, and you're just making up how many 787s you're going to sell to spread it across the future." So, >> [laughter] >> there's something going on there. >> So, so with the 787 on that particular model plane, given what we've you've just explained, what are some of the numbers there and how has that played out for them in developing the 787 in their forecasting? >> Yeah, so when the 787 launched, Boeing spent an average of about $400 million to build each of the first 40 or so Dreamliners against a plane that lists for roughly a quarter of that, i.e. it sold for $100 million. Cost typically fell about about 15% every time the production doubled. So, as you get these economies of scale, as you don't have to do so much testing and all of all all of that stuff that comes with the first few planes, you're getting cheaper and cheaper and cheaper cost of goods sold. But obviously the way that they account for it is they smooth, you know, they don't say we're incurring $300 million of loss per plane for the first 40. We're saying, "Actually, when smoothed across 1,300 planes, we're actually making a gross profit of $20 million per plane." Um and that's where accounting gets so complex and so kind of um opaque that you really need to go into details and be a bit of an expert. >> So, so on this point, then, following this through, if the cash isn't coming in from sales, how does Boeing pay for the development of these aircraft, then? Cuz, like you said, it's a tangible thing. You're going to need to get these things going and off the ground to start with to then uh take advantage of the economies of scale in the future. >> Yeah, so there's a number of ways that you pay for the development of a new aircraft, and they don't come across across very often, right? And we discussed the 737 Max, we discussed the 787. There There isn't a new plane coming out every year like a new model of car because it costs so much to develop. Three ways of doing it. Firstly, you can hopefully use the cash from the really, really well-selling existing planes that still sell for $60 million, but they only cost $30 million to produce. That's what happened with the 737. It was a real cash cow before the Max came along, hence why the share price went up. It was chucking off cash that was being reinvested into share buybacks, but also a new into new model development. Secondly, you can go out into uh the market and tap your existing shareholders. So, in 20 In November 2024, Boeing did a $22 billion rights issue, issuing new shares to basically shore up its balance sheet post COVID. They had a big strike in their factories, if you remember, uh around uh 2023 2024. So, they were facing a lot of headwinds. But then the third, and probably the most crucial one, is they raise money through debt. And it's so interesting. They've got about $55 billion of debt on their balance sheet. They've got a leverage ratio, a net debt to EBITDA to profit nearly six times. Which again, with my credit hat on, I like leverage ratios under three times. Even though they've got this $700 billion order book, a leverage ratio up at six times is really, really quite concerning. And I just put a little uh graphic of Boeing's credit rating. It's Moody's and S&P credit rating from the late 1990s, through December 2025 in our notes. And you can see the decline of the company through the credit rating decrease. So, it started off in 2000 as a double A company, almost the best you can get on on the S&P. By December 2025, 25 years later, it's a triple B minus, which is one stage above junk. This is like one of America's great companies. And it has gone from on a Moody's basis, it's gone from A1 to A2 to A3 to BA1 to BA2 to BAA3 to BAA3, and you're almost you're almost in the doldrums. >> But hold on, hold on. Isn't this a bit unfair? If we were to look outside of Boeing and outside of the sector, hasn't the world in the last 25 years moved to be more debt fueled in terms of how companies fund themselves anyway? >> Yeah, I think that's right. And I don't think that this triple B minus credit rating that S&P has given and the and the BAA3 that Moody's has given is just a result of the fact that they've got six times debt to EBITDA. Because they've got a very strong balance sheet, they've got this big order book, they are a profitable company. It's you've got to take into effect the other things that have been going on in Boeing. The >> [laughter] >> the safety issues, the things that the Netflix documentary is probably going to cover quite nicely. >> Okay, well, look, let's put this in a bit of context. You mentioned duopoly earlier. So, let's talk industry dynamics. I guess what I'm interested in, and this is a lesson for I guess a rule of thumb for analysis or investing, whether you're doing it professionally or for yourself, which is don't just accept the truth that someone tells you. I.E. Someone tells you it's a duopoly. Obviously, it's Airbus and Boeing. Now, okay, that's my assumption. That's why I understand superficially because that's what I see and experience when I bought a plane. How true is this? And how did it arrive to just being two? And I know as well there's always lots of um tit-for-tats about America or North America versus Europe as well in this this sort of race for airspace, if you like. So, yeah, how true is this duopoly factor? >> Yeah, it's pretty true. Airbus and Boeing control over 90% of commercial aircraft manufacturing. And even more than 90% when it comes to the mass transit airplanes that me and you fly on every so often. There are smaller players, especially in the yeah, again, in the private jet category in the smaller aircraft or the more niche category, but it has been a history a corporate history or a industry history of consolidation over the last 50, 60, 70 years. Back in the 1950s, there were lots of different manufacturers all doing it their own slightly different way, but then during the kind of move to the