Boeing Cruising to New Altitudes?

Summary

Motley Fool Money Episode Summary: "Boeing Cruising to New Altitudes?"

Release Date: June 26, 2025
Hosts: Dylan Lewis, Ricky Mulvey, and Mary Long
Episode Title: Boeing Cruising to New Altitudes?

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1. Introduction & Market Highlights

Tim Byers kicks off the episode by discussing significant market movements and policy developments. One of the major headlines is the speculation surrounding President Trump's potential nomination to replace Federal Reserve Chairman Jerome Powell. According to Tim, "The President could announce his choice for a successor as early as this summer," despite Powell having 11 months left in his term (00:28).

Transitioning to corporate earnings, Tim highlights Micron's impressive Q3 performance. The company reported a 15.5% sequential and 36.6% year-over-year revenue increase, reaching $9.3 billion. Pre-market trading saw Micron's stock rise by approximately 1.5%, with projections suggesting a revenue of $10.5 billion for the next quarter. "AI is a thing and is still a thing," Tim remarks, emphasizing the ongoing relevance of artificial intelligence in driving growth (01:20).

2. AI Advancements and Corporate Moves

Lou Whiteman comments on the competitive landscape in the AI sector, particularly the rivalry between Meta and OpenAI. Tim shares news about Palantir partnering to develop AI software for nuclear plant operations, introducing the Nuclear Operating System (NAS). Lou humorously references the acronym, saying, "When I hear NAS, I think like cars going really, really fast," suggesting a dynamic shift in AI applications (02:14).

In a notable move, Mark Zuckerberg continues to bolster Meta's AI capabilities by recruiting three former OpenAI researchers: Lucas Beyer, Alexander Kolestikov, and Xiao Zhai. Lou expresses enthusiasm for this development: "These are the Lakers and Celtics of the AI world. Meta versus OpenAI. We love it," underscoring the excitement around this high-stakes competition (02:28).

3. Innovations from the Paris Air Show

The discussion shifts to the recent Paris Air Show, where several groundbreaking technologies were unveiled.

a. CFM Rise Engine

Tim introduces the CFM Rise engine, describing it as a hybrid between a prop engine and a jet, boasting a 20% fuel efficiency improvement. Intrigued by the innovative design, he asks Lou if this engine could be a game-changer for the airline industry (03:08).

Lou acknowledges the engine's potential but notes the challenges ahead: "The idea has been around for decades... composite materials are better. We've made other advancements. So it is getting towards realistic," he explains. He highlights the need for rethinking aircraft design to incorporate such technologies, pointing out safety and weight considerations. While Pratt and Whitney opts for enhancing existing turbofan efficiencies, CFM, a joint venture between GE Aerospace and Safran, aims to commercialize the Rise engine by the early 2030s. "But it's really cool looking. So I'm with you. I'd love to see it on an airplane," Lou concludes (03:08).

b. Rolls Royce in Commercial Aviation

Tim brings up Rolls Royce's involvement with Riyadh Airlines, which has selected their engines for its Airbus A350 fleet. Reflecting on his childhood memories of flying on DC3 aircraft powered by Rolls Royce engines, Tim inquires about the company's current standing in the commercial air market (04:34).

Lou provides a realistic outlook, stating, "They're a decent third, but they are definitely third. GE Aerospace has more than half of the market... Pratt and Whitney is also ahead of Rolls Royce." He elaborates that Rolls Royce focuses on large widebody aircraft like the A350 and 777, which constitute less than 40% of the global fleet and are experiencing slower growth. Despite limited spare parts sales and servicing revenue, Lou recognizes Rolls Royce as a quality manufacturer poised to benefit from ongoing aviation needs. "European aerospace stocks have gotten a lot of attention for good reasons. It's a double right now. I don't know if I'd be jumping in right now," he advises, noting the company’s favorable positioning for future performance (04:34).

c. Textron and the Beechcraft King Air

Shifting focus to Textron, Tim discusses the introduction of a new multi-mission version of the Beechcraft King Air. Enthusiastic about its versatility for inter-island flights, Tim wonders if Textron (Ticker: TXT) deserves more attention from investors (06:13).

