LATAM’s midair ‘mass chaos’ not Boeing’s first injury. 🤕 Boeing’s year hasn’t started well. And now New Zealand’s joined the tally of in-flight mysteries following LATAM Airlines’ ‘horror flight’ - when their Boeing 787 Dreamliner had a ‘technical event’, the incident prompting Air NZ to issue assurances defending their Boeing fleet.

Are the wheels coming off Boeing? 🛞 Boeing (BA) has a widely documented flight incidence tally - not all of it Boeing’s fault - stretching beyond missing Malaysia Airlines flight MH370, to this year, a door blowing off Alaska Airlines’ plane mid-flight, leading to the grounding of 171 Boeing 737 Max 9 planes. And now Wall Street has waded in setting Boeing’s stock price for the year ahead.

Many of Boeing’s woes can be traced back to their 1997 merger with rival McDonnell Douglas. Unusually, incoming James McDonnell took over as CEO, swiftly axing 48,000 jobs - many in engineering - allegedly prioritising profits for shareholders over quality control. A move which later saw Boeing whistleblowers testify before Congress. Now some pilots have safety concerns:

‘It gives me even more pause when I get on the airplane. And not a pause of concern of flying it – but making sure I’m watching it like a hawk.’ - American Airlines pilot Dennis Tajer representing the Allied Pilots Association

While Boeing CEO Dave Calhoun paddles fiercely underwater to restore the legacy Seattle company’s former reputation of ‘unmatched safety and quality’ amid criminal fraud proceedings - costing billions - pilots are calling on the FAA to investigate every airline. 

Following this year’s Alaska Airlines midair blowout, however, Calhoun urged employees in an email to focus on Boeing’s delivery, saying:

‘We will simply focus on every next airplane while doing everything possible to support our customers, follow the lead of our regulator and ensure the highest standard of safety and quality in all that we do. Ultimately – that is what will drive our performance. We will go slow, we will not rush the system and we will take our time to do it right.’ - Boeing CEO Dave Calhoun

How Boeing makes money‍

Making planes is not Boeing’s only moneymaker. 💵 Protestors have called on Boeing to end ‘war profiteering’, because along with manufacturing commercial planes, Boeing is the world’s fifth largest defence company by revenue, behind US companies Lockheed Martin Corporation (LMT), RTX (RTX), Northrop Grumman Corporation (NOC), and China’s Aviation Industry Corporation of China.

Of Boeing’s total full year 2023 revenue before expenditure of US$77,794 million, their Commercial Airplanes business unit accounted for around 43.58% of revenue while Defense, Space & Security comprised 32%. The company also reduced their fourth quarter net loss to US$30 million, down from US$663 million the previous year. 

Why is Boeing stock dropping?  

‍Boeing has joined Tesla as one of the worst performers in the S&P 500 this year - their stock falling 28.57% year-to-date (YTD). Last week Forbes listed a catalogue of potential red flags after the company’s biggest share dip since October 2023, saying:

‘Boeing stock tanked again Tuesday as the aerospace giant’s headaches mount, wiping out roughly $45 billion of market value in 2024 alone as high-profile safety incidents draw the ire of Washington and Wall Street.’ - Derek Saul, Forbes

Defence stocks on US share markets

US defence stocks rise in 5 years as global tensions mount. 🪖 As well as Boeing, some large market cap weapons manufacturers and companies with military contracts are constituents on the S&P 500. But unlike Boeing, which has seen their stock fall 50.34% over five years, some other defence stocks have lifted - as much as 172.72% for General Electric (GE).

In order of largest market cap, the top ten defence stocks performance over 5 years on the US share markets are:

• General Electric (GE) has an aerospace segment which produces defence aircraft engines, but forms just one part of the company, and holds a market cap of US$185.758 billion. Their stock has climbed 34.90% YTD, and 88.96% year-over-year (YOY)
• RTX (RTX) is a global military manufacturer of weapons and missiles, including for the US Navy, the US Marine Corps, and the US Air Force with a market cap of US$124,268 billion. Their stock has lifted 9.67% YTD, but fallen 4.17% YOY
• Honeywell International (HON) supplies the global military sector, including producing engines for the US Army’s Chinook helicopters, with a market cap US$128.323 billion. Their stock is down 5.86% YTD, but up 3.62% YOY
• Boeing (BA) is involved in developing and maintaining military aircraft and satellites, and contributing to weapons systems used globally. It holds a market cap of US$109.727 billion. Their stock has fallen 28.57% YTD, and dropped 12.17% YOY
• Lockheed Martin Corporation (LMT) manufactures advanced military aircraft, ground vehicles and missile defence systems, and holds a market cap of US$104.68 billion. Their stock has fallen 5.02% YTD, and dropped 8.93% YOY
• General Dynamics Corporation (GD) manufactures the main battle tanks for the US Army, and has a market cap of US$76.057 billion. Their stock has climbed 7.35% YTD, and is up 26.23% YOY
• Northrop Grumman Corporation (NOC) produces advanced aircraft systems for the US Air Force and the US Navy, and manufactures tactical weapons and missiles, and holds a market cap of US$69.375 billion. Their stock has declined 1.64% YTD, but is up 2.92% YOY.
• Amphenol Corporation (APH) manufactures electrical, electronic and fibre optic connectors for the US Navy, and has a market cap of US$65.738 billion. They’ve seen their stock grow 13.18%  YTD, and surge 41.10% YOY 
• TransDigm (TDG) produces engineered aircraft components that are used in most military aircraft, and holds a market cap of US$65.671 billion. Their stock has grown 19.03% YTD, and soared 68.72% YOY
• Cummins (CMI) has defence contracts, including manufacturing mobile power sources for the US Army and has a market cap of US$40.588 billion. The company is another gainer, with their stock ahead 18.63% YTD, and up 24.42% YOY. 

Smaller market cap defence stock companies are:

• L3Harris Technologies (LHX) produces electronic warfare technology, such as two-channel handheld radios for the US Army  and has a market cap US$40.096 billion
• Textron (TXT) supplies military and electronic systems in sectors including defence, with a market cap of US$17.915 billion
• Leidos Holdings (LDOS) provides defence solutions including mission systems and C4ISR technologies (command, control, computers, communications, intelligence, surveillance and reconnaissance), and has a market cap of US$17.061 billion
• Huntington Ingalls Industries (HII) makes ships for the US Navy, and holds a market cap of US$11.505 billion

Defence ETFs and REITs

US share market-listed defence ETFs and REITs provide investors with diversification in the defence industry, and include:

• Invesco Aerospace & Defense (PPA) has a net asset value (NAV) of US$98.27. Its stock is up 7.25% YTD and has climbed 25.72% YOY
• SPDR S&P Aerospace & Defense (XAR) with a NAV of US$137.54 has seen their stock lift 2.09% but climb 21.04% YOY 
• iShares U.S. Aerospace & Defense (ITA) has a NAV of US$127.28. Their stock has lifted 1.31% YTD and it is up 13.32% YOY
• COPT Defense Properties (CDP) is a Real Estate Investment Trust (REIT) that owns, operates, and develops properties near US Government defence installations and missions, and has a market cap of US$2.753 billion. Its stock has fallen 7.10% YTD but has climbed 4.88% YOY  
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‍So… is Boeing safe? Circling Earth at any one time can be as many as 8,700 commercial flights carrying up to around 1 million passengers. CQUniversity Australia head of aviation Professor Doug Drury asked, ‘is it still safe to fly on Boeing planes?’, concluding that ‘Yes, it is.’ ‍

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