On November 5, US voters will decide who will move into the White House for the next four years. Shortly before the ballot, the result is still open - in the polls, Kamala Harris and Donald Trump are running neck-and-neck. What is certain is that the future president will initially travel on the plane of his predecessors. Two brand new Boeing 747-8s were actually due to go into service at the end of the year. However, the first flights of the two "Air Force One" were postponed in the summer. According to the adjusted plans, the jumbos, which are equipped with 4,000 square meters of office, conference and living space, will not take off until 2026. The delays to this prestigious order are symptomatic of Boeing's problems. The long-established aerospace company is experiencing serious turbulence.
A glance at the share price is enough to recognize the extent of the misery. While Wall Street as a whole is rushing from one all-time high to the next, Boeing has been bobbing along for years. The industrial giant is now trading at less than half the level it was at the end of 2019. Meanwhile, its European competitor Airbus has long since reached or even surpassed its pre-coronavirus level. What the two transatlantic rivals have in common is their bulging order books. Boeing estimates its order backlog at the end of September 2024 at more than half a trillion US dollars. Almost 84% of this sum came from the core business, commercial aircraft construction. This includes orders for around 5,400 aircraft from airlines, companies, governments and leasing companies. However, Boeing is failing to profitably process the lavishly filled backlog.
The acute crisis began with two fatal accidents. Boeing 737-Max aircraft crashed in 2018 and 2019. The crashes, which were presumably caused by problems with assistance software, were followed by groundings, legal disputes and other near-disasters. A labor dispute in the USA is currently exacerbating the situation. The strike has brought production of the 737-Max and the long-haul 767 and 777 series to a standstill. The majority of the 33,000 workers on strike have rejected a second wage offer from Boeing, which proposed a wage increase of 35% over four years. Even before the strike ballot, the wage dispute had pushed the company even deeper into the red. Boeing reported an operating loss of just under USD 7 billion for the first three quarters of 2024.
Kelly Ortberg wants to take the helm; he has been CEO of Boeing since the beginning of August. The manager with 35 years of experience in the aerospace business makes no secret of the fact that the one-time industry giant has lost its "iconic" status. Ortberg knows few taboos in his search for his former strength. Media reports recently emerged that he is considering selling off parts of the aerospace division. This would allow the CEO to streamline the broad-based company. "It is clear that our core of commercial aircraft and defense systems will remain part of Boeing in the long term," Ortberg explained a few days ago. With regard to the fundraising also announced as part of the presentation of figures, those responsible are getting serious: Boeing is raising more than USD 20 billion net by Thursday with the issue of new shares and convertible bonds. The company, which is burdened with a mountain of debt of almost USD 60 billion, is thus creating financial breathing space for its restructuring.
Unsurprisingly, the capital increase - the issue price for the new shares was around 8% below the market price - initially led to a new low for the large cap. In view of the impending dilution and the ongoing labor dispute, a rapid rebound seems rather unlikely. Nevertheless, there is a good chance that the Dow Jones stock will be able to maintain the overarching sideways trend. Leonteq's new soft-callable Barrier Reverse Convertible (BRC) is geared towards this scenario. In addition to a guaranteed coupon, these yield-optimization products offer a decent price cushion. Specifically, the CHF-denominated variant yields a distribution of 8.80% p.a.. In USD, the coupon is 12.60% per annum. The barriers are each at 59% of the initial fixing. Indicatively, the protection threshold is USD 88.90 and thus just below the low of March 2019.