AFP

Boeing said Wednesday it is close to receiving regulatory approval to resume 787 jet deliveries, a move that could help reverse lackluster profits, but warned that its production ramp-up for the 737 MAX would be slowed by supply chain problems.

The US aviation giant’s two most popular commercial planes figured prominently in its mixed quarterly earnings report, with the lack of revenue from the 787 Dreamliner again a big drag.

Shares gyrated before finishing the session slightly higher.

A resumption of 787 deliveries will restore a key source of revenue, but a more protracted 737 MAX ramp-up suggests Boeing won’t deliver as many of those planes as quickly as had been expected.

“A lot of things good happened over the quarter,” said Chief Executive Dave Calhoun, who described the company as “on the verge” of garnering approval from US air safety officials on the 787, though he declined to give a precise target date.

Calhoun reported no sign of overall slowdown in the sector, telling analysts that “this general recession thing so far hasn’t impacted our aviation industry.” 

“Will it at some moment? Maybe,” he said, while noting that air travel appears to have been “prioritized fundamentally to a higher slot” by consumers tired of pandemic restrictions.

– Engine trouble –

Calhoun however warned that the company had no timetable for lifting production of the MAX to 38 per month from the current level of 31, calling “limited” engine capacity a “constraint” on the company’s outlook.

“Some investment has to get made and capacity has to expand for the engine suppliers to keep up with what I believe will be continued robust demand,” Calhoun said.

Boeing Chief Financial Officer Brian West told analysts to expect MAX deliveries in the “low 400s” in 2022 after previously estimating around 500.

For the quarter ending June 30, Boeing reported a 67 percent plunge in quarterly profits to $193 million, as revenues declined 1.9 percent to $16.7 billion.

The company missed analyst estimates for revenues and earnings-per-share, but stock prices initially rose after the report, as Boeing confirmed it still expects to have positive cash flow in 2022.

On the 787, the company has been working with the Federal Aviation Administration to address a series of manufacturing issues uncovered in 2020 and since.

Boeing took a $3.5 billion charge for additional rework costs on the 787 in the fourth quarter of 2021. It said in April it also expects another $2 billion in “abnormal costs” for the 787.

At the end of June, Boeing had 120 Dreamliner planes in inventory and was producing the jet “at very low rates,” the company said in a filing.

On Wednesday, the company said it was working with US air safety officials on “final actions” to resume 787 deliveries. 

– China haze –

The enhanced regulatory scrutiny of the 787 and other Boeing planes comes on the heels of a pair of crashes in 2018 and 2019 on the 737 MAX, which led to a lengthy global grounding of the plane.

But the MAX has since returned to service, enabling Boeing to resume deliveries and announce significant new orders, including at the Farnborough Airshow earlier this month.

But Boeing still has 290 MAX planes in inventory. A key wild card remains when deliveries will resume in China, where the MAX has still not returned to service. 

“While we expect 737 MAX deliveries to our customers in China to resume in 2022, subject to final regulatory approvals, risk remains around the timing and rate of those deliveries,” Boeing said in a securities filing Wednesday.

Despite the latest Farnborough orders, Boeing’s backlog of orders in the pipeline lags that of archrival Airbus, but Calhoun told CNBC Wednesday he is not worried about the difference.

“We don’t need to close that gap,” Calhoun said, adding that the aviation industry is “supply constrained for as far as I can see.”

Boeing’s job is “to deliver against our backlog,” he said. “My job is to make sure I’ve got a big enough backlog to continue to increase my rate, stay stable in production and satisfy our customers every step of the way.”

Shares fell during the conference call, but recovered later and finished at $156.09, up 0.1 percent.

In Washington circles, saying the “R” word comes with a bit of risk.

As the specter of recession looms over the US economy, defining exactly what one is and when it begins has sparked furious debate — based as much around politics as economics.

Last week, the White House appeared to be trying to get the jump on the possible declaration of a recession in the world’s largest economy — second quarter GDP data is due on Thursday — with a pointed blog post.

The title? “How Do Economists Determine Whether the Economy is in a Recession?”

In the post, President Joe Biden’s team rejects the widely accepted definition of a recession as two consecutive quarters of negative growth — a situation the United States could find itself in as of Thursday.

“While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle,” the White House said.

Of course, opposition Republicans quickly picked up on the spin.