Lou agrees that Textron merits consideration but cautions that the company has faced challenges: "Textron has made themselves a tough company to love in recent years. Every quarter it seemed inevitably one of those businesses just laid off and earnings followed," he explains. However, he notes recent improvements, especially with the potential revival in business jets as companies replace aging fleets. Lou also mentions Bell Helicopter's recent success in securing a competition to replace the Blackhawk helicopter, further tying back to Rolls Royce engines. "Textron, they traded a discount to most big aerospace names. I think they are set up well for at least some of their most important businesses like Bell and Cessna to outperform," Lou concludes, suggesting a cautiously optimistic outlook (06:13).

4. Boeing vs. Airbus: Paris Air Show Performance

A central theme of the episode is the comparative performance of Boeing and Airbus at the Paris Air Show.

Tim sets the stage by reflecting on Boeing's turbulent past few years, including the recent Air India 787 Dreamliner crash. He contrasts this with Airbus, emphasizing the longstanding duopoly in the commercial aircraft market (08:23).

Lou provides insightful analysis, stating, "Boeing's actually outperforming Airbus for the year and they may be on track for a thousand or so orders," despite the ongoing challenges such as regulatory restrictions stemming from the 737 Max issues and mounting debt. He highlights the unprecedented commercial aircraft cycle, with a backlog of nearly 13,000 planes extending into the 2020s and 2030s. "If you are patient and you do believe that the worst is behind it, there's a pretty compelling case for Boeing to make gains as the balance sheet heals and as they just get back to normal in the face of all this demand," Lou advises (09:07).

Tim probes further into Boeing's response to the tragedy and its long-term design capabilities. Lou acknowledges the necessary time to investigate the crash but expresses concerns about Boeing's future: "One of my biggest fears about Boeing long term is that's their last clean sheet design. They have not sat down a group of engineers in a room and designed a plane since the Dreamliner," he warns, emphasizing the importance of innovative design for sustained competitiveness (12:22).

5. Airline Trivia and Air Traffic Control Modernization

Transitioning to a lighter segment, Tim introduces an airline trivia game focusing on the number of towers guiding aircraft across U.S. airspace. Lou confidently estimates the figure, but Tim reveals the correct number is 648, slightly over Lou's estimate of 550 (14:52).

Wrapping up the episode, Tim and Lou delve into the long-term investment opportunities in modernizing the U.S. air traffic control system. Lou elaborates on the outdated technology still in use, such as "Windows 95 and in some cases DOS systems," and the complexities involved in overhauling the system. He points out the involvement of multiple contractors and the slow, expensive nature of such projects, while recognizing the significant funding requirements (16:17).

Lou remains optimistic, stating, "We will get there. It's just really hard," suggesting that the modernization presents a potential investment opportunity once advancements are realized (16:17).

6. Closing Remarks

Tim thanks Lou for his valuable insights and wraps up the episode, reminding listeners to stay informed and patient regarding long-term investments in the aviation sector.

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Key Quotes from the Episode

• Tim Byers on Micron's AI impact: "AI is a thing and is still a thing." (01:20)
• Lou Whiteman on AI rivalry: "These are the Lakers and Celtics of the AI world. Meta versus OpenAI. We love it." (02:28)
• Lou Whiteman on the CFM Rise engine: "We need to rethink aircraft design. There's a lot of safety considerations, weight considerations." (03:08)
• Lou Whiteman on Rolls Royce: "Rolls Royce is a quality manufacturer, but they are limited. They only make engines for these big widebody like the A350 and the Dreamliner, the 777, that's a small part of the overall market." (04:34)
• Lou Whiteman on Textron: "Textron has made themselves a tough company to love in recent years." (06:13)
• Lou Whiteman on Boeing's backlog: "This is maybe the greatest commercial aircraft cycle we have ever seen in the history of the business." (09:07)
• Lou Whiteman on Boeing's future designs: "One of my biggest fears about Boeing long term is that's their last clean sheet design." (12:22)
• Lou Whiteman on air traffic control modernization: "We are using Windows 95 and in some cases DOS systems... It's just a really complicated problem." (16:17)

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Conclusion

In this episode of Motley Fool Money, Tim Byers and Lou Whiteman provide a comprehensive analysis of the current state and future prospects of the aviation industry, emphasizing innovations from the Paris Air Show, the competitive dynamics between Boeing and Airbus, and the critical need for modernization in air traffic control systems. The discussion intertwines market news, technological advancements, and strategic corporate moves, offering listeners a nuanced understanding of the factors influencing investment opportunities in the aerospace sector.

Transcript

[Tim Byers]

Will innovations from the Paris Air show be enough to lift airlines to new heights? You're listening. Motley Fool Money. I'm Tim Byers here with Lou Whiteman. Lou, how are you?

