Yesterday, Boeing's commercial division announced that it will have delivered 380 aircraft in 2019, the lowest level in more than ten years (especially since it includes some military versions of the civil aircraft). Airbus has delivered a total of 863 over the same period. The B737 family order book still contains 4,398 aircraft. The A320 family backlog exceeds 6,000 units.

2019, a record year... for Airbus

Financially, nothing seems to be able to bring down the American group. However, the rating agencies are ready to draw down the strength of the industrialist. The B737 MAX affair has already officially cost it $9.2 billion, which is more than the cost of developing the aircraft! An amount that will certainly be revalued on January 29 when the company's results are released.

The single-aisle aircraft is not expected to return to service until early June at American and United Airlines. At the same time, Boeing negotiators are criss-crossing the planet to discuss compensation with their client companies. By piling up billions of dollars, even the giants of the American stock market can find themselves shaken.

Stock buybacks

In any case, these provisions will not go towards the industrial development of the company. For some time now, Boeing has been pampering its shareholders more than its engineers. And that is probably part of the problem. Economists William Lazonick and Mustafa Erdem Sakinç have calculated that between the first quarter of 2013 and the first quarter of 2019, Boeing paid out $17.4 billion in dividends (42% of profits for the period) and bought back $43.1 billion worth of shares, or 104% of profits for the period. Buybacks peaked at $9.2 billion in 2017, but still represented $9 billion in 2018.

Obviously, part of these funds - more than $60 billion in 7 years - could have been used for industrial purposes. Boeing's last big program, not to mention the B737 MAX, went rather badly. The B787 finally seduced the companies, but after a lot of setbacks and a final bill that would have exceeded, it is said, $30 billion.

The difficulties encountered on this project also weighed in the balance at Boeing, when it was necessary to decide between a completely new single-aisle aircraft and a modernization of the venerable 737, whereas the aircraft had already undergone a facelift a few years earlier. It is only a short step from there to thinking that industrial expertise has been dulled by the flight of capital.

Mixing of genres

The trivialization of large-scale share buyback programs is all the more harmful because it sometimes goes hand in hand with variable executive compensation indexed to a cocktail of performance ratios and share price growth. This was the case at Boeing for the now ex-CEO Dennis Muilenburg, who was forced to resign at the end of 2019 because of the B737 MAX scandal. He received close to $96 million in gross compensation between 2015 and 2018 (again according to the work of Lazonick and Sakinç), while his annual salary was close to $1.7 million. More than half of the gross compensation comes from the exercise of stock options and free shares. And 34% of this compensation is based on financial ratios achieved by the company (note that some ratios are easier to achieve when there are fewer securities outstanding).

The Boeing share suffers but does not break in 2019

I will end with the amazing journey of the Boeing stock since March 13, when the B737 MAX was grounded. All in all, it has lost only 11.5% of its value. Admittedly, the differential with the S&P500 is significant (underperformance of 29%), but the sanction seems rather light in view of the consequences, in particular the proven loss of confidence of some carriers, crews and even customers. The new CEO has promised a profound transformation of the company. This will require more than share buybacks.