Airlines

British Airways places order for 200 Boeing 737 MAX

Nothing like a confidence boosting 200 plane order for the highly criticized Boeing 737 MAX jet at the Paris Airshow. British Airways CEO Willie Walsh said,

We have every confidence in Boeing and expect that the aircraft will make a successful return to service in the coming months.

There is no doubt Boeing offered a competitive price to generate some positive news spin since the crisis erupted. As CM always contended,

Ultimately the market will decide on the 737MAX. The plane has a 4,000+ unit backlog. Even if airlines wanted to change to A320neos, the switching costs would be prohibitively expensive in terms of pilot certification, maintenance and joining the end of an equally long queue. The order book is unlikely to suffer widespread cancellations.”

The mainstream media proves again its proclivity for sensationalist journalism without understanding the industry dynamics or the facts.

Boeing raises 20yr forecast

Boeing reports airlines will need around 44,000 new commercial aircraft worth $6.8 trillion by 2038, vs. 43,000 planes worth $6.49 trillion estimated in 2018. The biggest demand will remain for single-aisle jets. 32,420 narrow-body planes are likely to be built.

So much for the fear of global warming induced by air travel. In total, planes are 2% of human induced CO2. Or 0.00024% of the CO2 in the atmosphere.

Although the International Air Transport Association (IATA) wilted to the gun held to its head by the UN. The IATA has got behind the movement to do its bit for climate change. In a two page flyer, it covered the idea that we reckless passengers must consider our carbon footprint but at the same time help the U.N. raise $40bn in taxes, sorry ‘climate finance,’ between 2021 and 2035.

The reality is if Greta Thunberg receives an invite by the Queensland government to lecture on climate change she can rest easy that the footprint in the air will be so tiny because there isn’t a diesel electric train to get here.

Sustainable air travel will require extra sick bags

Air France-KLM is looking to fund the Dutch Delft University of Technology to explore a flying wing design known as the Flying V, where passengers will sit.

Boeing dabbled with the idea in 2007 but scrapped it as it likely worked out passengers sitting out toward the wingtips would be thrown around like rag dolls in turbulent weather. Anyone who has tried to drink hot coffee during rough weather will know how even sitting toward the centre of the plane causes it to swish about, mostly in the saucer. A wing aisle seat would mean one would wear it.

Better to save shareholders’ funds Air France/KLM. Prototyping this “sustainable aircraft” might do wonders for its CSR signaling but has it considered that it must include the environmental footprint of extra sick bags and all those nasty chemicals required to clean up the mess of those who suffer motion sickness but didn’t make it in time?

Perhaps Mother Nature has given us all tips on air travel. There are many passenger jets shaped like birds. Yet no birds shaped like the Delft University of Technology design…

If Air France/KLM is so worried about the environment the best thing to do would be to close down operations.

The Virgin Group CEO Josh Bayliss said,

“It’s definitely true that right now every one of us should think hard about whether or not we need to take a flight.”

Close the airline if it means so much to save the planet.

Constructive dismissal?

CM’s view on the incompetence of Rugby Australia (RA) is well documented and reconfirmed by Alan Jones in The Australian today. It appears that Israel Folau looks more like a sacrifice to the altar of the sponsor god, Qantas.

Sponsorship money is important to sports teams but it should never get to a point where the sponsored has to make unconscionable decisions to acquiesce their paymasters. It is unethical.

CM has long held issues over Qantas’ flagrant use of shareholder capital to sponsor the CEO’s activism. It is terrible governance.

Remember the acceptance rings ahead of the same sex marriage debate that Qantas pushed so hard on us? The idea was to distribute these acceptance rings (not fully closed) to customers, clients and travellers.