[Lou Whiteman]

Fully caffeinated, at least partially caffeinated. Hopefully that's good enough.

[Tim Byers]

I mean, I'm fully caffeinated. Ready to go. Let's get into it. We have some news straight off the top. President Trump preparing to a possible nominee to replace Fed Chairman Jerome Powell. This is according to the Wall Street Journal. The President could announce his choice for a successor as early as this summer. And this is despite Powell still having 11 months remaining in his term. So look out. I don't know. We'll see here, Lou. And then Micron, right, reporting really strong fiscal Q3 earnings. Stock was up 1 1/2% roughly in pre market trading. Overall revenue jumped 15.5% sequentially, 36.6% year over year to 9.3 billion. Looks like they're on track for 10 1/2 billion next quarter. No shocker here, Lou. AI is a thing and is still a thing.

[Lou Whiteman]

Yeah, it seems to be doing all right for Micron.

[Tim Byers]

Yeah. Palantir teaming to build AI software for building nuclear plants. This is a partnership with a nuclear company will result in new software called a new software system, I should say called nas, the nuclear Operating System. Honestly, I get fast and furious vibes on this one because when I hear nas, I think like cars going really, really fast. And then finally, Mark Zuckerberg is continuing his AI recruiting press landing three OpenAI researchers in the latest round here. He's spend loads of money. Lucas Beyer, Alexander Kolestikov and Xiao Zhai have all joined Meta for Zuck's superintelligence effort. All three had set up the Zurich office of OpenAI just last year. Lou, I mean, have you gotten an offer from Mark Zuckerberg? Lou?

[Lou Whiteman]

I haven't, but hearing what they've been quoting, I really wish I would I'll say this. Sam Altman, the CEO of OpenAI, he sort of telegraphed this and look, we need a good feud, we need a good rivalry. So I'm all for this. Let's let this happen. This could be fun.

[Tim Byers]

There you go. These the the Lakers Celtics of the AI world. Meta versus Open AI. We love it. Let's move on to the Paris Air Show. Lou, which is an area of your expertise. I want to talk about the CFM Rise engine. This was something I thought was absolutely fascinating because to me this looks like a prop engine because you essentially you Take away the nacelle, you have a prop engine, but is running like a jet and apparently has 20% fuel efficiency. So tell me, what is this thing? And I mean is, is this a thing that saves airlines? It saves them a bunch of money maybe.

[Lou Whiteman]

Okay, so it's definitely real. The question is if and when it's practical. Right. The idea has been around for decades. It goes back to the 1970s, the oil crisis. But you know, composite materials are better. We've made other advancements. So it is getting towards realistic. You know, the nature of this engine would kind of. We need to rethink aircraft design. There's a lot of safety considerations, weight considerations. Pratt and Whitney, the RTX company that wanted arrivals here, they seem to think they'd be better off just getting efficiency gains by refining their geared turbofan than not doing something new. But hey, the manufacturer, cfm, that's GE Aerospace and Safran, it's a joint venture. They really hope to commercialize this by the early 2000-30s TBD. But it's really cool looking. So I'm with you. I'd love to see it on an airplane.

[Tim Byers]

I mean it's. Some of the concept designs look really fascinating. Moving on to Rolls Royce. Riyadh Airlines has chosen to outfit its Airbus 350 aircraft with rolls Royce engines. I remember seeing Rolls Royce engines on DC3 aircraft when I was flying back when I was a kid. How big a player today is Rolls Royce in the commercial air market? Because this stock is trading near the cusp of 52 week high. So tell me, are you a buyer here? Is this a big deal?

[Lou Whiteman]

They're a decent third, but they are definitely third. GE Aerospace has more than half of the market, including that joint venture we just mentioned. Pratt and Whitney is also ahead of Rolls Royce. Look, Rolls Royce, by the way, they don't make the cars anymore, so don't, don't think about it like that. But it's a quality manufacturer. But they are limited. They only make engines for these big widebody like the A350 and the Dreamliner, the 777, that's a small part of the overall market. Less than 40% of the global fleet. And it's growing at a slower pace. So that means from the business point of view, a lot less spare parts sales, a lot less servicing revenue over the lifetime in the engine. Overall. Do I like the stock? Look, it's a well diversified company. European aerospace stocks have gotten a lot of attention for good reasons. It's a double right now. I don't know if I'd be jumping in right now. But look, they should have good tailwinds. Pardoned upon this. There should be. They're set up nice to perform from here.