“Newsflash for Joe Biden: You can’t change reality by arguing over definitions,” the Republican National Committee said in a statement on Monday.

– ‘One official arbiter’ –

So beyond the political spin machine, what really is a recession?

“There’s been negative growth in the first quarter of this year. We’ll see what the numbers are… If (the second quarter) were negative, that would technically potentially be a recession,” IMF chief economist Pierre-Olivier Gourinchas said.

In a note on its website, the International Monetary Fund nevertheless insists there is “no official definition of recession.”

“Most commentators and analysts use, as a practical definition of recession, two consecutive quarters of decline in a country’s real (inflation-adjusted) gross domestic product (GDP),” the Washington-based global lender says.

For Gourinchas, “the general assessment as to whether the economy is in a recession overall is a little bit more complex.”

Federal Reserve Chair Jerome Powell said Wednesday the Fed “doesn’t make a judgment on that,” but added: “What a recession really is — it’s a broad-based decline across many industries that is sustained for more than a couple months.”

“The labor market is just sending such a strong signal of economic strength that it makes you really question the GDP data,” Powell said.

David Wilcox, a senior economist at the Peterson Institute for International Economics and at Bloomberg Economics, says that considering an economy as entering recession after two consecutive quarters of negative GDP growth is simply “wrong.”

He says while it’s a “handy rule of thumb,” it’s not gospel. 

“I kind of cringe and resist every time I see” that definition, Wilcox told AFP.

“There’s one official arbiter of recession dating in the United States. And that’s the National Bureau of Economic Research.”

– Late to the party? –

The NBER, a private, independent and nonpartisan entity, was founded in 1920 to refine research on the US economy. Its “Business Cycle Dating Committee” uses several data points to determine when the economy is in expansion or recession.

“A recession is the period between a peak of economic activity and its subsequent trough, or lowest point,” the NBER says on its website.

“The NBER’s definition emphasizes that a recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

But because the bureau prefers to base its assessment on solid data and publish its opinion several months after the figures are released, it can seem a little late to the party.

Ellen Hughes-Cromwick, an economist at the Third Way, a center-left think tank, says that the NBER’s traditional delay is “not a problem” but rather a “methodology” that allows the bureau to avoid repeated revisions.

“What is common knowledge among economists is that in that preliminary estimate, they have less than 50 percent of actual statistics to measure second quarter GDP,” she explains.

“In other words, 50 percent of that GDP preliminary estimate… are estimates,” adds Hughes-Cromwick, who worked as an economist under presidents Ronald Reagan and Barack Obama.

Translation: the NBER is perhaps totally justified in taking its time.

US market regulators on Wednesday went to court in an effort to stop Facebook-owner Meta from buying virtual reality fitness app maker Within, a potential blow to the tech giant’s metaverse ambitions.

In a complaint filed in federal court, the Federal Trade Commission argued Meta is trying to illegally expand its virtual reality empire with the purchase of Within Unlimited, maker of fitness app “Supernatural.”

Meta has made it a focus to build its metaverse vision for the internet’s future, betting heavily on the interactive virtual world that the company believes will ensure its powerful position.

“This acquisition poses a reasonable probability of eliminating both present and future competition,” the FTC complaint said. “And Meta would be one step closer to its ultimate goal of owning the entire ‘Metaverse.'”

The social media giant said the FTC’s move defied reality, and expressed confidence that its buy of Within would be good for VR users as well as developers who make apps in that market.

“The FTC’s case is based on ideology and speculation, not evidence,” Meta said in response to an AFP inquiry.

“The idea that this acquisition would lead to anticompetitive outcomes in a dynamic space with as much entry and growth as online and connected fitness is simply not credible.”

Yet the FTC called the acquisition “illegal” and competition bureau deputy director John Newman added: “Instead of competing on the merits, Meta is trying to buy its way to the top.”  

– Moving to block Meta –

Meta is already a leading player in the virtual reality market, and its chief Mark Zuckerberg has stressed that the metaverse is key to the company’s future.

The Silicon Valley titan years back bought virtual reality gear maker Oculus and studios devoted to apps for use in digital realms.

Meta purchases have included a popular “Beat Saber” game in which players slash at oncoming virtual blocks in time to music.

