This is what happens when you let the accountants run the business.
First the research goes. Then the product engineering drops. Then there's mass layoffs. Then the whole thing falls apart.
To an accountant, a drop in costs is as valuable to the business as a rise in revenue. To everyone else, this is obviously not true. Risking future profits to cut current costs is a great move according to an accountant. For everyone else, it's corporate suicide.
Edit: I realise COVID. But that's the excuse, not the reason.
No, this is how Boeing has always operated. It's a cyclic industry. Google "boeing employment by year". The charts are practically a sine wave. "Hire 10,000 when demand is high, lay off 10,000 when demand is low" has been how they've operating since WWII.
There are many issues with Boeing management today (I used to work there so I love flaming them as much as anyone), but it's hard for me to imagine how any aircraft company could avoid this. All aerospace employers are laying off (or furloughing) workers by the thousands:
> Boeing, which has been struggling for the past year with the safety of its 737 Max jet, has spent over $43 billion buying back stock over the past decade.
I mean, that kind of makes sense. But instead, why not hire 5,000 when times are good, stash away the rest of the cash, and then just keep all the great people you have when business is down?
It seems like retaining people instead of hiring up a bunch of new people and possibly losing some of your best people would be a better approach.
Sure, the other guys might get ahead of you a bit during the boom times, but you'll get a good jump during the bust and be much better positioned to take advantage of the next boom.
> No, this is how Boeing has always operated. It's a cyclic industry.
Do the cyclic layoffs generally occur right when they're supposed to be building hundreds of planes? I think what's unusual about this round of layoffs is that it was caused by all their orders being cancelled.
If Boeing isn't alarmed by this situation -- if they chalk it up to an historic pattern -- I think that in itself is a sign of bad management.
No this is not how Boeing has always operated. Boeing had a great engineering culture for most of its' history. A fundamental shift happened around the time that the company merged with McDonnell Douglas, a merger that was shepherded largely by the Department of Defense. Around this time began the "Financialization" of Boeing. The following is a good read on the shift within the company and how that new culture enabled the Dreamliner and the 737 Max debacles.
Has anyone written about how exactly the acquired company (McDonnel Douglas) was able to take over the acquiring company? Sounds like it would be an interesting story.
I also wonder if there are similar accounts of the same happening in other companies.
When a company seeks to acquire another company, the executives of the target company are sometimes promised and given a disproportionate share of management roles in the reorganized entity as enticement to grease the acquisition. The alternative is more expensive payouts. And of course, no matter which approach is taken, cash will be tight post merger so there'll naturally be an emphasis on cost cutting and "synergizing", which McDonnell Douglas executives were well practiced in, likely drawing favor from the board, despite that it was still 2/3rds Boeing post merger.
Also, despite the narrative, it may very well have already been the case that Boeing's culture was going down the gutter, its acquisition of McDonnell Douglas a reflection of that rather than the root cause.
EDIT: Here's a 2002 article that suggests it was all of these phenomena--disproportionate leadership roles, a claim to cost control expertise, a skittish board, and evolving business strategies. https://www.seattlepi.com/business/article/Hard-nosed-Stonec... Some former McDonnell Douglas executives, like Boeing President and COO Harry Stonecipher, were well placed to take control when the inevitable cash crunch happened. Stonecipher replaced the Boeing CFO with a GM executive. See also this contemporaneous 1998 article describing the same event: https://archive.seattletimes.com/archive/?date=19980715&slug... That article says it was Stonecipher and the board chairman, Phil Condit, who forced the CFO out for his overly conservative accounting. Condit, AFAIU, was also CEO at the time and had been CEO of Boeing prior to the McDonnell Douglas merger. In fact, Condit led multiple acquisitions before MD, which suggests to me he and Boeing were already following the "acquire rather than innovate" playbook.
Yes. There's was a good article on this recently. I've provided the original URL and outline URL to get around the login wall:
>In the eyes of many Boeing employees, McDonnell Douglas executives seemed to do disproportionately well out of the merger: Many were given senior positions following the acquisition, with the company’s head, Harry Stonecipher initially appointed chief operating officer and holding more than twice the number of shares in the company as Condit, who remained CEO. Stonecipher and John McDonnell, formerly the chair of McDonnell Douglas’ board, were now the two largest individual shareholders of the merged companies."
In a 2007 interview, Ron Woodard, the former president of Boeing’s Commercial Airplane Group, bemoaned the changes the merger brought with it. “We thought that we’d kill McDonnell Douglas and we had it on the ropes,” he said. “I still believe that Harry outsmarted Phil and his gang bought Boeing with Boeing’s money."[1][2]
Airbus cut 2,500 jobs in February.. I don't know how many more they cut since then. The reality is that the commercial airline industry is in a freefall and it's nobody's fault.
I think it would be more accurate to say this is what happens when you let the shareholders who are too far removed from the business itself run the business. Those are the people who'd like a company to be a simple growing-asset in their portfolio, who specifically don't want to be bothered with its nuances or long-term health, and who have the leverage to impose their ill-informed will on everyone else.
I have a pet theory that a large portion of the decay in our society can be traced back to the layers of abstraction between stakeholders and the things (and people) they have power over. Usually this kind of thing doesn't happen before a company has gone public.
If you're interested in corporate governance, you might enjoy reading the book "Pay without performance"
One of the points it makes is that shareholders have very little power in practice, as even if you own a million dollars of Apple shares, that's only 0.00007% of the company. Not exactly enough to force through a motion on your own.
And if you think you'll build up a coalition to get a majority? Good luck doing that when you can't even find out the names of other shareholders.
Minority shareholder lawsuits? They're actually a negligible force; rare, unlikely to succeed, and low impact even when they do.
And that's without getting into 'preference shares' that grant CEOs outsized voting rights.
The book argues management can neglect shareholders' interests with impunity for these reasons.
Well there are two kinds of public shareholders, right. There may be a small number who own large enough shares to bother attending board meetings and voting, and then there are the millions with pensions, 401ks, index funds, etc. I think you're talking about the latter, who have the same issue but a slightly different version of it. In their case, the "ill-informed management" comes down to "price goes up, buy, price goes down, sell". Through share price they wield an extremely blunt version of the same weapon.
This is almost worse, because it very explicitly cares only about the short-term price. It's also a much harder problem to solve, because you can't just tell those people "think long-term and ethically when you're exercising your impact on the marketplace!". No matter how ethical they may be as individuals, most of them probably don't even know which companies they have stakes in, much less whether those companies are heading in the right direction!
I think there’s a third class: Institutional investors like CalPERS or NYSLRS. CalPERS has something like $300B in assets. When they talk, companies listen.
While they might be implicitly in your first group, attending significant meetings AND ensuring long term growth are primary responsibilities.
> it very explicitly cares only about the short-term price.
There is no short term price in stocks. Stocks are valued at their perceived long term value. If shareholders suspect a company is sacrificing the long term for the short term, they're going to dump the stock until the price of it drops to reflect that.
This also implies that if you can reliably detect that a company is eating its seed corn before everyone else does, you can make a mint shorting it.
> There is no short term price in stocks. Stocks are valued at their perceived long term value.
Hogwash. Pretty much every company on the S&P 500 dropped 30% around March. Did their perceived long-term value change 30%? I doubt it. I think most people were fully aware that most companies in the S&P's 10 year value wasn't going to change much; certainly not 30%. Yet, it dropped 30%. And then the next month it has risen back up to about 10% of its all-time high. I don't think people seriously thought that Apple, Coca-Cola, Pepsi, etc. suddenly dropped in value 30% and then suddenly rose 20% (yes, I know, technically it was more). If you can have swings of +/- 30% over a period of two months, I don't think the value is reflecting the long-term prospects.
There is both short-term AND long-term pricing in stocks. "In the short-run, the market is a voting machine. In the long-run, the market is a weighing machine." Ben Graham
The short term price theory requires that anyone selling at those short term high prices is selling to someone convinced that prices will go higher in the future, i.e. that you've tricked them.
Price volatility is an indication that either economic conditions are changing rapidly which affects the long term prospects, or that people are very unsure about what the long term prospects are.
It is not an indication that companies are being rewarded for eating their seed corn.
BTW, years ago, I knew a CEO who believed in manipulating the accounts to boost the short term at the expense of the long term. He made the mistake of telling the press he was doing this. The stock immediately tanked.
If the short term pricing theory was correct, the stock would have risen.
Then we have companies like Amazon, who explicitly say they are sacrificing short term profits for long term growth. The result? The stock price has soared to incredible heights.
Hogwash. Pretty much every company on the S&P 500 dropped 30% around March. Did their perceived long-term value change 30%?
Double hogwash. That pricing reflected that people suddenly needed cash right now and was irrespective of what anyone thought about long term value. I will bet most of the sellers bitterly regretted it but saw no option but to sell at whatever price they could get because they had urgent immediate needs.
Yes, one good way to think about this was that there was very little change in the value (fully discounted long term etc.) of stocks but a large change in the price (current exchange rate with other participants facing temporal constraints) of cash.
Right, that's my point: prices don't perfectly reflect long-term value. You give an excellent example of why the currently price might not reflect long-term value, which I need to remember for next time!
Your example is hogswash. Absolutely, the perceived long term value dropped 30% as people feared a million deaths (with lockdown) and dead bodies piling up outside hospitals across the country (with lockdown, and not just New York City). The stock market is rising now that people realize the pandemic, while still bad, isn't going to be as bad as those predictions. Our perception/understanding of the pandemic has rapidly changed.
Indeed - but brundolf laments about the lack of shareholders "bothered with [Boeing's] nuances or long-term health" and having only a single one-bit message is not conducive to nuance.
Or who don't even care about the long-term health. Extract all you can today and dump the remains. Having a company that remains healthy and prosperous for generations is not an outcome that some investors seem to be optimizing for.
On the one hand, from a systems perspective, this is obviously true.
But I wonder at what point you have to draw the line and quit excusing any and all behavior as the result of misaligned incentives, and simply hold people morally and ethically accountable for the choices they make?
I'm not excusing it, I'm only being pragmatic. It's well and good to push people to be more ethical, but relying on that trait is a separate question.
The human conscience doesn't do very well with abstractions. The further removed someone's actions are from the damage caused down the line, the weaker that moral signal gets. If we want to improve our society, we have to be realistic about these things and design our institutions to buttress against them.
Certainly, but shaming and shunning are interpreted by the human conscience as damage in very real ways. You're not wrong, but I think modern sensibility has such an adverse reaction to using shame as a deterrent that we refuse to call things out as shameful.
Sure, it only works if the people in question care about your opinion, but building consensus on what acts should be shunned only takes about a generation and a half. Segregation, dog fighting, the list is long. If we really think this is bad for society (and I do) then shrugging and talking about incentives isn't the way forward. Especially in the absence of a mechanic to actually change those incentives.
We absolutely rely on people to act ethically even with incentive systems. Every incentive system is prone to abuse. Also, people are motivated by different incentives. These often boil down to their own ethical/moral values.
>But I wonder at what point you have to draw the line and quit excusing any and all behavior as the result of misaligned incentives, and simply hold people morally and ethically accountable for the choices they make?
Your statement is contradictory, incentives are what hold people accountable.
> I have a pet theory that a large portion of the decay in our society can be traced back to the layers of abstraction between stakeholders and the things (and people) they have power over.
My pet theory is a specific instance of yours: MBAs wielding spreadsheets (and, more generally, analysts wielding databases) is the abstraction layer.
Were it up to me I'd personalize all liability, including legal. No more corporate fines. Fines levied against corporations should come directly from the personal fortunes of shareholders and legal malfeasance should always result in prison time for the decision makers, even if it's as little as a single week in jail.