jet age and mass transportation through air travel, the sheer importance of economies of scale really, really started to bite. So, economies of scale, not just in the sense that if you are producing 100 airplanes, it you can spread the cost of the development of that airplane across 100 airplanes as we've discussed previously. So, much better to do that than only to sell five or 10. But also, you've got economies of scale in terms of your relationships with the commercial airline providers. And the commercial airlines are the ones buying the planes. These commercial airlines, they don't want to have to deal with six or seven or eight different plane types. They want Ideally, they would want one manual, one set of instructions, one maintenance guide. They've got the option of two. Any more than that, and you're getting extremely complex from a mechanics from a ground transport, from a airport perspective. And then the third part is you've got the kind of sovereign interest. Boeing is so wedded to the US, and Airbus is so wedded to the EU, and they are the sovereign manufacturers. So, it is possible that another major carrier will come along, and there are some not carrier, sorry, a will come along. And we're seeing some moves coming out of China. But other examples, so for example, uh Bombardier, which had the backing of the Canadian government, kind of modeled along modeled along modeled along and ended up ended up getting bought by Airbus because it just couldn't hit the scale and couldn't get the support that it needed to develop a mass commercially viable plane. So, it is this weird you don't get too many duopolies in the world. Sometimes you get monopolies. More often you get more competitive markets, but there are so many interesting market dynamics here that lead Airbus and Boeing to be these two great hulking beasts that are swapping percentage market share with each other across long haul and short haul and wide-bodied and narrow-bodied. >> Do you think there would ever be a case that China or I guess it's China could penetrate this market? We've had like BYD come in and really excuse the pun supercharge the EV market with taking over market share from Tesla. I was reading in the FT this week how a what they called a pesky Jordan copycat dribbled around Nike in China. And you wouldn't believe this. There's a There's a basketball store that's become insanely popular in China and it's basically the Jumpman logo. It's It's almost exactly the same except his hand's not up, it's down. And Jordan's tried to I Jordan Nike to combat this, but they've just It's just eaten into their share. What are How does this duopoly hold? So, just cleanly list for me like what are the factors here that stop or put a necessary high barrier to entry that keeps it a duopoly. Okay, let's take the Bombardier C Series as an example. So, again, backed by the Canadian government, this C Series was the equivalent of a 737. It's, you know, can hold 150-200 passengers, something like that. Development costs were supposedly about $3 billion just to get this plane into a manufacturable position. They ballooned very quickly to over $6 billion. The Quebec government injected over a billion dollars for a 49.5% stake, the sovereign interest, and Ottawa added a big loan as well. Then Boeing filed a trade complaint, this is very important, alleging that this is an unfair subsidy, and the US subsequently slapped a 220% tariff on the C Series. So, what hap- what happened? Bombardier had to had to basically give the development of the C Series for basically peanuts to Airbus because they were the only other one that could manufacture at scale, so cut the costs of development without having to rely on subsidies. So, when it comes to something like China, yes, they might be able to create a commercially viable domestic manufacturer selling into China. But, at significant levels of subsidies, I think not only are they going to be, you know, a tariff question, but there's also going to be a you cannot fly this airplane in our sovereign territory, in our space, right? >> [laughter] >> Um and we have jurisdiction over what goes on directly above us, and we're going to decide that you fall foul of of jurisdictional kind of grant. And I I was looking at some timelines in the R&D side of how long does that actually take to go from like the artist's drawing board and prototyping from from scratch. And it it's around 7 to 12 years, which such a long time, billions of dollars, so it's such a huge amount that that engineering complexity. So, maybe we could pivot and talk about what really was the predominant feature, I guess, of the first Netflix documentary that came out, which was really focused on you kind of it feels like you've had this period of real um the company flourishing during that '60s jet boom, but it's really the focus then turning to when it went from engineering first, it was like the epicenter of uh the highest levels of engineering quality, to then becoming a business. And you mentioned there about that infamous merger that happened in the late '90s. So, let's talk about that. How did that merger come along? What happened to the business to create such a pivot fundamentally in its culture? >> Yeah, so this was the 1997 merger with McDonnell Douglas, which is a $13 billion acquired the company, but in practice, the McDonnell Douglas finance first management led by this guy Harry Stonecipher, who later became Boeing's CEO. And he is an absolute piece of work, right? So, the single most quoted line about the culture shift uh was from Stonecipher, and he said, "I want to make Boeing so that it's run like a business rather than a great engineering firm." And that, in the same way as Welch with General Electric, sowed the seeds of that company's downfall with its financial engineering viewing the company as a conduit for shareholder value. This is exactly what happened from the late '90s into the 2000s, represented