[Tim Byers]

I mean, we like tailwinds, Lou. Tailwinds are good.

[Lou Whiteman]

We need tailwinds.

[Tim Byers]

Textron. Let's talk about Textron here. Having been to Hawaii more than a few times, I am a big fan of the King Air platform. Those are little planes that I have flown between islands. They're inter island planes and they're fantastic. I love them. And it looks like there's a new multi mission version of the Beechcraft King Air. So let's talk a little bit more about this. And honestly, Textron, you know, ticker Txt, this is a stock that we don't talk about very much. Does it deserve a little bit more love from investors?

[Lou Whiteman]

I think it probably does. But in fairness to investors, Textron has made themselves a tough company to love in recent years. Okay? So I don't know if it's all our fault. So Textron is one of the last great industrial conglomerates, aviation, as you mentioned, the Beechcraft, but also Cessna business jets. They own Bell helicopters, Jacobson lawnmowers, they make golf carts, they make all sorts of things. And for a while every quarter it seemed inevitably one of those businesses just, you know, laid nick and earnings followed. And it has just been a lot of one after the other. In fairness though, they've done a lot better of late. We're entering a big refresh cycle in business jets. All those CEOs that got shamed in 2008 and held off on buying new business jets, those are finally coming due for replacement. So Cessna, there's again tailwinds there. Bell Helicopter just won a big competition to replace the Blackhawk helicopter. By the way, they'll be using Rolls Royce engines for that too. So that's another thing for Rolls Royce. Look, Textron, they traded a discount to most big aerospace names. I think they are set up well for at least some of their most important businesses like Bell and Cessna to outperform. And if not, I don't know if I'm rooting for this, but this is a conglomerate in an age where a lot of breakups, if they don't catch up with that multiple. Tim, I can really see an activist coming in and start looking for ways to kind of do to them what we've done to GE or so many others.

[Tim Byers]

I mean, that would be interesting. All right, up next, which is the better stock that we saw at the Paris Air Show Is it Boeing or is it Airbus?

[Dan Boyd]

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[Tim Byers]

About which is the better stock here. Boeing had, I think it's fair to say Boeing has had a rough maybe three years, but in particular it's had a past really bad couple of weeks. Real heartbreaking tragedy with the Air India crash of the 787 Dreamliner here and Airbus as the European competitor. I mean, we've often talked about this. This is the commercial aircraft duopoly. They came out of the Paris Air show with some deals in hand. Tell me what you think here. Who did it better? It's the who wore it best of the Paris Air show here. Is it Boeing or is it Airbus?

[Lou Whiteman]

So yeah, normally these are huge PR events where Boeing and Airbus will trumpet all the orders they have. But as you say, with the air crash, both Boeing and GE Aerospace kind of stayed on the sideline. So it was kind of a somber show and we didn't see all the announcements. We can count planes though, and know how they're doing. Boeing's actually outperforming Airbus for the year and they may be on track for a thousand or so orders, which would be really, really good because, you know, you said, I'd actually say it's been a tough decade for Boeing almost now and I do hope they're on the upswing. You know, they're still under regul restrictions on how many planes they can produce and that's stemming from the 737 Max tragedies and all of the fallout from that. That's important because back when Covid hit, they basically mortgaged every piece of equipment they could find. I mean, Tim, they were taking the staplers off of the desk of the finance department and saying, what can we get for this? You know, and it was probably a good move because, you know, they didn't know what was coming and they needed to just make sure they had the cash to survive. But Today Boeing has 50 billion or so of debt, up from say 10 billion in 2018. They need to bring that down. And the way you bring that down is by selling more airplanes and generating the cash flow. Right. So, you know, I think investors need to Understand that even if it all goes perfect from here, we are still years away from Boeing just getting back to normal. Patience is needed and Airbus is definitely then a cleaner story. But hey, look, this is maybe the greatest commercial aircraft cycle we have ever seen in the history of the business. Between Airbus and Boeing, the backlog is almost 13,000 planes. That's well into the 2000-30s. So if you are patient and you do believe that the worst is behind it, there's a pretty compelling case for Boeing to make gains as the balance sheet heals and as they just get back to normal in the face of all this demand.

[Tim Byers]

I mean, you bring up a really interesting point here that that backlog is absolutely extraordinary. And so there are years of what you would hope is predictable cash flow here. But we do have this tragedy and that is going to be yet another black mark on, on Boeing's record. Meanwhile, Airbus continues to do, I mean relatively well, you. The A320 platform. The A320neo platform has been solid for quite some time and it looks like that will continue to be solid for a while. What do you need to see if anything from Boeing and its response to the Air India tragedy that they haven't already done? Is there anything.