Would anyone dare touch a stock market if they were personally responsible for liabilities of companies they invest in?
Particularly in the case of stock indexes - where a single company with a $xxT poorly written contract could wipe out the entire index and everyone who held it.
Proportionality. If you own one tenth of one percent of the stock you should have one tenth of one percent of the liability. No liability equals no responsibility equals no integrity. Being an amoral company should be just as likely to end in disaster as being an amoral person.
Imagine some middle manager in some S&P 500 company approves a contract that says:
"Company A agrees to purchase for $1000 each product offered by company B which meet the specifications provided".
And Company B finds that the spec says "A quartz crystal between 1um and 1mm in diameter".
So company B goes and finds a beach, full of sand, calculates there are 1 billion grains of sand in each cubic meter of the beach, and the beach is 50m long, 50m deep, and 50m wide. Total amount is 50 * 50 * 50 * 1 billion * $1000 = $125 quadrillion.
Far more than all the money in the world.
That bankrupts the company, but since there is no liability limit, it bankrupts every other investor. Even if you have 0.0001% of the company, you're still bankrupt.
If you have insurance, the insurance company is bankrupt, and you're still on the hook for whatever remains, which bankrupts you too.
share holders? The same "passive investors" that are buying an index fund that includes Boeing.
It's not about leverage it's about taking time and figuring out what you are investing in. Everyone wants the free ride of "investing" nobody actually wants to pick stocks by doing research into which companies have sustainable businesses and good governance.
Otherwise known as the "democratic means of production" which can be measured by how many US citizens own equities (almost 50%). And let's not discount the "managerial revolution" that has occurred as management:labor ratios have exploded over time (and noted by the Pulitzer Prize winning The Visible Hand by Alfred D. Chandler, Jr.)
You say "Modern capitalism" as if there was a different capitalism before it. The system is the same (perhaps more optimized from longer innovation); the culture and the players are different.
I think he's saying that the modern economic shell game that is going on is actively damaging the economic welfare of a large body of people. From my perspective the "modern" part of it has become more extractive than generative. A lot of "innovation" has been to cut as many corners as possible while isolating wealth into fewer and fewer groups.
"Modern capitalism" might be better called "managerial capitalism". It is different from entrepreneurial capitalism, which preceded it.
Entrepreneurial capitalism was a constellation of small private enterprises, often family-owned. Managerial capitalism is characterized by the dominance of firms publicly traded on capital markets, and managed by professional managers who are often distinct from the shareholders.
Entrepreneurial capitalism, I believe, better aligns incentives by combining the shareholder and manager role. It also reduces dependence on capital markets, which can become a single point of failure during a financial panic. Lastly entrepreneurial capitalism makes coordination between competitors less likely, whereas such coordination is embraced by the mergers and acquisitions arms of banks in a mangerial capitalist system quite openly.
The only advantage of managerial capitalism is scale. Pooling capital in public markets permits massive economies of scale and their efficiencies.
I believe capitalism can work well on a micro-scale when the products are simple enough that consumers can exert perceivable pressure on producers. Make a better hammer? I'll buy a better hammer.
Where modern capitalism falls down is complexity. There's 3 (non-niche) desktop operating systems, for example, and way more than 3 attributes that consumers care about in a computer. Or cars, or TVs, or airplanes, or anything else that costs more than $20. There's simply not enough levers by which consumers can send any meaningful signal through the market to producers. This breaks the Invisible Hand.
It’s the only system that relies on the willingness of two parties to exchange something of value in a way that it mutually beneficial. Every other system involves the use of force, either explicit or implicit to compel people to act in ways that are contrary to their own interests. Because if it were in their best interest, force wouldn’t be necessary. Capitalism requires a willing buyer and a willing seller. It’s the most free system there is. Inefficiencies obviously can create problems, but in those problems, there are yet infinite possibilities.
I'm not willing to go hungry or be homeless. What if my interest is art or playing video games all day, but then I'd be hungry and homeless. So I'm forced to work.
> This is what happens when you let the accountants run the business.
You're shooting the messenger when the core issue is that Boeing, like all publicly traded companies do not have medium to long-term views for their business. It is always quarter-to-quarter. That is what management is judged on, because their job and their compensation is tied to maximize shareholder returns.
>like all publicly traded companies do not have medium to long-term views for their business
Why do people keep repeating this garbage over and over and over? It just isn't true.
Amazon literally didn't make profits for 10 years. Many other tech companies haven't made a cent yet, but investors are looking 5-10 years into the future for those.
Some businesses just make bad decisions, others make good decisions. Overall the free market/public corporation system is a resounding success. Just because boeing messed up doesn't say anything about the rest of the system.
>Overall the free market/public corporation system is a resounding success.
We don't have a free market. The market is not allowed to implode. Mega corporations and banks are not allowed to fail. Boeing is not allowed to fail, and that fact, more than anything else, explains why they are such a poorly run company. Where you see a "resounding success" I see an absolute failure that is closer to a scam or a ponzi scheme than a legitimate system.
Boeing isn't allowed to fail because they're a national security risk. The government doesn't want Boeing's most talented aerospace engineers to move to a foreign company like Airbus or Comac. The government will happily allow businesses like Macy's or Uber go under.
Boeing didn't take the money anyways, so I don't know why people are so riled up about it.
AFAIK, Airbus won’t hire American nationals. Boeing will hire Europeans, at least on the commercial side.
The defense part of Boeing used to be a separate company (McD). DoD could easily let commercial fail and spin out McD again, or just shrink to defense only. For a long time, Airbus has claimed that the DoD spending subsidizes the commercial side. So TBH, letting commercial fail would result in more bang for the DoD buck.
About Airbus and American nationals, you might want to check out John Leahy: Head of Sales from 1985 until 2017, sold 16000 planes, brought Airbus inside US airlines, and overall probably the most well known Airbus executive.
Regarding military activities, I don't doubt that there are engineering synergies between commercial aviation and military aviation. However I've always heard that from a commercial perspective the two are at odds: for a defense organization you want to make sure to keep as little cash on hands, as it's fairly easy to ask for more. There are always scope changes, delays and shit happening. The last thing you want is to have a war chest that your customers will ask you to tap in to cover the costs of contradictory requirements, feature creep and original underbidding to win the contract. See the A400M as an example: the civil side of Airbus is coughing up quite a lot of cash for that clusterfuck.
On the other hand, developing civil airliners requires cash. A lot of cash. You can't ask American Airlines to cough up some extra cash because your 787 is delayed and is costing more to produce than anticipated. In fact the opposite is true: because your 787 is delayed, your customers will pay much less, and only when you can actually deliver the product (for the most part). Bombardier didn't have pockets deep enough to sustain the CSeries...
Bear Stearns, Washington Mutual, WorldCom and many others are evidence to the contrary. I'm not sure if Boeing will be "allowed" to fail if it's on that path, but your statement that "Mega corporations and banks are not allowed to fail" is simply false.
Yeah every decade or so we let a company fail just to set an example to the rest. WaMu, in particular, is a pretty hilarious example. We, the public, bailed out JP Morgan and with those funds they purchased WaMu at pennies on the dollar.
You’re right, we don’t have a free market. We don’t have the freedom to leave our homes and shop at will. Stores don’t have the freedom to be open. People don’t have the freedom to provide services. So until our government overlords deem it ok, allowing businesses to fail at-will in the existing climate makes little sense.
Most stores are permitted to be open, no healthy American is currently locked in their home, delivery services will bring anything you want to your doorstep, and only a few services are currently shut down.
Yet for some reason, nobody's buying from the stores that are open.
> Amazon literally didn't make profits for 10 years.
Yeah, and they caught never-ending flak for it until AWS starting turning a profit and eventually dragged Amazon into the black. Amazon was/is the exception, not the rule.
> Amazon literally didn't make profits for 10 years. Many other tech companies haven't made a cent yet, but investors are looking 5-10 years into the future for those.
Amazon went public in 1997. Boeing went public in 1962.
You get leeway as a young-ish public company, which will expire once you are an established player. How do you think markets are going to react if the bottom falls out of Amazon's business in 2055?
In my experience at the executive level of a company this was never the case. There were always 1 year, 3 year, and 5 year plans in place.
Long range plans get re-evaluated periodically because things change, both technology and markets but I have never experienced them being either ignored or thrown out in pursuit of the quarterly 'numbers.'
That said, if your senior management doesn't understand all aspects of your product value, they will make poor choices both in the short term and for the long term.
This thread reminds me of one I saw on here this morning re: the netflix quikster debacle.
I would imagine that it is easy to push a narrative that execs are greedy, short sighted and barely competent. I would imagine this can be true, but more than likely its a bunch of factors that aren't public that led to less than optimal decision making.
I think you're conflating job losses with not prospering.
Boeing's stock is up on the news. Lost jobs = lower payroll = improved cash flow. That's the bottom line. Shareholders couldn't care less how you arrive there, just that you do.
This is one of the best arguments I can think of against having large corporations with "corporate person hood". It does enable large capital accumulation over time, but that capital accumulation eventually becomes so de-personalized in how it gets used that it becomes detrimental to society. A single private owner tends to care and have more purpose, more personal stake in real long-term growth, and can take the real risk of investment. Corporations, as we see more and more, get huge amounts of capital and then start gaming the system for short term executive bonuses.
Economies of scale are extremely valuable to the overall economy as mega corps tend to charge lower prices. Similarly, SpaceX as a high risk high cost investment is vastly more likely with group funding than a single private owner.
Clearly there are some downsides, but managing them via laws and regulations is possible.
There's a cost associated with this as well though. Those lower costs don't come for free - they come from increased efficiency which translates to fewer workers and less money being redirected into local economies.
Is more workers to achieve the same total outcome a desirable state? It seems like what you’re proposing doing there is literally wasting entire human work lives for zero productive output.
If you took this to an unrealistic extreme, where 100% of all jobs are automated, every cent of profit flows into the hands of owners and shareholders, and there's literally no job that labour can take, that's clearly and obviously worse. The flipside, where efficiency is at it's lowest, and every single product ever is hand-crafted with a tremendous amount of labour seems obviously bad too.
Of course, those are both ridiculous extremes - the answer to what balance is healthiest for an economy I'm sure is immensely complicated. I'm just saying that efficiency doesn't come without costs, and we shouldn't design our entire economy completely around the interests of shareholders of major corporations.
It seems like your automated example allows a welfare state to provide a better quality of life than we currently enjoy. Having people do pointless jobs for the same income at that point seems inherently worse.
That said, I have serious doubts that everything can be automated as that suggests all human labor would be providing zero value.
While generally true,
The medium term view is why they need to let go in the first place .
I am guessing aircraft manufacturing is going to severely depressed in the medium term. Customers are delaying deliveries, canceling orders etc. Demand will likely not return to pre covid levels in even one year. Even if it does, airlines are not in any financial position to make significant purchases for few years. On top of it 737-MAX issues and resulting hold in manufacturing of that line has not left Boeing in a great shape.
Quarterly pressure from Wall Street is not a good excuse. That just means that the CEO and other C-level execs are just ineffective leaders. People who are too far removed from the product, i.e. bean counters with little passion for the technology and industry, tend to make bad leaders for firms like Boeing.
- golf buddy convinces CEO of well-run software shop: your company is way too inefficient "your per-employee ratios are off the charts low!"
- golf buddy gets hired as Chief Strategy Officer, hires a bunch of high paid underlings
- they decide the freeze wages, reduces bonuses, reduces benefits for software engineers. Lots of savings to show! (unless you also count inflated salaries of new management)
- Software engineers demoralized, best ones move on to better jobs, adverse selection, more demoralization
- Golf buddy hires more project managers -- because obviously the answer to underpaid SWEs is to hire more managers. Beatings will continue until morale improves.