very clearly by the 2001 move of the company's headquarters from Seattle, where it's been since day dot, you know, really strong community. Think about the amount of pride that Seattle and the state has in housing a company like Boeing. They're moving to Chicago, moving the headquarters to Chicago, so that the finance heads are closer to New York and where the money is, but they are, importantly, disassociated, dislocated from the engineers. So, the dictats come from Chicago saying, "We need to cut costs." And spread this culture of literally doing things with a, you know, with a really, really strict cost control, making sure that things are done quickly as opposed to right, correctly from an engineering perspective, taking these shortcuts, trying to figure out how they can be the darling of their customers by cutting costs and trying to, you know, trying to make life easy and cheap for the customers, but at the expense of safety. >> So, did the culture compound because, as we said earlier in the conversation, the share price was going up from this point onward, it would seem. So, was management almost getting complacent cuz it was getting rewarded by Wall Street? And so, you start taking more and more leaning into the strategy. But as we just said, the R&D for these planes, a new plane, takes 7 to 12 years. Coincidentally, the share price then from when they came over till when it starts to go a bit wrong starts to play out. >> Yeah, and this is this is such an age-old problem. It's important to incentivize its executives with a combination of salary and a little bit of skin in the game, a little bit of share share upside. However, when that becomes an oversized element of a performance-related pay package, then you're going to have the tail, which is the share price, wagging the dog, which is the business. So, between 2013 and 2019, where and you rightly said that the share price more than tripled, Boeing spent about $43 billion on share buybacks. Share buybacks decrease the number of shares in circulation, increasing the earnings per share, usually sending the share price higher. Now, it was more than the cumulative profit over that period once dividends are included. Notably, Boeing's annual buyback spend in this window, about $79 billion $729 billion a year, was about the size of the estimated extra cost of building an all-new 737 replacement. >> [laughter] >> So, if they had just stopped buybacks for 1 year, yes, maybe the investor shareholders would have been a little bit annoyed, but they would have they would have held onto enough money to do the 737 Max properly instead of just trying to kind of create a very very cheap and dirty upgrade. >> So, with the 737 Max, they obviously garnered a huge amount of press attention. I think most people are aware of probably what happened, but maybe it warrants just a bit of a recap. So, what were some of the issues then that started to happen with this particular model? >> Yeah, so it the problem was they tried fitting really, really heavy engines on the existing 737. Um and that in order to to increase the fuel efficiency and make it go further and therefore reduce the cost of this new aircraft. They were competing with the Airbus A320 Neo, but they didn't want to spend a lot of money totally building a ground-up airplane. One of the problems with that is if you put these very heavy engines onto a plane that wasn't designed for them, they have there are certain physics problems which result in the nose of the plane uh shooting up and then nose diving. So, they implemented this piece of software called MCAS, which is the infamous MCAS, which is basically if the plane started um if the nose of the plane started going up, the software would reconcile and it would point the nose back down. Fine. But, they also wanted to save money by claiming that um pilots wouldn't have to be retrained because it's ostensibly the same as the 737. So, in this aftercare relationship with the commercial airlines, it's basically saying, "Look, you know, this is the same plane. You don't need to be retrained." So, none of the pilots heard about the MCAS system. And they even lobbied successfully to get the MCAS system not included in the user manual. So, when inevitably the two 737 Maxes that very, very tragically crashed very, very soon after they were they started flying in 2018 and then in 2019, uh the Lion Air flight and the Ethiopian Airlines flight. The pilots didn't know about this MCAS system precisely because Boeing was trying to do it on the cheap. They were trying to satisfy the cost constraints of their clients and trying to get around legislation or regulation. And obviously it cost not only absolute tragedy for for many hundreds of families, but also the 737 Max was grounded and the company lost billions of dollars and their share price was eroded. All of the gains that they made during the 2013 to 2019 era were pretty much erased. >> Yeah, and not forgetting then COVID hits. Absolutely devastates airline demand. That order backlog, I'm not sure what that would have looked like, but I'm sure it got reined in substantially. So compounding these issues and then obviously there's that infamous one in Jan. I think it was beginning of Jan 2024 when the door plug blew off a 737 Max Alaska Airline mid-flight. Can you imagine just being sat mid-flight and the door flying off. I mean, that started to then trigger uh all the whistleblower reports, things about everything we've discussed, the claims of continued poor quality control. Interestingly, looking at the share price, I was just having a look at Airbus's share price cuz whilst Boeing has reclaimed its low, so when it went through this peak period and I think it was obviously you remember when we all got sent home, you're not allowed to leave, it was like the midpoint of March of 2020, they bottomed out their share price. It was around a hundred uh dollars Boeing. They're now trading at 