Orders and commitments

Clearly there were two big stories in aviation today, the announcement of Airbus’ 2007 results, and Boeing’s announcement of 787 delays.

About the 2007 orders story, as you’ve probably read by now, Airbus had 1,341 net orders last year, compared to Boeing’s previously announced year-end total of 1,413 net orders. The Airbus gross total was 1,458 orders and the Boeing gross total was 1,423 orders.

Today’s Airbus announcement, combined with Boeing’s release earlier this month, provides a really good sense of the orders picture in 2007.

And what I take away from all this is that 2007 was an incredibly strong orders year for our industry. Perhaps that’s an understatement. Between our two companies we had more than 2,750 orders. And we’ve seen our combined unfilled orders grow to more than 6,800 airplanes.

So why was last year such a good year? A number of factors aligned. We’ve seen strong fundamentals across our industry now for three years – strong economic growth, passenger traffic, revenue, and airline profitability. All those wonderful factors have led to unprecedented demand for new commercial airplanes.

The other part of the equation, of course, has been the development of new, extraordinarily fuel efficient airplanes such as the 787 Dreamliner. The availability of these airplanes has resulted in airlines wanting to replace older, less fuel efficient aircraft in light of high oil prices.

Looking at Boeing’s roster of unfilled orders, it is balanced by region, by airline business model, and airplane type. We like where we stand.

Now, on to the 787. As you can guess, we’re all disappointed that we’ve had a delay in the program. We now expect first flight around the end of the second quarter.

photo

Dreamliner mural at Sea-Tac International Airport: Boeing remains committed to delivering this breakthrough airplane.

We’re working hard on the new schedule, and we’re working with our customers and our manufacturing team to better understand how this will impact deliveries. We should know more about that around the end of the first quarter.

But as I read through some of what’s been written today about the latest 787 news, I want to emphasize that we’ve made a lot of progress. And as Scott Carson said this morning, we’re committed to flying, certifying, and delivering the 787 as soon as possible. Yes, we have a lot of work to do. And as we move farther along, our confidence in this airplane has only increased.

We’ve acknowledged all along that building new airplanes is really challenging. But we’ve solved tough start-up issues before - as has our competition. We know from experience that the bottom line is to deliver an airplane that gives our customers a new level of performance, efficiency, and passenger experience. And that’s how we’ll ultimately be judged.

We’re committed to bringing to the market an airplane that will really transform the industry, a truly game-changing airplane.

At the Airbus year-end announcement today, it was mentioned that the latest 787 news reinforces just how complex aircraft manufacturing is and why there are only two successful producers of large commercial aircraft in the world. I think that says it pretty well.

Comments (6)

Steven (LI,NY):

Can you now explain the difference between "options" and "purchase rights"?

Randy, your blog entries are very informative and eagerly awaited. Keep up the great work.

----

Thanks Steven,

Here's the answer. An "option" gives an airline a right to a future aircraft under a predefined business arrangement. Each option has a defined delivery position as well as an option exercise date and requires a non-refundable option deposit to secure each option position.

A purchase right is where an airline will predefine a business arrangement for future aircraft. Typically the right will be valid for a defined period of time but has no delivery position assigned. Purchase rights require no deposits, which means an airline can only exercise a purchase right if there is an available aircraft within their purchase right "window".

Hope that helps.

- Randy Tinseth

Norman (Long Beach, California, United States):

2007 has been a great year for Airbus and Boeing,
but the big jump in orders came for Boeing as the
margin between A and B has gotten smaller in recent
years.

So far in January the success continues as Boeing
has already picked up a major order from Gulf Air
for up to twenty-four 787's.

This year will be a big year for the 787 as the
first flight will occur this year, I am sure
many orders will be made as these events happen.

Chris C (South Africa):

Naturally, the news of yet another delay to the schedule for the super-efficient Boeing 787 Dreamliner, truly is disappointing. The delay is disappointing as the entire aviation world is exceptionally eager to get their hands onto the airplane, and to put this revolutionary, game-changing airplane into service. Of course the pressure on Boeing no doubt is immense, as with an order book fast approaching 1,000 firm orders, and continued pressure on a 787-10x and other 787 derivatives, it is an understatement to say that it is imperative that Boeing sticks to this new schedule!

The airplane itself is an absolute technological marvel, and the flagship of the 21st Century, period. This is clearly attested by the continual overwhelming interest in the airplane. If anything, this airplane’s production methods have certainly taught not only Boeing, but the rest of the aviation community, vital lessons for the future of airplane production methods. This is certainly a very steep, frustrating, tiring and challenging learning curve, but once Boeing overcomes the ‘mishaps’ with the 787 schedules, the rewards will be endless!

I wish you everything of success in your redoubling efforts to get this beautiful bird into the skies, safely and as promised!

Todd Cohen (Philadelphia):

The 787 will fly and it will be right. Boeing will get this right. They always have and they will here as well. Changing the rules is never easy.

Vaidya Sethuraman (Chicago,Il):

Two comments;one-the challenge in building a high tech plane cannot be under estimated; hence we can give a pass to Boeing.

Second;what we cannot understand is- why is even Boeing giving info on delays in bits and pieces; I thought, Boeing with its SEC listing is more open in terms of information than Airbus (though this is subjective); the airplane team has sure lost its credibility ;perhaps more so, the corporate team at Chicago.It is sad , even a company like Boeing is not learning as we think, it can.

Shankar Sethuraman (Chennai, TN, India):

I agree with Mr. Sethuraman. Why are delays being announced periodically? Does this mean that Project Management is NOT on top of things?

I am an Airbus man myself, but I still wanted to hear good news about the 787 and see it get off the ground early next year.

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