- Now the company really does have bad metrics. Decisions are made to offshore half the staff -- save 30%, but increase work for onshore staff. Offshore staff is great, but at a disadvantage due to distance and not having context/proximity to business.
- Golf buddy hires product managers to better define specs, more project managers to produce more reports.
- Gold buddy, his friends, ride off with their big paychecks to spoil the next company
Innovative CEO, a sales centric MBA who's never written a line of code, now overseeing acquired software company, imposes the golf buddy's investor pleasing "blended shore" model, the outsourcing of core knowledge work to noobs coupled with shipping the actual skilled labor to lowest cost locales, against the advice of everyone who's ever successfully shipped software, who are all now branded "seditious", and managed out of the company they built up from zero.
Your crude caricature relies on the existing CEO, and the board, to be incompetent and easily swayed by bogus numbers. If they were indeed incompetent, its not exactly a shock if the company implodes then is it?
It's not the accountants' fault. The only force binding together the thousands of people that make up a corporation is the accounting (accountability). Before the advent of accounting, there were not corporations, as any concentration of capital would be immediately diffused through fraud. It would be great if society could figure out how to be accountable to metrics other than profit and revenue, but so far we haven't figured out how to measure anything else, so we can't optimize for it.
This is what happens when you let the accountants run the business.
This is so completely not true. Worked with the Finance Dept heavily at my last job. The accountants keep track of the expenses, and make sure everyone is sticking to the budgets...but the accountants don't make the budgets. Management does. The accountants are the ones making sure that the company can actually pay for everything.
To an accountant, a drop in costs is as valuable to the business as a rise in revenue.
This is also false. To an accountant, a drop in costs is literally the exact opposite of a rise in revenue. (For comparison, it would be like saying that to a software developer having a more powerful computer is the same as writing your software to be more efficient.) A drop in costs is only valuable to the accounting team if there's not enough money to pay for everything, because then the drop in costs makes it possible to pay for more of the bills that the rest of the company incurs. The Finance Dept would absolutely prefer to see more revenue over a drop in costs, because revenue is repeatable and sustainable, while reducing costs is not.
Management are the folks that only cares about the bottom line regardless of how it's reached.
By "blame accountants" the OP was referring to management being accountants. Nobody sincerely believes that accountants have the power to do layoffs, but managements that were previously accountants won't see the long term destruction in value, only the short term profits.
If anyone understands the concept of investment, it is someone in finance. To claim they only care about cutting costs maximizing revenue today at the expense of the future is ridiculous.
An amazingly uninsightful truism: people have a shallow understanding of topics that they are not intimately familiar with.
Perhaps this is why accountants and MBA types run businesses and software devs continue to just develop software for their bosses. You know, the ones who understand business more deeply. Because that's what they do. To misappropriate Sorkin: if software devs are so fucking smart, how come they lose so goddamn always?
People in finance don’t really understand or care about engineering R&D and long term investment in engineering culture, possibly because the effects of these things haven’t been quantified scientifically. It’s simply another line item. They do acutely understand the effects of numbers on their stock compensation though.
and people in engineering R&D and "engineering culture" (whatever that means) are completed disconnected from reality when it comes to making payroll. And i say this as a software engineer myself.
Yep. When you're at a growth company that enters cost reduction mode, it's a good time to start looking for another opportunity. "Why is AWS going up? Get that cloud bill down. Do you really need all these monitoring services? Cancel them." They should be focusing on revenue, like you said.
I don't blame anyone. I want the world to evolve into one where our society puts human welfare first. Blaming does not help that happen at all.
It is easy to get caught in a trap thinking heavily about money. When thinking about things we own, the emotion and fear centers are aroused far more than when we think about other people. To avoid this, I believe our society must be trained away from neoliberal and 'greed is good' thought.
Blaming people for this state of events, or the addictive qualities of facebook, or the dangerous misinformation spread designed to take advantage of cognitive flaws of the human mind - these practices will get us nowhere. One thing that businesses started doing right was the blameless postmortem.
I don't disagree with the main point you are making, but I would consider this argument to be a bit weak "For comparison, it would be like saying that to a software developer having a more powerful computer is the same as writing your software to be more efficient."
There's a lot of companies out there that just throw some more hardware at a problem.
I find it amazing how much good companies will sacrifice for a good quarter or so of "growth". Great R&D can be unprofitable for a long time until it's suddenly Bell Labs. That doesn't happen without some infrastructure, but an accountant rocks up and suddenly the company is a husk, time and time again.
Even Bell Labs wasn't suddenly Bell Labs though. Even when Bell Labs was "Bell Labs", was it ever profitable for those who were footing the bill (as opposed to society at large, which it obviously was)?
Wasn't Bell Labs funded by a tax/surcharge on people's phone bills? I believe there was some restrictions on commercializing its developments as well. It could do research, create things for internal use at AT&T, but not traditional product development.
Someone could make some good money by explaining how this squares with the conventional wisdom that optimizing for profit also optimizes for the good of mankind.
Almost nobody who has a say has any incentive to think long term. For a CEO the next few years are important, shareholders can jump ship anytime. It’s a total alienation of somebody’s actions from the long term consequences.
Most shareholders are in it for the long term. They can dump Boeing, but only by putting money into something they think will do better. They won't put the money in a mattress or such.
Most shares belong to 401k retirement accounts of the middle class.
401k owners generally have no say due to low number of shares. And most likely they are not in a position to make a judgement of the decision a management makes.
Who is looking out for them? Not the CEO and I don’t think the board either. You need to have a lot of shares before you have an influence.
Their corporate governance teams are surprisingly small. Vanguard has only something like 35 people overseeing thousands of companies and voting on hundreds of thousands proposals each year.
The entire point of having ISS (or Glass Lewis) advise on voting and offer options like autopilot is to give the collective power of all those tiny 401K balances to a single unifying entity who can help drive shareholder-friendly terms (or at least provide a partial balance to what might otherwise become too boardroom-friendly terms). I view that the voting is on autopilot as a potentially positive control not the negative that you seem to believe it to be.
Some fund companies commit to following ISS advice across the board or on certain topics. Others like Vanguard delegate the voting power to fund managers (who have access to ISS reports but aren't obliged to follow it slavishly).
I would expect the overwhelming majority of actively managed funds to vote with management recommendations. If they didn’t agree with management, it’s much quicker and more effective to decline to invest rather than invest and then vote against them.
It is bizarre and disappointing to see this as the highest-ranked comment.
Do you have any evidence that “accountants” made this decision? Or that COVID is merely an excuse?
It is blindingly obvious that Boeing has been quite adversely affected by this pandemic and that global travel is unlikely to return to normal levels for at least 2-3 years. No amount of extra spending on R&D or product engineering is going to save your airplane company when people don’t want to get on the plane.
Boeing lost their way in the 90s when the MD merger turned them into an accountant-managed company whereas they were previously engineering-managed. The resulting 737MAX disaster is the main source of their problems today, not COVID.
You're blaming the accountants for something the article clearly says is the result of management decisions...made by an engineer...
(McDonnell's Stonecipher was an engineer that rose into management ranks and was the one that thought up the brilliant idea to just cut costs regardless of the consequences.)
I think this is yet another manifestation of online discussions amplifying shallow and simplistic "analysis" that appeals to human biases and stereotypes. So I'd say it's not bizarre, but another sign of our times.
The problem is not with accountants per se but when accountants get promoted to executive positions. They will always run the business purely on a short term profit/cost basis, whereas operations and engineering managers who get promoted will know from experience that you need to spend money in the short term to make money in the long term.
It has been my experience as a consultant and in-house that engineering departments significantly overvalue the R&D they perform. R&D has value, but nowhere near what the engineers think it does, especially when all of the costs of bringing that R&D to market are taken into consideration.
See, for example, Juicero, Bird, Boosted, Magic Leap, Theranos, etc.
Putting this dissenting opinion on HN will likely get you downvoted, but I for one appreciate it. There is a balancing act of profit vs development that us engineers to overlook.
However, some of your examples aren't great IMO. Theranos should have been ONLY R&D, as it was never a product that was ready to bring to market. Same with Magic Leap.
I think also due to Boeing's business of making tin cans move hundreds of miles of hour thousands of feet in the air, means the engineering department should be their primary focus as well, thus all the outrage at the company.
The current CEO was appointed in January. It is currently the end of May. I guess we could still count that in weeks, but most would use months at this point.
Hutzpah is begging the court's leniency, claiming to be an orphan, after murdering one's parents. Or eating the seed corn and then being surprised by the famine.
You get the idea.
I have zero sympathy for the wrecking crew who destroyed an American icon and rage on behalf of all the workers, families, and taxpayers who paid the price.
"I realise COVID. But that's the excuse, not the reason." I would tend to agree. From what I understand Boeing has spent some 70%+ of their free cash flow on buybacks for the past 10 years; some 40+ billion dollars worth. They spent so much money trying to boost their own share prices (legal market manipulation?) it's no wonder they have no money.
Based on the article it sounds like a lot of these are line staff and support staff which is a direct result of a decline in the number of orders. Unfortunately I think there's not much they can realistically do about that.
The sudden shift in staffing comes from the sudden shift in demand.
Slight correction: "To an accountant, a drop in costs is MORE valuable to the business as a rise in revenue." This is because an increase in revenue of 1M does not increase profits by 1M, but a cost cut of 1M can.
boeing is having really hard times. Even if it were not for a pandemic that directly effects them, the max issues were going to hurt. I dont know if they had to lay off those workers, but I am not surprised at all.
kinda the point. If they were still run by engineers they wouldn't be having those Max issues. They might be having other issues, of course, but making planes that can't take off without crashing wouldn't be one of them
i think the boeing executives are better equiped to measure future demand. i'm sure they wouldn't be cutting costs unless they knew there would be future decline in demand.
Companies that focus on doing the thing they do well tend to do well. Companies that focus on messing about with their finances to keep the investors happy tend to fail.
I guess maybe I am too new here. I thought poor decisions were the realm of marketing people, managers, and accountants. Perhaps it is possible that an engineer is working in marketing/accounting and therefore has to accept some of the blame?
I've worked on many cost cutting projects in the past, in consulting and private equity where cost-cutting was the norm. These statements very easy to say in retrospect.
Many studies show that private equity owned companies, which typically run businesses the leanest, actually perform better.
Yeah, that's the only one I could find. I definitely don't have the background to understand the whole paper, but it doesn't seem to paint a very positive picture. If you cut employment by 13% and grow labor productivity (output per employee) by 8%, aren't you worse off? At best, you're producing the same amount while benefiting society less and the owners more.
Also:
>Public-to-private buyouts involve greater leverage and bankruptcy risk but few advantages in financial returns, at least in recent decades. Private-to-private buyouts appear more likely to create value by relaxing financial constraints and improving management practices.
Public-to-private buyouts are generally the ones people get angry about, and it seems that they're economically bad in addition to the social consequences. I don't think people generally object to one private equity firm buying from another.
This is just the start of the trouble for Boeing. They are technologically quite substantially in arrears to Airbus, and with none of their products able to pull in particularly hefty profits anymore they don't have the funds to make the necessary investment in R&D to close the gap. The double-punch combo of the 737 MAX scandal and the pandemic will have left them in serious strife.
Off topic, but: I had never heard that usage of "in arrears", and it sounded off because it doesn't even work metaphorically with the usage I do know, so I looked it up and ... "It's a secondary definition, sir, but it checks out."
2. (of a competitor in a sports race or match) having a lower score or weaker performance than other competitors.
Arrears is derived from an old French word that literally just means behind. I've seen it used in English with that meaning in ways that are more generic than specifically referring to payments.