CM supposed if someone were to politely decline to wear one they risked being be branded homophobic, bigoted and summarily ostracized for expressing such views. It might be that they actually support gay marriage but do not wish to express it openly. That is nothing more than a conscious choice, not categorical staunch opposition. Perhaps failure to wear the ring could cause their career takes a turn for the worse all because they don’t comply with group expression i.e. corporate slavery. The team leader who passes them over because they incorrectly assume the employee is a dissenter. That is palpable workplace bullying encouraged by a woke CEO.

What Jones points out is that the ‘wallaby court’ had already decided the outcome before a word was uttered in defence. It appears it was a ‘hearing’ conducted with the deaf.

RA CEO Raelene Castle apparently told Vanessa Hudson, chief customer officer at Qantas,

I updated her on the situation a day after the post and told her that, confidentially, Rugby AU would be working towards a process to terminate Mr Folau’s contract and that Ms Hudson can share that position with Qantas chief executive Mr Alan Joyce. Ms Hudson texted me later that day saying that she had only shared the update with Mr Joyce and he was appreciative of the transparency and he said that a speedy resolution by Rugby AU was paramount.”

This says a lot about Qantas. If it wants to exert control over RA it should acquire it and manage it as a subsidiary.

Yet where was the pushback by RA? It flaked. If it understood the dwindling fan numbers meant it wasn’t connecting to revenue, it might have thought defending Folau might have been its greatest coup and that many non virtue signaling corporates could replace Qantas’ sponsorship.

The culture of RA is self evident. It is not about rugby anymore but a platform for identity politics.No wonder fans are deserting it. CM discusses dwindling fan numbers yesterday, something Jones alluded to. Put simply, the product stinks and that rot permeates from the top. Fans aren’t stupid.

Coach Michael Cheika’s abysmal win/loss record is tolerated because he tows the line of the C-level cabal. So do some of the players who threatened to boycott the team if Folau was allowed to keep playing.What a joke! These virtue signaling players if given the choice to stand by their beliefs or keep their lucrative contracts would choose the latter every time. They sounded just like those Hollywoodcelebrities that threatened to leave America if Trump won the presidency.Hypocrites.

However it only reinforces the reality of the culture within the RA that encourages this type of numb skulled response to pander to the top. If these players wanted to think about faith in context of not selling out core beliefs they could learn muchfrom Israel Folau.

It increasingly looks like the high level breach has been committed by the board in cahoots with Qantas.

As CM mentioned yesterday, perhaps receivership is the best outcome for RA. That way the apparatchiks get cleared out and replaced by people that connect with fans who ultimately pay the keep the lights on at HQ. It isn’t that hard to fix RA’s problems but it will be impossible with a leadership team which seems to support constructive dismissal at the behest of corporates that champion activism rather than principle. Clearly Qantas is the mean “spirit of Australia”

Get woke, go broke.

IATA caves to the climate change cabal to fill the UN coffers

The International Air Transport Association (IATA) has got behind the movement to do its bit for climate change. In a two page flyer, it covered the idea that we reckless passengers must consider our carbon footprint but at the same time help the U.N. raise $40bn in taxes, sorry ‘climate finance,’ between 2021 and 2035.

The Carbon Offsetting & Reduction Scheme for International Aviation (CORSIA) is the vehicle which the UN’s International Civil Aviation Organization (ICAO) intends to liberate us from our sins and help fund the waste so endemic in the NY based cabal. Wherever the UN is involved expect a sinister agenda behind the virtue.

All airlines have been required to monitor, report and verify their emissions on international flights since Jan 1, 2019. Operators will be required to buy “emissions units” from the UN. If one asked the UN would it prefer emissions to be cut or taxes to be raised, it would select the latter every time.

But why? Passengers don’t seem to demand airlines flight shame them before they board. On the contrary, many carbon offset schemes exist among airlines but hardly any passengers elect to pay them. Note the world’s largest offset program below.

In its 2017 Annual Report, Qantas boasted,

We have the world’s largest airline offset program and have now been carbon offsetting for over 10 years. In 2016/17, we reached three million tonnes offset.”

