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With the expected deployment of coronavirus vaccines in the early stages, the global travel industry is knocking on the door of the beginnings of a recovery. Still Boeing (NYSE: BA) The shares are still falling more than 30% from their 2020 highs, and nearly 50% below the all-time high reached before the accidents involving its 737 MAX jets.
The 737 MAX is back in service and air travel is expected to return to normal, possibly in the next six months. Does this represent an opportunity for investors to buy?
On the December 4 issue of “The Wrap” at Motley Fool Live, presenter Jason Hall discusses Boeing with Motley Fool’s office boss Nick Sciple, including current issues within the company that have affected his business over the past year and could have a lasting effect. They also discuss the likelihood that Boeing will be one of the last companies to benefit from the recovery in air travel, as the coronavirus pandemic has changed the industry’s growth prospects many more years to come.
Transcription:
Jason Hall: Nick, has Boeing been on your radar lately?
Nick Sciple: No, so we’ve talked about Boeing, Lou Whiteman and I have talked about Boeing multiple times on podcasts this year, obviously it’s been in the news a lot since the 737 MAX crashed. I think it was in 2018 that those crashes happened for the first time, but maybe 2019.
Then, of course, there have been continuous problems with them. I think I put Boeing on and the stack “too hard” just to come up with what Danny just said. For me. You see, it’s one of these things where you see the 737 MAX problem and then more and more woodworking problems come up with the company. You see a similar pattern and you like it GIVE for example, Wells fargo, many of these older companies. I will say that when you look at Boeing’s competitive positioning, they are in a global duopoly, we are not going to stop flying in the long run, although there are some questions about how quickly demand recovers.
I think one thing that’s interesting is you look at a year, year and a half ago, Boeing, because there was so much demand for flights, it really had a lot of influence on its buyers. Now you see it South west is pushing Boeing on its 737 MAX offers. I believe Ryanair you are getting a special offer from them now. The narrative has changed a bit with Boeing over the last year or so, I put it on the “too hard” pile just because of cultural issues. It might work, but it’s too difficult for me.
Jason Hall: To spin the real estate phrase, this has certainly gone from a seller’s market to a buyer’s market. I think there are implications, many implications for Boeing there.
There’s a reason Boeing shares are still down 47%, Airbus shares are down 25%, right? That problem is that the structural problems in the Boeing business, the cultural problems in the Boeing business became more and more apparent, right? I think there is little doubt that you look five or ten years from now and Boeing will probably be fine; I don’t think there is a real risk of financial bankruptcy, of insolvency.
But here’s the thing, this is not Marriott or Ryman Hospitality Properties Or some real estate company that is dealing with temporary problems that should pick up very, very quickly in the second half of next year, right? In the fourth quarter of next year. When people can get in their car and drive to a city three or four hours away and stay in a hotel for a weekend trip or something. Or companies start holding corporate events and that sort of thing. And they are doing big conventions and that kind of thing.
It will take several years for the airline industry to recover when it comes to capital deployment. The bottom line is that the industry simply hit the reset button for much of its growth. Sure, he’s going to go back to where he was, I think a year or two. Once we get to next summer and vaccines are widely available and roll out around the world. I think it can be said that within two years the airline industry will have mostly recovered.
Guess what? They already have the planes for that, right? I mean, you don’t have to buy new planes just to get there, right? There are many inactive assets that-.
Danny Vena: They have to get people to fly in them.
Jason Hall: Yes. So the bottom line is that for a company like Boeing there, the ultimate benefit of a full recovery, right? Because all it has done is delay all growth, which is what Boeing’s thesis has been.
I sure think it’s a good company. I think they have come a long way, but it seems like there are so many other investments that are better than anchoring, that it will get back to where it was. I don’t think stocks are necessarily going to immediately go back to where they were a year and a half or two years ago. I think there are other places you can do better in big business facing temporary problems compared to all the things that make Boeing not a big business right now.
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