[Lou Whiteman]

I think Boeing is doing what they need to do. I mean, we will see. It takes months if not longer to figure out what happened. We will see. You know, it's all speculation right now. If it is a material design flaw, I think that that would be material for investors. The Dreamliner has flown for 25 years and without.

[Tim Byers]

That's amazing, isn't it?

[Lou Whiteman]

Yeah, yeah. Well, you know, and this is an interesting point too, not to sidetrack but one of my biggest fears about Boeing long term is that's their last clean sheet design. They have not sat down a group of engineers in a room and designed a plane since the Dreamliner. They're in no position to do it now. But eventually they really need that mid market, that 757 replacement now. They need to at some point. And Tim, you know, people retire by the time they do a clean sheet. It's going to be all a group of people that basically don't have that institutional memory. So I mean that, that to me is Gary, I think hopefully with Air India it was a tragedy kind of. No, you know, whoever, whatever the finger pointing ends up. But I do think that this is on course to be a more typical tragedy with this and it shouldn't, I don't think stunt the turnaround. But I mean we're talking years for this turnaround anyway. So there is a lot that can just go wrong in, in the business cycle and all sorts of things that I think investors need to get my keep in mind before they just get too excited.

[Tim Byers]

Right. All right. Up next, a little trivia, little airline trivia. You're listening to Motley Fool Money Shop.

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[Tim Byers]

All right, Lou, we've got a little trivia game that I want to play with you and all of our listeners here. So get your, get your guests in. We would love to see what you guessed in. You know, leave a comment below in whatever your, wherever you listen to your podcast, just let us know what your guess was. But Lou, I, you're, you're a longtime follower of this industry and I know you've got some real history related to this question. So let's talk about it. My question for you is how many towers help guide aircraft across the United States airspace? Is it more or less than 550?

[Lou Whiteman]

See, 550 seems so specific there. And I think, Tim, that you're playing a game with me here, which it kind of. Yeah, you're in my head already.

[Tim Byers]

I would never do that. I would never try to trick you, Lou. No, go ahead, keep going.

[Lou Whiteman]

I will say in your part of the world, you can still see like the way we did it before when we actually, when we first started aviation, when we put huge giant arrows in the ground so the pilots could see those from the ground. I think, I think It's, I think 550 is close. I'd probably go over, but I don't know. It feels, it feels really close to 550. If it's exactly 550, I'm going to be annoyed with you.

[Tim Byers]

It is over. It's 648. It's 648. So. You got that right. And the reason I wanted to kick this off and we'll, we'll, well, as we close down the show here, just a quick conversation about the long term Opportunity here. The way that we manage air traffic here in the United States is ancient. So, Lou, any thoughts about what is the investing opportunity here? Because you would think after a while, I mean, surely we're going to get to the point where we're using satellites, we're going to use more advanced technology to route planes more efficiently. Right now, we route planes according to where the towers are. Not the fastest route. And that is striking. So your thoughts on this, Lou, before we close up today's show?

[Lou Whiteman]

Yeah, no, definitely. I mean, we're using Windows 95 and in some cases DOS systems, which I'm old enough to remember that, but not to enjoy it. So. Yeah, look, I was telling you that I was actually in 2001, I was at a hearing where they were just talking about just this modernizing air traffic control. And I'm pretty sure most. I'd have to find my notes. But we are still in that process. It is happening. It's slow, it's expensive, it's behind schedule. But if you think about this, five nines at least, right. You need redundancies, you need to get it just right. You can't shut down the air system for six months to kind of do a clean reboot. So it's just a really complicated problem. Satellites are part of the issue. I don't think that it's just a clear one vendor thing. There's a lot of companies from L3 Harris to Leidos and some of the contractors that are involved, but really, it isn't so much of a huge government boondoggle project. It's just in a million different places, backfilling, digging through, trying to figure it out. It is just a tedious, slow process that requires a ton of funding. And those tend to be nightmares when, you know, annual government budgets come around. So we'll get there. It's just really hard.

[Tim Byers]

Yeah. A rule breaker opportunity to come. We'll see. But it hasn't. It hasn't happened yet, but we're going to keep an eye on it. Lou, thanks for being here.

[Lou Whiteman]

Always a pleasure.

[Tim Byers]

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