Carbon calculators tend to work on the assumption of 0.158kg CO2/passenger kilometre.

In the last 10 years, Qantas has flown around 1 trillion revenue passenger kilometres. While the literature in the annual report denotes one passenger offsets every 53 seconds, the mathematical reality is simple – 2% of miles are carbon offset. So that means that 98% of people couldn’t care less.

Perhaps more embarrassing is that The Guardian noted in Jan 2018 that,

Qantas [was the] worst airline operating across Pacific for CO2 emissions

Kind of a massive load of hot air when you do the maths!

Which begs the question, why does the IATA feel compelled to intervene in ramping up the costs of travel when passengers aren’t calling for it? IATA’s job is to keep airlines flying and support the growth where it forecasts a doubling of air travel by 2030. Airlines have been ordering Boeing 737 MAX & Airbus A320neo short-haul jets as well as long-range B787 & A350 in huge numbers to take advantage of fuel efficiency that helps lower operating costs.

By IATA’s own admission, global air travel in totality is only 2% of man-made CO2 emissions. That is to say that all air travel is responsible for 0.00003% of CO2 in the atmosphere. Big deal! What is the point of taxing an industry where the footprint is so minuscule?

Take Josh Bayliss, CEO of Virgin Group. He said,

“It’s definitely true that right now every one of us should think hard about whether or not we need to take a flight.”

Why doesn’t he close down the airlines in the portfolio? Instead of waiting for his customers to grow a conscience via flight shaming and do the right thing why not force their choice? The obvious answer is that it’s hypocritical in the extreme.

Airlines operate on about 70% capacity load factor break even so if Virgin flights end up being half full thanks to flight shaming he’ll only end up having his fleet of jets spewing more or less the same CO2 per flight which will ultimately put the airline out of business.

It is all too stupid. IATA joins the growing list of bodies petrified to talk in hard numbers about true impacts. When the 22,000 pilgrims that fly each year to UN COP summits around the world to kneel at the altar of the IPCC practice what they preach, CM may start to feel concerned Until then, CM will keep calling the climate hoax out. Deeds, not words, IATA!

737 MAX is more Audi TT than Ford Pinto

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The NY Times has come out with a hit piece on Boeing and the ill-fated Boeing 737 MAX. Yet to CM, the problem seems more an Audi TT or Mercedes A-Class than a deliberate case of manufacturing flaw that was the Ford Pinto.

Recall that Ford deliberately placed the fuel tank to save money, knowing that it could spontaneously combust if hit from the rear. Yet the financial boffins deduced that the cost of making the move to a safer position would not be worth the risks of such a scenario playing out. Boeing never designed the 737 MAX to have inherent instability. The computer modelling power now is such that the most extreme scenarios would have passed muster. The FAA felt confident that the plane was airworthy to approve it.

Audi had an issue in 2000 with the TT. The sleek 2-door sports car was built off the VW Golf platform. However, the car was found to be prone to uncontrolled spins which killed 5 drivers. Audi was forced to install a spoiler and more sophisticated driver aids (software) to prevent the problem from occurring again. Same for the Mercedes Benz A-Class which failed the elk test conducted by a Finnish motoring magazine in 1997. It flipped when trying to avoid a dummy elk on a test track. This forced Mercedes back to the design room to install stability software to overcome the problem and restore its reputation for safety.

This is essentially what has happened at Boeing. While the press wishes to point to evil doings, the reality is that poor internal communication on such a big project was to blame, not willful negligence. Planes are pushed well beyond what they would ever be likely to encounter in real life. Take the 787’s wing flex test at 30% more than the plane would ever encounter while flying in the worst conditions.

It makes absolutely no sense for Boeing to take such massive risks on the 737 MAX, its #1 selling aircraft, by making it in such a way that it had a high propensity to crash.