"in arrears" is derived from "en arrière" which is still used in modern French. Like most French words, it evolved from Latin: ad retro.
In modern French, it's used both literally and figuratively. A common folk song goes "3 pas en arrière…" (3 steps backward). Similarly, "arriérés" could mean "people with retrograde mindsets", or "arrears", i.e. rent or taxes that should have already been paid. I suppose the English language merged "arriérés" and "arrière" into a single word.
Yep, e.g. la porte en arrière = the back door. Handy that the English word has "rear" right there in it. And in case this comment doesn't sound snickery/sexual enough yet, there's also derrière (butt or rear end).
Please excuse me as I'll be a tad fussy. You're welcome to pay me back in my own coin with my approximative English.
The right expression is la porte arrière (not "en arrière"), which usually means the back door of a vehicle. Some will more correctly say la portière arrière. It will rarely endorse the other meaning of "back door". Out of context, absolutely no one would see anything sexual in this expression.
On the other hand, la porte de derrière will point to the door which is on the back side, for instance the back door of a house. In some contexts, it may convey some sexual innuendo.
I'd personally say "la porte arrière" for the rear door of a car but "la porte de derrière" for the rear door of a house for instance. I think the distinction is that on a car both sets of doors are side-by-side whereas in a house they're in opposition to one-another. That's my France's French take at least.
Right, but that's the usage I was familiar with: having some debt that you are behind on paying. The parent was using it to mean "performing worse than a competitor", which is distinct.
I guess I use words pretty liberally, but I don't see much of a distinction -- especially when you look at the etymology: https://en.wiktionary.org/wiki/arrear
It comes from "to the rear". So, in a competition (against Airbus), it means you're behind the person in first. On a payment schedule, it means you're behind the schedule.
Right but it seemed like it didn't work metaphorically because a pretty important part of the definition -- something present every time I saw the term used -- is that you're in debt to someone else, usually with the connotation of them being able to take the collateralized asset. Yet there was no sense in which that relationship would apply to Boeing and Airbus.
Every other time someone was behind, they were just "behind" -- never saw that prompt the use of a legalistic French term the way that "being in arrears" did.
Edit: O...kay, getting some pushback on this. Let me try to explain with another analogy.
Let's say I saw a comment that read, "He got involved in human trafficking because he has a mortgage."
I had only ever seen "mortgage" used to referred to a secured loan for a home.
So I'd interpret the statement to mean, "he has a big debt he wants to pay and needs money and that motivated him to do slimy things for it."
But let's further say I had specific knowledge that that guy had paid off his home loan years ago. Then I'd be confused and say so, "uh, what? He doesn't even have a mortgage."
Then a bunch of people respond to say, "oh, duh, 'mortgage' comes from the French 'death pledge'[1] -- here they were talking about how he had pledged his life to serve the cartels on pain of death." "Oh, yeah, man, I use 'mortgage' all the time to refer to a blood oath."
That ... would definitely be news to me. Sure -- I wasn't aware of people who had used it the other way. But do you see why I would never have abstracted "mortgage" to refer to death pledges in general, even with great abstraction skills?
Note: "Mortgage", to my knowledge, is not used in English in this other way -- I'm just conveying the sense of surprise there to learn that, had it actually been true.
For what little it's worth, I had the same reaction as SilasX here; I've just never encountered this usage before, only the "in debt"/"late payment" usage.
I'm slightly surprised to see that this definition is considered obscure. Perhaps I've been disproportionately exposed to it through my slight obsession with motor-racing :-) Having said that, Boeing's situation is closer to the first definition of 'debt' than you might imagine, if you consider the idea of 'technical debt', a concept that (at least in a software context) most of the HN crowd will be familiar with. The 737 is in a recognisable state of technical debt - if it were a software product, its innards would be written in FORTRAN.
The article is about the jobs disappearing, not Boeing disappearing.
Any such bailout isn't going to be enough to bring back jobs in the commercial aircraft business, which is likely where most of these job cuts are coming from.
The original comment was that Boeing is in trouble itself - and the parent comment was addressing that trouble and what the US response will be.
I agree that those jobs are likely not coming back, but the company isn't going anywhere since the US just lost a lot of clout covering Boeing when the MAX incident happened - they're not going to give up on it now.
Yes, but there's more than one way to save Boeing's defense business and recent scandals have left them with less political capital then they would have otherwise had. There's no guarantee post-bailout Boeing would be the same company as pre-bailout Boeing or even remain a single company.
I'm not so sure about that. Contracts are routinely picked up by others if one fails. Not only this but even if they fail they could partially fail and kill the commercial aircraft arm of the company but keep the juicy defense arm.
Commercial aircraft used to be the juicy part. In terms of actual military aircraft, Boeing now only has the P-8 (success), C-17 (success), KC-46 (debacle), F-18 (success), and F-15 (success). The P-8 is a limited contract, the C-17 is out of production, the KC-46 is just a joke, the F-18 program is winding down, and the F-15 is hanging by a thread. Boeing also sells the AH-64, but it too is a old system that doesn't generate a lot of revenue.
The Pentagon and Congress pushed for defense contractors to consolidate, in the hopes that the skills needed to produce military grade aircraft would be preserved. The US went from having Lockheed, Martin Marietta, Boeing, Hughes, Vought, Grumman, McDonnell Douglas, Raytheon, Northrop, General Dynamics.
All of these contractors were merged under Pentagon guidance into Boeing, Lockheed Martin, and Raytheon. In the US, these three really have no competition since most military contracts prohibit foreign companies from entering bids.
Agree with most of that but isn't the F-15 alive and well? It's not a stealth aircraft but can be loaded with advanced electronics and 16 long range missiles and use F-35s or F-22s to lock targets for them I believe.
F-15 won't survive in a modern A2D environment without a lot of SEAD support. The airframe on the F-15 are also getting a lot of miles on them. I'm referring to the F-15C types, not the F-15Es.
I don't think they fly the P-8 in the same flight regiment as the Orion used to fly. There's no MAD sensor, and it doesn't have the range at low levels to consistently hit the deck.
ASW has been starved of funds and attention for so long. The P-8 is really an MPA, not so much an ASW platform. It can do some of the job, but compared to the S-3/P-3, it makes some sacrifices. The nice thing is that it can transit an area quickly.
If by US public you mean the common citizenry then no, of course that won't happen. But you can be certain that any public servants helping to grease through the bail out will be given quite cushy positions when they retire. That's the pattern in the US, when something should go to citizens it is instead diverted to politicians while rhetoric about bootstraps[1] is voluminously discussed.
1. Both sides of the aisle have large amounts of corruption and are ineffective to the citizenry - but the GOP really loves driving home the benefits of bootstraps.
Then they can focus on just being a defense contractor. But there's nothing that requires them to bail out the commercial airline business, and it wouldn't be the first time a major aerospace and defense company made this pivot. When Lockheed merged with Martin Marietta, they stopped making commercial airliners.
Boeing is the only American commercial transport jet manufacturer based in the US. The US politically would never allow the loss of this - whether it be “Boeing” or some new named thing that’s basically the same. For pro-global politicians it would be a major signal of failure of American industry, for “America first” isolationists it’s an obvious problem.
I think even from a national defense perspective it makes sense to retain a lot of the talent and manufacturing capability in some ways even if it's no longer WW2 and we can just launch a missile now. Maybe call it national strategy to have talent in a broad array of fields.
Which talent? There's only accounting talents from McDonald-Douglas left. The technical talent was replaced with cheap labor from overseas long time ago. And then there are thousands of bean counters to control overseas labor. You really need those domestic bean counters, that's their speciality.
Boeing will not go out of business because the government will not let it happen. All the aerospace industry starting from Boeing and ending with SpaceX is built on the pockets of tax payers. But, of course, the profits are private.
Yeah, the saving grace for them is definitely their incestuous relationship with the US Government. But while that can save them from total collapse, it can't prop up their civil aviation activities on its own.
The world may not have a choice but to do so; midsize and large planes were already a duopoly, and both had backlogged orders in the thousands. Airbus can't absorb all these new orders, and there are no other options (not for lack of trying; Japan, Russia and China among others are all having difficulties with their state-backed aircraft development programs; the planes are late, overbudget, and generally poorer quality (e.g. shorter range, less efficient)). Not to mention the huge fleet of perfectly fine Boeing aircraft already operating that still need servicing and maintenance.
Boeing will go out of business, it's inevitable at this point. They've outsourced too much of their core engineering competencies, core manufacturing operations, and are mostly a financial re-packager of other people's products. They can't innovate, they don't know how, they can only cut costs.
The workers they're laying off, that's the remainder of your operational knowledge walking out the door. They didn't train a new crop of engineers to replace the aging ones.
I think we'll see Lockheed or Northrup acquire whatever components the DoD needs, and the commercial aviation division will be acquired by another conglomerate.
I dont really agree with your assertion that Boeing is unable to fund future development - they have a big bucket of cash, they appear to have no trouble borrowing, and they have profitable military programs. They should be able to fund a new narrow body jet with ease. Heck, a modernized 757 would be fairly cheap to design/build and its effectively still a pretty modern airframe too.
No, and that's the point. The 757 is already a more capable airframe, for a start, and there's a lot more leeway for the same kinds of modernizations applied to the 737 before getting in trouble. Obvious example, more room under the wings, so you can use newer, larger, more quiet and efficient engines without running out of space and having to resort to the kind of CG-shifting "put the engine in front of the wing" hack that necessitated MCAS and doomed the MAX.
You're still talking about modernizing a 40 year old design....by a company that fucked up a modernisation spectacularly.
>hack that necessitated MCAS and doomed the MAX.
The issue is not that the airframe required it but that the corporate culture looked at this issue and concluded lets do it. Lets do it DESPITE the problems...that's the company you've got leading the modernization of the 757 you propose.
Boeing will pull through with flying colours though. US won't allow their only commercial plane maker to fail even if they need to build planes out of freshly printed Papier-mâché dollars
The 757 is out of production, although the tooling is in storage somewhere. Restarting production would be a huge undertaking by itself, not accounting for modernizing the airliner. It's all blueprints on sheets of paper. And Airbus could quite easily answer with a rewinged, slightly longer A320 (the long-rumored A322) that they admitted to have worked on... Although so far Airbus seems content with just the A321NEO-XLR: cheap to develop, and good-enough to replace most 757 out there (more or less, depending on the model of 757 and the route).
A modernized 767, on the other hand, could be a winner: it's still in production as a freighter and has been modernized for its military variant (KC-46A Pegasus). It's smaller than the 787-8 so wouldn't canibalize sales too much. On the other side the only Airbus competitor is the A330-800 which is too long-range optimized (and thus large/heavy/expensive) to be competitive against a hypothetical medium-haul optimized 767. Really the A330-800 is not even competitive against the A330-900, Airbus shouldn't have built it at all, if you ask me...
In the sense that they can still access liquidity from credit markets, yes. But they're paying a pretty hefty interest rate of 4.50% over the risk-free rate.[1]
That kind of borrowing cost, when compounded, starts to become pretty crippling for any sort of long-term R&D or product development. Compared to a high-grade corporate, a project with a 10-year payback time is 50% more expensive at Boeing's current cost of borrowing.
They'll save the company, but that doesn't mean 12k workers are coming back. And they're mostly concerned with the Defense/Military aspects -- are they going to fund the commercial side too?
(counterpoint -- the USG threw money at auto-makers)
While it doesn't say, these are likely very significantly manufacturing jobs, of course they'll come back. Orders are gone, cancelled, 737-MAX is stalled until the regulatory bits are done sorting out later this year, maintenance needs are way down, so you end up with empty or much slowed factories.