The FTC said that the suit seeks specifically to block Meta and Zuckerberg from getting their hands on Within Unlimited.

The Supernatural app made buy independent studio Within lets users work out in routines set to music by popular artists such as Lady Gaga, Katy Perry, and Coldplay in realistic, virtual locales such as the Galapagos Islands, the FTC said.

The complaint quoted Within’s as calling fitness apps “the killer use case for VR.”

Oculus vice president of play Jason Rubin announced the deal to buy Within in October, not disclosing financial details.

Supernatural is to operate independently as part of Meta’s Reality Labs if the deal is consummated, Rubin said in a blog post at the time.

Supernatural workouts feature routines synched to music hits, real coaches, and “stunning” virtual destinations from Machu Picchu to the surface of Mars, Rubin said.

Some tech world watchers questioned whether the FTC move had also sent a “chilling message” to developers who hope of cashing in when their creations are snapped upt.

“How does the FTC expect startup founders and employees to get any liquidity from their hard work if traditional exit method are going to be blocked?” read a tweet to the regulator from the @pachos account of Samsung Ventures America managing director Michael Pachos.

The US Senate passed a bill on Wednesday to boost domestic production of semiconductors amid shortages of the microchips that power everything from smartphones to cars to weapons.

The legislation, which now goes back to the House of Representatives for final passage, provides $52 billion to increase domestic semiconductor production and more than $100 billion over five years for research and development.

The CHIPS Act was passed in the Senate by a rare bipartisan vote of 64 to 33 with 17 Republicans joining hands with Democrats.

President Joe Biden welcomed Senate passage of the legislation that he said will “accelerate the manufacturing of semiconductors in America, lowering prices on everything from cars to dishwashers.”

“It also will create jobs -– good-paying jobs right here in the United States,” Biden said in a statement.

“It will mean more resilient American supply chains, so we are never so reliant on foreign countries for the critical technologies that we need for American consumers and national security,” he said.

Global semiconductor supplies were severely disrupted by fallout from Covid-19 pandemic shutdowns, sparking shortages of the chips — many of which are made in Asia.

The shortages notably slowed production of new automobiles last year, causing prices to increase.

The version of the CHIPS Act passed Wednesday provides $39 billion to finance semiconductor manufacturing plants in the United States and another $13 billion for research.

Senate passage of the bill came a day after the South Korean group SK announced a huge investment in US semiconductor and other cutting edge industries.

The conglomerate said in a statement it plans to “increase its new investment in the United States by $22 billion in areas including semiconductors, green energy, and bioscience, creating tens of thousands of new high-tech, high-paying American jobs.”

US market regulators on Wednesday went to court to stop Meta from buying virtual reality fitness app maker Within, a potential blow to the tech giant’s metaverse ambitions.

In a complaint filed in federal court, the Federal Trade Commission argued that Facebook-parent Meta is trying to illegally expand its virtual reality empire with the buy of Within Unlimited, maker of fitness app “Supernatural.”

Meta has made it a focus to build its metaverse vision for the internet’s future, betting heavily on the interactive virtual world that the company believes will keep it relevant.

“Instead of competing on the merits, Meta is trying to buy its way to the top,” FTC competition bureau deputy director John Newman said in a release.

“This is an illegal acquisition, and we will pursue all appropriate relief.”

Meta did not immediately respond to a request for comment.

Meta is already a leading player in the virtual reality market, and its chief Mark Zuckerberg has stressed that the metaverse is key to the company’s future.

The Silicon Valley titan years back bought virtual reality gear maker Oculus and studios devoted to apps for use in digital realms.

Meta purchases have included a popular “Beat Saber” game in which players slash at oncoming virtual blocks in time to music.

The FTC said that the suit seeks specifically to block Meta and Zuckerberg from getting their hands on Within Unlimited.

The Supernatural app made buy independent studio Within lets users work out in routines set to music by popular artists such as Lady Gaga, Katy Perry, and Coldplay in realistic, virtual locales such as the Galapagos Islands, the FTC said.

The complaint quoted Within’s as calling fitness apps “the killer use case for VR.”

“Meta is a potential entrant in the virtual reality dedicated fitness app market with the required resources and a reasonable probability of building its own virtual reality app to compete in the space,” the FTC said in the complaint.

“But instead of entering, it chose to try buying Supernatural.”