Boeing Buffeted by Obama Budget

Highlights include The Boeing Company (BA) and Northrop Grumman Corp. (NOC).

It seems apocalyptical that President Obama’s spending plan -- which is intended to save the country from ruin and despair -- has now being dubbed the “787 budget” by some pundits. That may not sit well with The Boeing Company (BA) and us folks in the Pacific Northwest.

First, Boeing encountered humongous problems getting the 787 Dreamliner to fly. Then, the economy nosedives and airlines cancel or, at the very least, defer orders for new airplanes because they don’t need them and/or can’t get financing. Now, there is word from Washington that several defense contracts for which Boeing is vying (or has already won) may be delayed or terminated.

It’s just like the weather this year: If you just wait a minute, it’ll get worse.

It appears that the program to replace existing aging aerial refueling tankers -- the KC-135s and KC-10s -- may be delayed for 5 years. Boeing had lost that program to Northrop Grumman Corp. (NOC), but then the government relented and now it’s in limbo. In 5 years, the 767 -- the basis for Boeing’s offering -- may have gone the way of the 757, et al: it will be out of production.

So, Boeing might be able to then propose a 787 tanker…to which Northrop Grumman will counter-propose an (Airbus) A350 tanker. And the beat goes on…and on…and on!

Also in some jeopardy is Boeing’s Future Combat Systems program for the Army and its 747-based Airborne Laser program for the Air Force. Meanwhile, Boeing can perhaps take some solace in Airbus’s inability to get its A400M off the ground, which could be a harbinger of what might happen with the A350.

In any event, in 5 years, the economy may have been turned around, people could be flying to exotic places again, airlines might be ordering more 787s and life will be good.  Let us pray.

Read the full analyst report on BA

Read the full analyst report on NOC