Boeing lays off a quarter of its workforce once or twice a decade. Airplanes are big, long term investments (big airliners tend to live to the ripe old age of 30 or so) and the demand and sale of them comes and goes with the global economy. The economy slows periodically, orders dry up, and factory workers don't have any work for a long time (or more like the years long order queue gets quite a bit shorter with old orders cancelled and few new orders coming in). It's a cyclical business that can't help but to make significant adjustments to its workforce.
A brief, incomplete and possibly inaccurate history of Boeing layoffs:
> The double-punch combo of the 737 MAX scandal and the pandemic will have left them in serious strife.
They're probably just redundant. The 737 MAX debacle meant they weren't going to sell those planes this year, but the coronavirus meant they weren't going to sell those planes this year. Same result from one as both.
I don't think I've heard anyone use the word redundant to describe anything that was more complicated than an exact 1-1 replacement. The two-punch combo is a good analogy; I wouldn't call a punch that knocked someone out cold redundant if it came after a punch that simply gave them a nosebleed.
probably OP means to say given that you got the knockout punch the first punch is redundant not the other way around. Since no aircraft is selling now, 737-MAX issues are no longer relevant is his premise
My understanding is that Boeing has used composites for a wider variety of structures, and more complex structures than Airbus, though I am not the OP, or an expert in the field.
Airbus was the first company to use a large composite load-bearing structure on an airliner, the A300 vertical tail back in 1984.
Most of the A380 and A350 are composite, just put together differently to the 787.
Airbus also now have access to the most advanced composite lay-up technology, used by Bombardier Belfast to build the A220 wings.
The real pioneer was Beech, with the all-composite Starship; it took huge balls to release that on the commercial market, and sadly the gamble didn't pay off. They went back to building aluminium King Airs.
Unfortunately they're just chasing marginal efficiency gains with these. It's much more important to make a plane that's safe enough to actually remain in the air.
> Unfortunately they're just chasing marginal efficiency gains with these
Marginal gains is the name of the game for airliners. A 2% increase in fuel efficiency is something airlines drool over.
> It's much more important to make a plane that's safe enough to actually remain in the air.
Which Boeing unequivocally does. Ya, they stumbled with the 737-MAX, but all the other perfectly good 737 variants are still the workhorse of most airlines. There's still more 737's flying around than Airbus A320 variants (including the A321). That doesn't even account for all the 767, 777 and 787's flying around the world every day... nor all the 747's and DC10/MD-11's shuttling freight too.
> Marginal gains is the name of the game for airliners. A 2% increase in fuel efficiency is something airlines drool over.
It's not if the resultant airplane isn't safe to use. 2% improvement over nothing (because you can't even fly the damn thing) is nothing.
Most of the success stories you're referring to are the old Boeing, from decades past. The 787 had lots of problems but they did eventually get it dialed in with fortunately no fatal crashes, just having lost many billions of dollars in overruns. But their most recent plane is an absolute disaster. They can't keep coasting on the successes of the past without making more successes in the future. These layoffs are prove of it. On their current trajectory, they are failing.
The history of aviation is that of chasing marginal efficiency gains.
Are you trying to make some nationalistic point, or just make yourself sound superior?
Sometimes aircraft crash due to faults in design or user interface; examples include the DC-10 cargo doors, de Havilland Comet, and arguably Airbus' own A330 in the case of AF447. Two Boeing aircraft crashed for a series of reasons, yet Boeing still has a storied history of making very safe, effective aircraft.
> The history of aviation is that of chasing marginal efficiency gains.
Yes, while crucially, making your plane safe enough to fly.
> Are you trying to make some nationalistic point
From the HN rules: "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."
I'll have you know, I'm Nth generation American, never lived anywhere else. My American identity, however, is emphatically not wrapped up in this one particular company. I can be honest when it's faltering and not doing well without feeling like I'm letting down my national identity. Can you?
This storied history you're referring to is the old Boeing. The new Boeing (the one taken over in a reverse merger by McDonnell Douglas business people) isn't doing so great.
The A-320 was a runaway success which threatened to shut Boeing out of that segment. Boeing needed to do something, and fast. Hence the 737-MAX as a stop-gap until they could come up with a better competitor.
Yes, the A-380 (different segment) did poorly. Boeing actually had a nice thing going for them with the 787.
> Boeing actually had a nice thing going for them with the 787.
Recently, maybe. But the 787 program had its fair share of major issues with the significant delays during development and then the battery fires that led to the fleet being grounded.
If the market shrinks, they'll be hit just like Boeing, but there's also the current lockdown hit where Airbus has an advantage and can wait a bit more before announcing layoffs:
> For now, Airbus is relying on government-backed furlough schemes in France, Germany and Britain to reduce staff costs after earlier asking employees to take 10 days’ leave.
I bet that Boeing will eventually get a bailout that is similarly huge in terms of dollars or euros. But I'll also bet it will be structured significantly different, with far fewer worker protections. That'll end up being better by the numbers, but there are a lot of intangibles that aren't reflected in the number on the bottom line.
For starters, their highest selling plane, the 737 series, is a six decade old obsolete fly-by-mechanical-cable design that sits too low to the ground to fit large modern high efficiency jet engines.
Airbus and Embraer both make substantially better planes in the same/similar segment.
The 737 Max is definitely a rehash if old tech with engines that are in an odd spot. However, the main problem with the Max is not stability issues without MCAS. It's that the took a perfectly reasonable airplane that could fly just fine with proper pilot training. But they decided to be cheap and make it handle like a regular 737 using the flawed MCAS system.
No it could not just fly fine, it is to comply with regulations regarding stick forces when approaching stalls. Putting it on a new type certificate would have meant that all the old designs and solutions that today are grandfathered in by being used for decades safely would have to be updated to modern standards while also losing all advantages of the large amount of certified pilots.
MCAS is a longitudinal stability enhancement. It is not for stall prevention (although indirectly it helps) or to make the MAX handle like the NG (although it does); it was introduced to counteract the non-linear lift generated by the LEAP-1B engine nacelles at high AoA and give a steady increase in stick force as the stall is approached as required by regulation
The 195 has 112 seats vs the 737 MAX 7 with 138 seats. That's pretty similar. And the Embraer is cheaper and has a nicer/more spacious/more appealing cockpit and interior. This is the 737's age showing through here; despite the 737 being larger, it's more cramped inside than the 195.
Granted, most 737 MAX orders were for larger variants, and also the 737 flies farther (the Embraer is very much more of a regional jet). But there's a lot of routes that could be done using either, and the Embraer wins many of those, even before you consider the fact that the 737 MAX flat-out can't fly them at all since it's grounded indefinitely.
So overall they've got superior competition from Airbus throughout the entire segment, and superior competition from Embraer at the bottom of the segment as well. Boeing is in a rough spot. They should have built a clean sheet redesign of the 737 awhile ago to handle the same segment, but they did not, and now they're really suffering for it.
Airlines like southwest need to be convinced to adopt the new plane. Their major claim to fame is cutting costs by only having one airplane that saves training costs and pilots can fly anything they have. (less spare parts for maintenance, but they have already lost that with the max and other variantes)
Boeing deserves the overwhelming majority of the blame here, not one of their many, many customers. Southwest did not want a plane so unsafe that it cannot fly. If their wish list desires were not all reasonable, then it's Boeing's responsibility to let them know it.
That is a different point. Southwest (they are not alone, though they are the obvious example) is not going to buy any plane from someone else because the 737 is so embedded in their company. They can take something else, and reserve the right if Boeing cannot deliver. However it is unlikely anything other than the 737 will be bought in the foreseeable future.
Now if someone built a plane with the same type certificate required with capacity from 25 to 300 (exact bound are of course negotiable) passengers and can deliver in quantity that would catch South west's attention and probably change their entire fleet. I suspect that isn't possible but...
From a consumer's perspective (primarily Alaskan and Delta), I've only flown on Embraer aircraft domestically (not by choice, by consequence), and 50% Embraer for short international hops. From my perspective, your comment rings very true.
I fly the 220 regularly on routes within Europe and it is rapidly becoming my favorite plane for short hops (< 2500 km). It doesn't seem to be as easily perturbed as older planes, nice cabin, very quick turnarounds so rarely issues with delayed flights due to slow turnaround. This matters a lot because once you miss your departure slot on many airports in Europe it tends to get a lot worse right away, not just a few minutes.
I think the better way to describe this would be that Airbus has more of their plane models be on a modern base. All of Airbus models are fly by wire and almost all share the same type rating.
Specifically the 737 and 757 are based on very old designs.
The 757 has been out of production for 16 years, it's just common because it's cost-effective to own and operate for a variety of services.
With respect to type ratings, Airbus shares type ratings between the 330, 340, and 350, but the 340 is basically gone (few operators), and the 320 (their most numerous airframe) is a different type. Boeing has common type ratings for the 777 and 787, as well as for the 757 and 767.
They do. A330/A340/A350 are all on the same type rating. A319/320/321 are on the other Airbus type rating. Boeing has the 737, 747, 757/767 and 777/787 types. Boeing has more type ratings because there is less computerization, all airbus planes fly the same under normal law.
Well, that was weird. A quick Google search doesn't answer it directly but it might be something like:
FAA (and maybe EASA) takes it as 2 types but it only requires a difference training from the 330->350.
From the link: The new regulatory approval means that pilots who are qualified and current on the A330 can already commence their preparations to take the A350 XWB’s controls by undergoing “differences training” only
From what I read the "757-Plus" comments have been widely miss-understood: Boeing is looking at developing a new plane in roughly the same market segment as where the 757 was sitting. They are not looking at restarting the 757 production.
The interim airliner would be an enhanced 767, that is still in production (although not as a passenger aircraft).
Airbus has the A320 line, which is a quantum leap ahead of the 737, and the A220 line, which is another leap ahead of that. The latter, which for my money is the best commercial jet in the world right now, also benefits from not being subject to import duty in the US, which was previously the main reason besides patriotism for US airlines to buy Boeing narrowbodies. In addition, although Boeing's widebodies are not obsolete in the same way as the 737 is, the A350 is probably the best long-haul jet in the world right now. In the past, Boeing used to make massive profits on 747s because no-one else was selling super-high capacity planes, but the A380 squeezed their margins to the extent that they had to pursue the sticking-plaster MAX instead of a clean-sheet replacement.
The only effect the A380 had was to trick Boeing into developing the 747-8, a major failure as a passenger plane, but doing fairly decently as a freighter.
Boeing didn't have the cash to develop a clean ship 737 successor because of the issues with 787 production. Although the 787 has become (pre-COVID) quite a cash cow, in 2011 when Boeing decided to do the 737MAX instead of the NSA it was in a very poor shape: 20~30 billions USD hole, 3 years delayed, and no positive cash flow expected for years to come.
The house was on fire, it was not the right time to commit to a new clean-sheet design, although it would probably have been the right decision (hindsight...).
The 737 was not replaced because of development costs but because airlines that are heavily invested in 737s already just want more of them. Boeing is really squeezed in that situation.
this is not true about boeing being behind airbus. boeing saw the point to point rise and decrease of hub and spoke years earlier and invested in the 787. while airbus has poured billions into the a380, now slated for permanent production shutdown, which may have never been profitable for the company
Completely disagree. You forgot the A350, which appears to be a better plane than the 777x. I also disagree that the A330 neo is inferior to the 787. Its cheaper, more reliable and the fuel burn isn't much different. To say they're "soundly" winning in the widebody market isn't correct, and it also leaves out the fact that the A220/A3XX is outselling the 737 like crazy.