The Boeing 737-400 series had inert fuel tank issues where near empty scenarios could cause the vapor to ignite in the centre tank that could lead to a deadly explosion. Several did. Some in the air. Some on the tarmac. These planes weren’t grounded. World aviation authorities, like Australia, issued advisories on how to mitigate the risk of it happening.

The 737 also had a rudder hard-over fault which led to several crashes. The design flaws were rectified when one pilot was able to recover the near-death experience. It was a faulty rudder actuator which could stick under certain temperatures.

The list of 787 airworthiness directives (from fire issues, wings, flight controls to landing gear) stands at 52. FIFTY-TWO. Sure a 787 has not crashed yet but where have the authorities been trying to ground the type until it has no ailments at all? Do they need a crash to rally into action? Or do they look at the issue on its individual merits? The 737 can fly without this AOA safely, which is why the FAA still allows its operation.

Having been a former aerospace analyst, this is the first time in a very long time CM can remember that a virtual global ban was put on any aircraft type. When Qantas flight QF32 (an Airbus A380) had an uncontained engine failure which ruptured the wing tanks and severing hydraulics, the airlines grounded their own planes as a safety measure, not the authorities. Singapore Airlines suspended its A380 flights for one day before resuming operations.

When AA587 crashed in Queens after the tail and engines sheared off, Airbus A300s weren’t summarily grounded. When AF447 crashed into the ocean off the coast of Brazil, A330s weren’t grounded as a precaution. It was pilots not paying attention to basics protocols, becoming overreliant on systems.

Ultimately the market will decide on the 737MAX. The plane has a 4,000+ unit backlog. Even if airlines wanted to change to A320neos, the switching costs would be prohibitively expensive in terms of pilot certification, maintenance and joining the end of an equally long queue. The order book is unlikely to suffer widespread cancellations.

Airlines run on razor-thin profit margins and the extra efficiency the MAX will offer over the existing fleet is why airlines want them now. The new LEAP-X engine technology is a once in 50-year event. The engines offer more power, 15% better fuel economy and lower emissions. The components are now ceramic matrix composites (CMC) which allows the engine to burn hotter and increase performance without suffering extra fuel burn. Nippon Carbon is the sole supplier of this magic material.

There has undoubtedly been a breakdown in communication with the FAA and Boeing. This engineering flaw can be safely encountered by software. While the NY Times has tried to over-exaggerate the fault in design, the reality is that all aircraft have engineering limitations. The 737 is a 50 years old airframe with over 1 billion passenger miles.

CM has stated many times that pilots have become too reliant on safety systems. AF 447 was a perfect case in point. When these glass cockpits with all manner of electronic trickery go wrong, pilots only need first principles to fly.

CM is sure that Boeing will recover from this incident and 737 MAX deliveries will continue as they had. The press just seems too eager for click bait, not understanding the complexities of developing new aircraft.

Go woke, go broke

Yet another example of why CM has cancelled his FT subscription. Where is the critical reporting? This article by Pilita Clark doesn’t critique the ridiculous movement by corporates to virtue signal but falls in line with the stupidity.

Maybe the best metaphor for the woke corporation is parsley. It often looks nice as a garnish but 99.9% of us push it to the side of the plate and leave it to be thrown away.

Corporate hypocrisy is everywhere.

Take Josh Bayliss, CEO of Virgin Group. He says,

“It’s definitely true that right now every one of us should think hard about whether or not we need to take a flight.”

Why doesn’t he close down the airlines in the portfolio? Instead of waiting for his customers to grow a conscience and do the right thing why not force their choice? The obvious answer is that it’s hypocritical.

Airlines operate on about 70% capacity load factor break even so if Virgin flights end up being half full he’ll only end up spewing more or less the same CO2 per flight and go out of business. British Airways, EasyJet and Ryanair will welcome Virgin’s virtue signaling. Go woke, go broke.

Qantas has the world’s largest carbon offset program yet only 2% of passengers elect to pay. That’s the extent of the belief in global warming.