225. Airbus, they hit a low of around well, sub 50. They're now trading north of 200, almost at record highs for Airbus. So, yeah, interesting there that we we basically doubled in Boeing, but we've gotten a lot more in Airbus over that same period. They've they've kind of made hay while the sun is shining, it would seem, to the detriment of of of Boeing. But, with I think it's often it's easy to be, I guess, somewhat fed the narrative. And certainly this week is a case in point where Netflix are coming back with the second episode second episode here. Uh this one this latest one was due to the whistleblower reports that have come out. And so, is it right just to look at this as it is a good genuine case study of shareholder returns versus long-term engineering discipline and investment, as you said. But, isn't there some good things as well that might have happened between you can't just be an engineering firm forever and not sell any planes and make any money because that's not going to mean that more engineers can get jobs and make cool things. So, what is it on the flip side that we should be at least cognizant of that perhaps management were able to bring into this business. >> Yeah. I think it's very, very hard to have a totally riskless business. I think that's worth saying. And the airline industry is almost completely riskless, and that is such an unbelievable feat. The concept of building >> [laughter] >> an airplane at this scale, this complexity, the supply chains alone are kind of five or six companies deep. These companies not only employ thousands of people, but also employ tens tens and tens of thousands of people through their supply chains. So, the sheer fact of these two airlines these two manufacturers existing and being able to do what they do in order to create pretty riskless air travel is quite remarkable. Let's just say that. However, standards were significantly lower than they should have been in an environment where the regulatory framework did set out the state of affairs, like what should be best practice. So, what's happening now is CEO Kelly Ortberg, who was appointed in August 2024, is, I think, saying and doing the right things. Really, really focusing on the core business, really focusing on safety. And there's that classic business um classic business play that you might do if you can see a structural problem within a business and you want and you know that there are loads of other derivative problems, but you can try and identify the one single problem that represents the entire culture. So, this is what Kelly Ortberg's doing. Saying, "Look, there will not be one single point of failure or one single failure across any part of the production process. And if we get one, we're failed, right? So, it's returning back to that simple metric that defines the culture of the entire organization. The metric is not, "Let's get the share price to 300." It's, "Let's make sure that we do not incur a single point of failure and we will be rewarded based on that single metric." And I think that's the that's the positive story to this. I mean, again, the airline industry, sorry, the airline manufacturing industry, it's still buoyant. It's still you know, we still want to fly. We still want to fly and we just need really responsible managers, CEOs, companies to do it for us. >> On the balance sheet then, I've talked a few times about the share price and how it compares from the past and also against its main competitor. But what are some of the other figures that we should be aware of on how this company is performing right now that have stuck out to you on the balance sheet? >> I mean, the picture's pretty rosy for Boeing, all things considered, notwithstanding some of the comments that I made before about the the amount of debt and leverage ratio and things like that. So, as I mentioned, 715 billion on the order book, massive backlog. Its revenue was up 30% year-on-year. So, it's bounced back quite significantly from the grounding of the 737 Max. There have been significant disposals. So, selling They sold Jeppesen and Digital Aviation Solutions to private equity firm Thoma Bravo for $10 billion and they acquired their main supplier, Spirit Aero Systems, which used to be part of Boeing. And it's rebrought them back into the fold for quality assurance processes. They've also diver- They've also divested their autonomous uh flying aircraft department, which is made up of Wisk, Sky Grid, and Insitu to Archer Aviation, as we discussed. And the share price has gone up. So, it's again up at $230 a share. Yeah, again, trading private price earnings multiple of, well, 85 times, but that suggests that earnings are relatively thin on the ground as opposed to the bullishness of the investment community. So, again, it's I wouldn't say that this is now an opportunity to get stuck in and buy shares in Boeing. I'm sure there's a big, big multi-year turnaround, but the fact that they can make so many mess-ups, so many mess-ups, and still have a backlog of $715 billion of airplanes. >> [laughter] >> That is why, ladies and gentlemen, you want to be part of a duopoly. >> All right, cool. Well, look, that was really insightful. And actually, when we first tabled this idea of Boeing, I was like, "Boeing? Is that Is that going to be interesting enough?" But then, actually, the business case learnings from it, in addition to a lot of the focus on it as a business to really understand it when we're getting all of this media attention around this new Netflix documentary, really insightful, Stephen. So, thank you very much. And if anyone has any comments or questions, things like that, as usual, do let us know. >> And there going to be people out there that know more about airplanes than I do. So, please do put it in the comments. You know, this is an opportunity for us to learn as well as you guys. >> Good stuff. All right, thanks, everyone. Take care. See you next time. >> Thanks, Sam.