OP was talking about technology though: A330 neo is hardly technologically superior to 787. Even A350 doesn't have some
of the innovations of 787 like not using bleed air
A lot of Boeing's current dilemma is the failure of executive management. A commonly written story is that the competent executives at Boeing, who were focused on solid engineering, were pushed aside by the political McDonnell Douglas executives.
McDonnell Douglas was purchased almost 25 years ago, so perhaps it may be a little unfair to ascribe all of Boeing's current problems to that one event. Still, as an engineer, I can't help but notice executive management operate in similar politically-bent ways at some tech companies I've worked at.
> McDonnell Douglas was purchased almost 25 years ago, so perhaps it may be a little unfair to ascribe all of Boeing's current problems to that one event.
Planes have a very long development cycle. If the foundations at Boeing started rotting on the day of the McDonnell-Douglas acquisition, it makes sense that we'd only start seeing it fall apart now.
Aviation is going to be the last thing to recover so this is unsurprising. I could easily see it being years before new aircraft are ordered as there are just so many parked right now.
An Aircraft's lifetime is mostly determined by how often it starts, because of the stress of going to low-pressure high-altitude and back. All these aircraft not flying will seriously cut the rate of new orders even in the months after airlines recovered.
In some ways, this may have taken some pressure off them, and given them some time to catch up, though it seems likely this recession will just hurt Boeing less than Airbus (as the latter was in a better sales position going in).
I unfortunately think that flights are likely to end up at a more expensive equilibrium. There’ll be a lot less pressure to cut costs and a bit more pressure to improve the experience, now that all the lifestyles revolving around regular air travel have been disrupted.
Even cheaper?! If anything I think prices should be tripled. It's ridiculous how cheap it is to fly nowadays. Often cheaper than way more environmentally friendly ways of travelling.
You get low ticket prices when the air is full of big efficient planes, consistently full of passengers, being used around the clock, in competition with many other airlines.
We should expect an increase in ticket prices over the coming years.
No they wouldn't as the only people who are flying are going to be those who need to fly, not those who decided to hop down to Mexico for a week as it was cheap.
For the short term they are definitely cheaper, the airlines are desperate to get people back in the habit of flying. My son is going to a camp halfway across the country later this summer, and their original plan was to take a train. After checking the plane fares a couple of weeks ago they changed their mind and are going to fly.
No matter how you look at it, Boeing's business appears to be in terrible shape. The Atlantic has a decent article on how the company lost its way: "a company once driven by engineers became driven by finance."[a]
However, from "the stock market's perspective," everything at Boeing is honky dory -- the stock is up +2% today.
Stock being up 2% today is myopic and meaningless. Look at the performance over the last year. FWIW, Wall St isn't a bunch of morons trying to financially engineer an airplane to take off.
What's going to happen to all the highly skilled and specialized labor of building aircrafts? Where would they go? I wonder if we won't see a situation like the early 90's when suddenly all the top scientific and engineering talent of the USSR migrated to the US looking for work. If China was smart they would try to poach as many of these guys as possible. Layoff the propaganda and pay the top guys well. You could be looking at massive knowledge transfer in the years to come.
Securing IP and existing tech within borders is much easier then preventing people from moving around.
Really feel for those employees in a time like this. I mean, if you're a web software engineer and you get laid of, there are literally many thousands of companies who would have a need for your skills. If you're an aerospace engineer, how many options are there really besides Boeing and a couple of other big guys?
Curious what folks in the aerospace community think.
Ex-aerospace engineer here, now software developer. This is one major reason why a lot of younger folks at Boeing leave (at least the ones with a more broader view of their industry).
A lot of "engineers" at Boeing are actually project / program / product managers and can pivot to similar roles at tech firms. The stress engineers have it a lot tougher.
Software engineering has almost zero transferable skills and as developers in high wage countries are about to find out, very easy to move to cheaper markets.
I wouldn’t be worried if I was in Poland as a web software engineer. I would be very worried if I was doing that in the United States right now.
We’ve seen many times already how fast software jobs dry up in high wage countries when the economy changes.
This is simply ludicrous. I was around in software during the .com bust in 2000, and again during the financial crisis in 2008-9. At both times there were plenty of chicken littles saying all software dev would be outsourced to India and China. Both times software dev positions came roaring back with even higher salaries than before.
Fortunately, there are a lot of aerospace companies still hiring. Look at the aerospace hubs (Seattle, Houston, Huntsville, etc.), the defense and space side is still booming.
Seeing Boeing engineering practices first hand gave me anxiety and concern for the safety of air travel and US defense. Boeing is basically 100's of siloed companies living under a broken umbrella. Everyone is reinventing the wheel. Sharing code is not possible. No inner sourcing. Tons of duplication everywhere. It's crazy the amount of waste. I watched nothing happen for 3 years other than catastrophic failure and honestly I'm glad to be gone and not working with them.
Military projects have it the worst. Depending on the program and funding, they either have access to modern tooling or such little funding that it prevents them from using something made in the last century. This company probably has one of the most impressive development tool catalogs a company can have, but most developers can't even take advantage of it. They have everything and a lot of the teams I worked with just couldn't use the stuff so the licenses sit on shelves burning cash. They renewed software we migrated away from, just in case... for auditing purposes. WTF?
They always had a crazy security protocol for why they cant do something too. I get it, defense is important. They tell me they want an air gapped system for X, cool here is the link to software X and MD5 from our authorized site/customer area. They're not allowed to download it, I still get it. Looks like I'm traveling to Colorado to hand over a USB stick. Without a second thought, I watched the SRE plug it right into his machine. Dude no. WTF? This would have been safer to download. Countless screen shares with people exposing private keys and passwords. The list just goes on and on and on. It's security theatre.
This company is also in love with the H1-B program. I don't mind H1-B at all, but when companies exploit humans from other countries so they don't have to pay American wages, that's where I draw the line, it's bad for everyone except Boeing. They are specifically gouging people from India. Couple this with their time tracking policies which I wont cover, their business practices are fairly absurd and rather disgusting.
Purchasing, holy balls. Every team purchases software differently. There is no consolidation or money saving practices. This has to do with funding, but someone could do this more intelligently. I tried having the conversation with them. Boeing, we want to give you back 250K in savings a year by not having 45 pieces of paper, it's a burden for us too. They don't care. Nothing matters over there. You follow the policy or look for a new job/vendor. It made me really sad having to work with them. I was so excited too, and it quickly faded with all the stupid stuff they've imposed on themselves which has led to lives being lost and costing people jobs.
> This company is also in love with the H1-B program.
What ? That rings completely counter to everything I know about the aerospace field.
I spent my whole undergrad (Indian citizen) building planes and the big reason I left it was that no one in the airplane industry would hire engineers without security clearance. H1B engineers were legally impossible.
One of my aunts (US citizen) was a top level exec in GE Aviation, and she straight laughed in my face at the possibility of non-permanent residents / citizens getting jobs at any company deeply involved in defense. I have interviewed (2019) with Pratt and Whitney, and they too made it clear they won't apply for H1bs but they would apply for EB1 Green Cards...until which point (first 2-3 years) I would have to work on the small subset of non-defense projects. My friends who went to US top 10 universities for their masters in Aerospace literally returned to India because no one would hire them and another of my friend who was a scientist at ISRO (and more prestigious Indian defense programs he can't even state on his resume) hasn't gotten any call backs for job applications at Aerospace companies in the US because of being Indian. He has now pivoted to Applied Math as his graduate education.
As an Indian, I literally do not know a single person in the US with a job in the aeronautics industry. (Bar one that works at NASA-JPL in robotics and got his PR on hire, but he is literally one of the smartest and hardest working guy I know)
Now I understand that you aren't lying. But I would actually love to know more about the type of roles these H1Bs fulfill and how they get past these very real security issues.
Easy, they bring most of the people in through the front door aka Boeing of India (https://www.boeing.co.in/). Do a Linkedin search. I will admit most of H1-B is on the commercial side of the house which doesn't interact with the defense side at all.
> This company is also in love with the H1-B program. I don't mind H1-B at all, but when companies exploit humans from other countries so they don't have to pay American wages, that's where I draw the line, it's bad for everyone
My perspective as a non-American: I'd gladly work for less than "American wages" (which is still more than I earn in my country) in exchange for a shot at a green card.
That's now how it works though. You're going to make half what an American makes but have the same expenses. So basically you're broke, struggling to maintain abroad while being chained along with the promise of a green card.
When year 4/5 rolls around and it becomes time to pay the green card piper, they just fire you instead because legal paperwork is expensive and everything you struggled to build for yourself in America is instantly gone. Want that green card? Start the process over, 5 more years of indentured slavery.
It's not sustainable for anyone. I'd prefer they pay you what Americans make if they're going to ask you to live and work in America.
> I don't mind H1-B at all, but when companies exploit humans from other countries so they don't have to pay American wages, that's where I draw the line, it's bad for everyone except Boeing. They are specifically gouging people from India. Couple this with their time tracking policies which I wont cover, their business practices are fairly absurd and rather disgusting.
May 7th:
Boeing has raised $25 billion in a massive debt sale, allowing it to avoid tapping a $17 billion coronavirus bailout fund meant to shore up businesses critical to national security.
"That stance concerned lawmakers from Washington state, who urged Calhoun in a letter to “consider utilizing the economic assistance provided by the Cares Act to safeguard thousands of jobs at Boeing in Washington State and across the country.”"
It's interesting how the common narrative uses metrics like low unemployment rates during certain touted "economic highs" and claim correlates, yet the popular narrative casts aside the correlation during times like this and jump into ambiguities and positive outlook for justification during certain "economic downturns."
It really, IMHO, helps illustrate just how disconnected many of these metrics are from economic prosperity for the vast majority of Americans.
Boeing will survive on the backs of the government, but GE is going to have to do a lot more to survive this. Every time people mentioned that GE is going belly up they said: no, GE is still the leader in aviation engines. Also, GE has billions of dollars in loans that need to be repaid, and they were counting on selling some of their business to make the payments. Some people thought that they were in great shape for "recovery".
That Boeing website you note may be referencing old data. Based on their 2019 annual report, on page 18 under item 6, Boeing cites that they had a year-end workforce of 161,100 employees. The annual report is available here: https://investors.boeing.com/investors/financial-reports/def...
Boeing busts aren't a new thing in the Seattle area. My dad was involved in one in 1969 or so...that bust is where "will the last person leaving Seattle please turn out the lights" came from.
Exactly. I've been in the PNW since the mid-80's and Boeing issues are not unusual.
They are one of the largest military contractors (who supplies the country that spends the most on military), and it the only National aircraft manufacturer.
I feel for the people affected by this, but I don't doubt that Boeing will turn things around.
> The company announced in April it would cut 10% of its worldwide workforce of 160,000 by the end of 2020
With production halted for indefinite time for the 737 MAX, and no new orders for other planes due to covid that seems reasonable.
Still, even if planes don't do well right now and they had a few setbacks in their space business (Starliner delayed, and Boeing's moon lander proposal losing to competitors), they are still one of the largest defense contractors. They will be just fine.
U.S. governments spend almost $7 trillion annually. Federal defense spending is a bit over 10% of that. Does 90% not count as "redirecting tax revenue back to taxpayers?" At what point does it count?
Federal defense spending is a bit over 25% of the federal budget. Adding all US government spending together to make the point you're trying to make is highly misleading; any given tax payer likely only pays into one, maybe two state governments in any given year; cuts or spending in other state governments don't effect them. (I would entertain summing an average of local, state, and federal, to compare to, but not all.)
Defense spending is about 15% of the federal budget. Which makes sense, because defense one of the key areas entrusted to the federal government, as compared to state and local governments. Leaving out spending from the layers of government assigned primary responsibility for things like health and education is a deception intended to make defense spending look artificially large.
