Good news for Boeing
Too little, too late.
Unfortunately, around about the same time McNerney was making his statement on CNBC, the Wall Street Journal ran a related report delivering Boeing's promise to begin deliveries to Air India (AI) as well, in the final quarter of the year. Problem is, according to AI, those deliveries should have begun two years ago. Boeing should have already delivered 20 Dreamliners to Delhi. The fact that it didn't, says the airline, has already cost Air India $1.32 billion in lost revenue -- which paints an "interesting" scenario for Boeing investors.
Consider that Boeing currently claims 847 Dreamliner orders on its books, with customers ranging from AI and ANA to Delta
(847 planes) / (20 planes owed to AI) x (AI's $1.32 billion lost revenues) = $55.9 billion
... or roughly $56 billion in lost revenues across the dozens of customers kept waiting. What, a Fool can wonder, will happen once the Dreamliners finally do get delivered, the damages from the delays become "fixed" in time, and if its customers begin demanding compensation for their accumulated losses?
This, Boeing investors, is the $56 billion question. We've already seen Boeing come to an understanding with Spirit AeroSystems
And what about Boeing's customers? Do Boeing's sales contracts specify liquidated damages in cases of contract breach? Might customers actually sue Boeing for lost revenues, or perhaps only lost profits? If the latter, well, most U.S. airlines eke out a living on 1% to 2% net profit margins, so maybe the damage won't be so bad after all. In Air India's case, the customer certainly has incentive to sue. Prior to returning to operating profitability in November/December 2010, AI had been losing money for years. If there's a chance AI can make Boeing cover some of those losses, I expect it will try.
Secure your tables, and return your seats to an upright position, Boeing investors. 2011 could be a rocky ride.
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