Blackrock’s chief Larry Fink said his asset manager needs to do more than just make money yet it only backed 10% of the climate related shareholder proposals. Why? Supposedly because they would crush profits. All talk, little walk.

BP surprisingly helped prevent a carbon tax it openly launched support for. A fossil fuel company trying to undermine a carbon tax? Wow. Who’d a thunk?

UK shadow chancellor John McDonnell has said Labour would seek to delist companies from the London Stock Exchange that didn’t meet their climate change commitments. In order to meet that, will that mean a child daycare company will be burnt at the stake for not brainwashing kindergarten kids? Will there be a minimum pot plant to child ratio?

How would regulations impact the myriad of different businesses that would trigger being dumped from the LSE? What standard would be applied? CM is betting corporates jus need to “file” a governance statement on climate change which no one will read. As long as 100% of companies file, nothing will happen.

Pretty easy to avoid too. Companies could list on Nasdaq or the Singapore exchange to avoid the regulations and still raise capital. Did you think of that Mr McDonnell? No because it is all about being woke and there are plenty of alternatives to dodge stupid policy. Capital is global.

Pilita Clark closes her article by saying,

“Yet the climate debate is shifting and I am willing to bet that companies failing to match their green claims with solid action face far greater risks than they ever have before.”

Like much of the climate religion, few hard facts are ever presented except the date we are all supposed to die. Even then that is an ever-shifting goal post. We can be assured that when 2028 arrives all of a sudden we’ll have another 12 years to do something. A bit like the joke where a patient asks his doctor how long he has to live and is given an extension so he can pay his bill.

The ever-growing tide of the “woke” corporation is going to thwart ingenuity and entrepreneurship. It is corporate suicide to pander to this nonsense. It is not for companies to bang on about their wonderful commitments. Customers and shareholders can decide for themselves. Maybe if companies listened to both groups they would find profits go up. People are growing sick and tired of being told what to do. How to think.

The world is littered with corporate wokeness backfiring. The irony is much of it is self-inflicted. By trying to create false images of virtue, the results have been disastrous.

P&G had to write off billions from its Gillette brand for the toxic masculinity campaign. Before the campaign Gillette was ranked 7th out of 45 health and grooming brands. After, rock bottom.

There is almost a wave of corporate fear twisted by a minority of social activists like Sleeping Giants which create false narratives about public perceptions of evil companies. There is a flip side.

Chick-fil-A was established by Southern Baptists. They don’t ram their Christian beliefs at all in the restaurants. Activists tried to boycott the fast food outlet because one of the directors personally didn’t support same-sex marriage. Guess what, store numbers have doubled and revenues tripled over the last decade.

Chick-fil-A states it’s mission is, “To glorify God by being a faithful steward of all that is entrusted to us. To have a positive influence on all who come in contact with Chick-fil-A.”

Chick-fil-A is notable by its closure on Sundays, Thanksgiving and Christmas. So people are well aware ofthis corporate backing its religious beliefs.

There is a difference between founding a company on certain beliefs and concocting them to ride a wave of hijacking social movements. Customers are aware of the difference.

Virgin Group can wax lyrical about its concerns in trying to save the planet but the only woke thing would be to shut down. Pushing the guilt back on its customers shows how hypocritical the airline is.

To be honest it gets tiring waiting in corporate lobbies watching flat panel TVs advertising all of the wonderful community things they do. 99% of the transaction with any corporate will be driven by the ability to deliver goods and services, not supporting tree planting. It is not to diminish charity or good intentions, rather to cut back on acting as though they’re angels to avoid being put on an imaginary naughty step that doesn’t exist.

Perhaps CM should recommend a portfolio of non-compliant ESG companies. When the market sells off, all the passive money in ESG compliant names should well underperform those that don’t. Perhaps an asset manager should establish an ETF with a basket of companies that just provide product or service rather than garnish it with lashings of corporate virtue. Here is betting it would be a contrarian winner.