As to your other point: my calculation results in an average. Total spending on defense divided by total spending gives you the average spending on defense as a percentage of average spending at local plus state plus federal levels.
The top 1% in American own more than 50% of the securities. Using the stock market as any sort of proxy for aggregate quality of life for all Americans is like saying "Everyone must be doing great, caviar sales are through the roof!"
There is zero rationality in the market right now. Making good money on short term options but man this doesn’t seem “right”.
Just looked at the stock and options for Boeing. Going to sit this one out. I would normally be ordering a put/short with this news, but the way things are going wouldn’t be surprised to see their stock rise.
I joke, but also, I throw my hands into the air and say, "damn, I honestly have no idea how this all works, best just stick to target date mutual funds."
Let it die. Free up lots of skilled engineers to work in smaller more productive enterprises. E.g. the Nokia collapse [1]. The growth a few years after the dinosaur death is significantly better for society than keeping the beast alive on life support.
I think the fears that are keeping people off airplanes are also going to keep them off high speed trains.
I am dreading New York City reopening because everyone is just going to drive to the city instead of taking public transportation. And it was already overrun with cars.
Raise tolls, promote remote work unless you absolutely need to be in the city. Use economic incentives to destroy demand for unnecessary vehicular travel.
I am with you, but we don't have infrastructure for toll collection on most of the East River bridges, so there isn't an easy answer here. (A lot of the traffic on the East River bridges is trucks that are simply avoiding the more direct tolled truck routes. It's unfortunate that CO2 emissions are cheaper than tolls, but here we are. I live in Brooklyn Heights which is walking distance to Manhattan modulo a big river in the middle, and I know my neighbors are just going to start driving to work when things reopen. It is going to be a mess.)
London managed it with congestion charges, and it is not an island with limited entry/exit points. No toll booths required: it is doable within a reasonable timeframe.
Why is that? Bailing out Boeing every now and then is almost certainly cheaper than bailing out a rail operator to the tune of tens of billions of dollars every year, and still having them teeter on the verge of insolvency: https://skift.com/2018/03/05/frances-rail-system-is-falling-...
> Underused stations on expensive tracks are one of the many reasons France’s vaunted rail system is insolvent, subsisting on life support from the state. Rail operator SNCF runs an annual deficit of 3 billion euros despite receiving 14 billion euros of public subsidies annually—just under half the defense budget. Its debt, at 45 billion euros, equals the national debt of New Zealand.
It's important to point out that it's low speed, aging infrastructure that's a big problem for French rail. Bullet trains make a lot of money and in general people complain because as a result the SNCF invests a lot more into the high-speed infrastructure than to maintain the old, slow, regional lines.
The high-speed axes like Paris<->Marseille or the Paris<->Bordeaux are definitely not underused and the tickets are quite expensive, often more so than plane tickets but trains are generally a lot more comfortable and convenient (and about as fast or even faster door-to-door).
More broadly the problem is whether you consider that the SNCF should be run uniquely for-profit (in which case they'd probably end up closing all the small regional lines and only run the bullet trains) or if it's a public service that can lose money if it provides an important service for the citizens (in which case it makes sense to maintain the local lines even if they lose a lot of money).
Uh, please stop downvoting rayiner. He didn't say anything wrong or kooky, on the contrary he provided an interesting, substantiated counter-point not often heard around these parts. Do you people _want_ HN to become an even worse echochamber?
Secondly, it makes it hard for me to read because it's light-colored text on light background. So knock it off.
It's probably for the best. Would have costed 10x as much as trains in other countries at 1/4-1/3 the speed. You're paying for a lamborghini and getting a honda civic, and you won't get it for a decade.
Perhaps. I recall articles about how expensive NYC Subway projects are...
OTOH how much more expensive is running international aiports, airplanes, and jet fuel?
Plus flying sucks, even at the business and first class. Amtrack wasn't amazing but I had way more seat space with a basic ticket and didn't have to get irradiated and searched just to get on a plane.
Couple of years ago when someone was arguing with my about high speed rail a Brit piped up with how much it'd cost to build third runway at Heathrow. Something like $12 to $15 billion. Which is what convinced me the California High Speed rail a good idea. Build that and you don't need to expand about 8-12 airports.
I want high speed trains as much as the next person, but they don’t work for the United States in the same way that flying does.
High speed rail would work on the coasts and in specific intercity regions. There most definitely should be high speed rail between nearby large cities - Texas, the Midwest, and California could really use high speed rail systems.
But the lack of these routes aren’t necessarily a disaster at present, especially when Americans generally need a car at their destination anyway (thanks to irreversible city planning from the past).
What high speed rail can never compete with are flights across the huge country.
The world’s largest high speed rail network in China doesn’t have to deal with United States sized distances. All Chinese cities are relatively close to the eastern coast.
And all Chinese cities are easy to traverse and live in without owning a car. The whole concept of the automobile-based single family home detached suburb doesn’t exist there.
Even with these advantages, a high speed train from Beijing to Shanghai (about 5 hours) barely competes with a flight on a low cost airline. It’s slower and not even very much cheaper.
Beijing to Shanghai is about 640 miles by plane. That distance wouldn’t even get you from New York to Chicago. Now imagine trying to get from New York to Orlando (940 miles) or Denver (1600 miles).
A high speed train simply can’t go fast enough to compete on price nor time (remember: more time in transit means more salaries paid to crew).
Train beats airplanes by other factors e.g. easy transition to subways so people spend much less time going to the train station than airports; also airplane especially the cheap ones tend to delay for X hours without notice while trains are usually on time. Also trains are much more comfortable.
I will second this and also add that I think there are unlockable network effects that happen when economic activity can be more dense across the country vs. a few large metropolitan areas. Of course they could use some public transit as well.
I totally agree with you. The problem is, how do you undo a half century of city planning, especially when McMansions and subdivisions continue to sprawl to this day?
Realistically, you can’t - not quickly at least, and furthermore you’ve got a whole population of people that is used to this lifestyle.
So I’m just evaluating (in my opinion) the prospects of high speed rail based on what we have right now. I think if it was a slam-dunk no brainer economic activity and tax revenue generator, it would have been done already.
I respect your opinion, I think that it's something that takes investment before economic activity is seen. Like many startups spending venture capital to build a network that doesn't turn a profit until it's scaled to a certain size, rail builds economies around it where it is. A lot of boom towns in the early 20th century were a result of a railway moving through the town. Hotels, restaurants, shops, etc were built by rail towns. It provides a physical conduit of currency and importantly freight moving around the country (but until I have sources up, this is my opinion).
I agree that those factors can beat airplane travel, but none of them really outweigh travel time in practice.
For subway connections, there is no physical limitation preventing local transit from connecting to the airport. Cities of varying sizes have direct connections to local transit (e.g. Chicago, Fort Worth, Cleveland). The fact that New York City got this so very wrong is an outlier. And finally, subway connection is irrelevant to the bulk of American cities that are car dependent. Having a high speed train arriving in Columbus, Ohio won’t fix the fact that you need to rent a car or Uber everywhere once you get there (to the point where, if you’re within a ~6 hour drive, you’re probably better off just driving your own car that you likely already own).
Flight delay problems are overblown and dramatized, most flights are on time. Trains can most certainly be delayed as well (usually not as frequently, sure - depends heavily on the train system).
Thing is, a flight to LA from New York could be delayed for hours and hours and it would still beat the train.
The hardest part about building a railway is the land-rights. You need a straight path from A->B, wide enough for at least two lines and fence. But once you have that then re-using that corridor as railway technology improves is very cheap proportionately (e.g. train densities, train speeds, etc).
The problem is that no generation wants to take on the initial "buy in," even if it gets more and more expensive as time goes on (since there's more property/interested parties along the route).
The problem is that politics are so corrupt/inefficient in the US that the projects go 4x over budget/time with no consequences for the politicians/bureaucrats/contractors who let things like this happen.
Just look at the Honolulu Rapid Transit Projects and California High Speed Rail projects.
The overruns in California (relative to European norms) have been attributed to: Higher property prices, mountain ranges, and legal challenges (from property owners, environmental groups, and so on).
If you have specific information on "corruption" then you can update the Wikipedia article on the project here:
Even ignoring the "expected" inflation of costs. IMO the bottom line with California HSR is it would require far more tunneling than is feasible to construct. They studied it extensively, and LA-SF high speed rail just didn't make sense.
Maybe so, maybe not, but what's the relevance? We're discussing something generally transportation-related, so let's discuss trains vs. planes too now?
It seems like you're trying to make a connection here, but it's not clear what it would be.
Boeing spent $43B on buybacks last decade - 74% of free cash flow.
Got record $8.7B subsidy from WA state, then cut 17,000 jobs there
Fired its CEO over 2 plane crashes/jet grounding & gave him $80.7M on the way out
This is one of the hardest things as you scale the business. Make sure that the company's hiring effort isn't captured by politics, but stays aligned to the mission and rewards those who are competent. In a startup it's easy. You have direct market feedback. In a big company it's one of the most difficult problems to solve.
Feel pretty sure that in those 12k people fired were some of the most competent people at Boeing, while some of those better at politics were retained.
I wish I could fast-forward 5 years and see how America has responded to the pandemic.
Will America’s economic system have finally met its match with COVID, or will they be churning along with lower unemployment numbers than the EU as they have post-2007/8 pre-COVID?
I know someone in data analytics as Boeing. As of Sunday he had a job. Obviously Boeing is in multiple sectors and don't have all of their eggs in the 737-Max basket, working in other areas of aerospace and rocketry (see ULA).
this is a good time for Boeing to invest into R&D so that when aviation does recover (a while from now) Boeing would be ready with a novel high quality offering.
Boeing kinda does this though. The fact that Boeing benefits accumulate based on time employed and not duration of employment is a nod to this.
They have a reputation for building a 'company within the company' for new plane models, which basically means there's a lot of vertical integration that goes on, and you will know a great deal about one airplane but maybe not much about any of the others. At the height of each cycle they have far more people than they can sustain. They seem like a huge company but they're market cap isn't that high. Yes, they have a bigger market cap than Detroit, but it's also been over 10 years since Apple had enough money its war chest to buy Boeing for cash.
So when a plane hits pre-production they start to get an itchy trigger finger. They get rid of the idiots and the non-essential people, and the non-essential people can hop onto the next thing in a couple of years.
They hired like mad for the 787, then did a round of R & D layoffs a while after the first flight. If I'm not mistaken the rampup of staff after that was to build all of the -8 planes which were basically redesigning their other planes with 787 tech.
So it seems the new triple-7 flew in January, so yep, time to trim again. Meanwhile all of those people on the 737-Max are probably furloughed, or retraining on another assembly line, and there would not be an infinite supply of those even without Covid.
It might be more noteworthy to look at how many people haven't been laid off in a lockdown situation. A long time ago, the powers that be in Washington state looked at traffic patterns around Puget Sound and realized that Boeing commuters were a large percentage of this traffic. Boeing has offices all over King County, but the project you work on might be at an office across town, and you might pass several offices on your way to work.
So they made a tax deal with Boeing to divert traffic rather than building more roads. My understanding is that as part of that Boeing allowed people to work from other branch offices, and while working from home wasn't encouraged, some bosses would let you get away with 1 day a week telecommuting. And I'm not sure when 4x10 and 9x9 schedules (four day workweek, 10 hours a day, or 9 day fortnight, 9 hours a day) came in, but those helped too.
Conference call software de rigeur, and whole disk encryption since before it was cool. There are a lot of quite old building blocks in place for at least some departments to keep working without being in the same room.
Leaving Boeing stops the benefits clock instead of resetting it.
A lot of old companies had benefit carrots designed to keep you from leaving, so those benefits come on work anniversaries, rather than cumulative years of service. If you leave at 4 years to start your own company and then get bought or come back, tough luck, you start over.
If you worked at Boeing off and on for your whole career you'd still be in the pension program, even if you kept leaving every 4 years to do something else.
Yeah, unless that vaccine everyone is working on _really, really_ works I don't see demand for airplanes (or other forms of public transportation, for that matter) coming back to anywhere near the level it was before C19. FWIW, whatever travel I do this year will be by car.
And chances of that vaccine working _reliably_ are pretty slim: we do not have vaccines for any other coronaviruses, and they mutate. Our vaccines against the flu (which is not a coronavirus, but which also mutates) leave a lot to be desired.
How is this relevant at all? Boeing's cuts are being caused by a collapse of its commercial airplane business brought on by the pandemic. SpaceX doesn't compete in commercial aviation at all.
If you're referring to SpaceX winning the launch contract over Boeing, that happened a while ago, and has no connection to the pandemic or this layoff.
Congratulations to SpaceX for their accomplishment today, but it's neither here nor there for the topic of this article.
Boeing's Space branch hasn't been doing well in general. Starliner delays lost them a big PR opportunity, their Delta IV rocket is getting increasingly fewer launches due to Falcon 9 being a serious competitor, and their moon lander proposal lost to much less well established competitors.
Their problems in commercial aviation are undoubtedly worse and the bigger reason for this layoff, but another major division struggling certainly didn't improve Boeing's situation.
To me at least, the GP's comment read more like a shallow aggrandizement of SpaceX, whose successes and failures can stand on their own.
To connect the current layoffs at Boeing to the competition in the commercial space launch industry really seems to be motivated reasoning that focuses on irrelevant minutiae while the whale in the room is the impact of the pandemic.
Which is relevant insofar as Boeing's Starliner was on track to be the first American vehicle to deliver astronauts to the ISS in nearly a decade, but after their pretty bad test flight SpaceX overtook them and are now getting that sweet PR instead.
It's been a bit of a horse race. SpaceX was kind of in the lead for a while but then their capsule's thruster blew up in a ground test which set them back several months. Then Boeing failed their test flight which let SpaceX get back in the lead.
Except Boeing's Starliner so far has cost Nasa almost 2X as much as SpaceX, and is aiming for prices at around 2/3 more per astronaut (55mil SpaceX vs 90mil Boeing).
If it's a horse rase, the plough horse is neck-and-neck with the thoroughbred.
> but I think less air travel would in many ways be a good thing for the world.
This seems overly myopic to me. Aviation accounts for at most 2% of global juman CO2 emissions during normal years. I think you could come up with dozens of arguments for why it’s a net good. For example, tourism has income allows small island nations to better financially prepare for rising sea levels far in excess of aviations contribution to sea level rise. Not only that, but travel exposes citizens of wealthy nations to the real living conditions of people in developing nations, which can have a number of positive political effects.
Aviation has a relatively low percentage of total emissions only because globally almost nobody can afford to fly. For a rich person like you and me, a transatlantic trip is a good way of doubling your emissions for the year.
A transatlantic flight of 6 hours on a Boeing 737 would emit about 540 kilograms for a single passenger. In the US per capita C02 emissions were 15.8 metric tons in 2017. So the round trip would account for ~1/15th of a person's yearly total.
You could probably make that up by driving less, since a typical passenger vehicle emits about 4.6 metric tons of carbon dioxide per year. If you look at the UK, it's estimated that 20% of the nation's emissions are directly from heating and hot water, which is analogous to many areas of the US. This is largely due to old and poorly insulated housing stock.
This isn't meant to be CO2 whataboutism, but rather to compare meaningful individual contributions to emissions. IMO aviation for most international travelers may be a large single contribution, but they do it infrequently and other activities could be moderated of modified to make up ground. I mention this to support my parent claim that aviation has numerous benefits, and they may likely outweigh their costs accounting for externalities. That said, I would advocate a carbon tax that prices emissions into things like gas, heating, flying, etc.
1/15th of a yearly total that is far, far too large. A sustainable value is 3 tons of CO2 per year (https://www.ecocivilization.info/three-tons-carbon-dioxide-p...). Now that transatlantic flight is 1/5 a person's yearly total which also has to include the emissions for their heating, water, food, and transport which is just not feasible in western countries today.
To reply to makersofspoons the blog post cited sources the 3 ton figure from a 2011 UN report. The report only mentions the figure in the summary and states "3 tons of carbon dioxide (CO2) emissions per capita by 2050 MAY
need to be considered". This seems a little thin for advocating the eradication of aviation in 2020.
There's really no budget for burning kerosene if we are serious about the 1.5 degree target. The only way I see aviation being compatible is if there is a massive breakthrough in biofuels or battery technology.
That article doesn't directly cite any IPCC report. This actual IPCC policy maker summary report[1] makes exactly 1 mention of air travel and it is to suggest structurally shifting some air travel to rail as a minor component of improving total transit emissions.
You're right, I cited the wrong article. The summary does mention air travel only once, but it does mention the 80% reduction figure, which seems nearly incompatible with air travel if everyone is expected to live with yearly emissions of ~3-4 tons of CO2.
CO2 emitted high in the atmosphere has a stronger warming effect. I've seen factors of 2x-3x for airplane emissions[eg 1]. I underestimated per capita emissions for US people. A German only emits 9t, a French person only 5t.
Nice infographic. I'm sad to say I moved in the wrong direction on a few of these: I used to be car-free and vegetarian. Now that I have a family, I'm neither. Then again, I did get two fewer children than I actually wanted.
> In the US per capita C02 emissions were 15.8 metric tons in 2017.
What about taking a normal person and not an American? Even compared to other developed, Western-type nations, the US emissions are terribly high (only matched by the other 2 large Anglo-Saxon colonies); but triple of UK and France per capita emissions. And those 2 are already over the emission budget.
2% of CO2 emissions is a lot when you consider the number of people who produce it. For anyone who flies regularly it will typically make up the lion's share of their carbon footprint.
If you see my other comment, for most travelers in the US at least who make a single large trip every year or so the single trip makes up less than 10% of their emissions for that year.
2% is not negligible. that's about a fourth the emissions share of cars, which are much more essential to daily life where they are used. we don't have the emissions budget for any sacred cows; we need to see a big cut from every source of CO2.
the arguments you gave are not that compelling. air travel doesn't need to disappear entirely, but the environment would benefit from having it be a good bit more expensive. part of this could be increased airport fees to help the island nations recoup some of the revenue.
> Not only that, but travel exposes citizens of wealthy nations to the real living conditions of people in developing nations, which can have a number of positive political effects.
maybe so, but I doubt you could measure this with enough confidence to use as a basis for policy.
I'm arguing against the idea that a decrease in aviation is on balance good, and I was trying to avoid just making the economic argument.
However, there are tons of economies that rely on tourism to function. There is no clear way to make up for that in the short to medium term. It's generally agreed that economies need to decarbonize energy production ASAP, and that takes money which has to come from somewhere. For many economies less air travel directly means a diminished ability to decarbonize energy.
Now let's turn our focus to the nations that originate the travel in question. These places generate a lot of economic activity from travel as well. Now laid off employees of Boeing do not pay income taxes, and use public money in the from of unemployment services. If they were still employed their taxes could go to any number fo climate initiatives, their pay checks could purchase more efficient vehicles, and they could retrofit their homes.
Diminished economic activity doesn't position any nation to take active measures towards climate change mitigation.
Yeah that's not how it works, people losing their jobs and others being unable/unwilling to experience the world and travel is a very bad thing for the world.
There are other jobs, and I would like to see objective evidence that those wealthy enough to fly international derive more value from "cultural experiences" than not putting those metric tons of CO2 into the atmosphere.
Yeah that's very "woke" of you for saying that but there's really no positive way to spin this. When a pilot, or flight attendant, or engineer has to retrain and possibly leave an industry they've worked in potentially their entire life that causes pain and suffering.
It doesn't surprise me that the HN crowd lacks the empathy to see the damage being done here, but say for instance someone told you couldn't code anymore, you lose your job, and you might have to pivot into another industry at a time when nobody's hiring and you don't even have the skills or training to get in the door. Then some pompous asshole online says "well ackchually this is good for the environment because computers consume energy and don't run off of the hot air I blow everytime I open my mouth"
Please don't conflate being realistic with being "woke". It sucks you've lost your job. Retrain or retire. I'm not without empathy, but America has chosen the lack of safety nets it exhibits. And I can appreciate the environmental benefits from the pandemic that we couldn't do ourselves as a species.
I would be a huge fan of Medicare for All and more robust safety nets resulting from this carnage, but I don't expect it. People are irrational and selfish in aggregate, and when times are good they are entirely apathetic to the political process. Only under duress do they scream "do something" to the people they've elected who actively do harm to their constituents' interests.
Propose an alternative solution to a sudden destruction in demand for these roles. This is why your job is not who you are, but merely a means by which you support yourself. I apologize if your life path has lead you to where your identity is your work. I never said we shouldn't take care of these people. They deserve a similar quality of life, even if their role no longer exists, and I apologize if that wasn't made clear by my comments. To be clear: We absolutely should take care of people collectively whose roles have evaporated.
I am not willing to have communal tax dollars to pay pilots, aircraft lease payments, and fuel for unneeded air travel capacity, or workers to build planes that'll never fly, and I don't think that's unreasonable. I would be totally fine taking those tax dollars and putting those folks on Social Security early (or whatever safety net is going to keep them comfortable). Take that safety to go find new work you enjoy. Or go fish. Or woodwork. Or spend time with loved ones.
I think many here do have empathy with the people involved. I certainly do. But we also see the bigger picture.
Every industry that dies or suffers a setback is a tragedy, but it's also the unavoidable result of progress, of capitalism, and of any sort of active economic activity.
And the people involved can be taken care of. There doesn't need to be pain an suffering unless society decides that people who lose their jobs because of something like this need to suffer.
And for the record, a close friend of mine did indeed lose the ability to code. He dropped out of his PhD and become a shop security guard for 7 years. Not exactly his dream job, but he accepted it and it worked out. There are millions, probably billions, of people in the world who don't get to work their dream job. Pilots and flight attendants aren't the only ones. I'm all for helping them.
None of that changes the fact that excessive air travel does a lot of damage.
Agreed. Furthermore, traveling is overrated - yes I said that. Traveling to other places IMP is not as fun as going to national parks and exploring nature right here at home. Just my personal take on it - I’ve travelled extensively and I don’t enjoy it anymore.
You were agreeing with the statement "I feel sorry for the people who lose their jobs because of this, but I think less air travel would in many ways be a good thing for the world.
".
That necessarily implies that fewer people should be able to travel.
Yeah not all of us travel to compare national parks and nature. Bird watching in the Aleutian Islands would be a drag for most of us.
On the other hand, events with friends, lovers, annual festivals (yacht weeks, film festivals, music festivals), getting immersed somewhere else so long that you take classes and go about the day to day with others in the class, actually enjoying taking cross country trains because they are a fast and viable form of transportation. Can't wait till that is viable again! Many of those things are possible in the US, many of the events are just not in the US and their original locations are better for it, there are also lots of people not interested or capable of coming here, who I like to be around.
Even if I agree with your argument, not everyone lives near nature and national parks. Many people live in cities without sea, mountains, canyons, forests etc.
First the research goes. Then the product engineering drops. Then there's mass layoffs. Then the whole thing falls apart.
To an accountant, a drop in costs is as valuable to the business as a rise in revenue. To everyone else, this is obviously not true. Risking future profits to cut current costs is a great move according to an accountant. For everyone else, it's corporate suicide.
Edit: I realise COVID. But that's the excuse, not the reason.