Growth and guidance

The Boeing Company shared some strong financial results today, and projected some solid growth to come.

You can read through a lot of the details in our first quarter earnings release. But I wanted to briefly touch upon some of the key points for Commercial Airplanes.

BCA delivered 115 airplanes this past quarter, and reported 289 orders. For the 787 Dreamliner there were 75 orders in the quarter – and the program continues its record-setting sales pace with 892 firm orders and 57 customers since launch.

As we learned earlier this month, we’ve shifted the 787’s first flight to the fourth quarter of this year, with deliveries moving to third quarter of 2009. The plan is for a more gradual ramp-up to full production. The delays have been a deep disappointment to us and to our customers. But we think the new plan reduces the schedule risk a great deal. We’re talking with our customers now about how the schedule will affect them, and how we can reduce the impact.

During the earnings call with investors and media, Jim McNerney mentioned his recent visit to the 787 factory. He saw good progress on Airplane #1 toward meeting our commitments for power on and first flight. He also mentioned that the static and fatigue airplanes are moving along, and that the condition of the assemblies we’ve gotten in Everett from our partners are noticeably improved on Airplanes #2 and #3.

Much has been said about the 787 and the problems we’ve encountered on the program. However, from this earnings report it’s clear that our core business continues to deliver improving performance. Our 737, 747, 767, 777 and services teams are executing their plans very well.

I also want to point out that we’re moving ahead on other development programs, including the 777 Freighter, and the 747-8.

image/photo

Major assembly for the 777 Freighter began in the first quarter. And final assembly got underway this month. This is a view during “final body join” of the first 777F in the Everett factory.

On the guidance side of the message, we’re expecting to deliver between 475 and 480 commercial airplanes this year, and between 500 and 505 in 2009. We also expect 2010 deliveries to be higher than in 2009.

Let me also touch briefly on what we’ve heard about the U.S. economy as it affects our industry today. Capital markets have weakened and we saw some small airlines file for bankruptcy in the first quarter.

As we look at these economic conditions going forward, it’s important to note that our total backlog is strong and diverse by region, product and customer. For example, only 11% of BCA’s backlog is from airlines based in the United States. A large piece of the commercial backlog is with customers in Asia and the Middle East, where economic conditions are more favorable.

Demand globally remains strong for new, more efficient commercial airplanes due to high fuel prices and environmental concerns. So, while the market has become more volatile, as you can see from our guidance, the delivery up-cycle continues.

And, as Jim McNerney put it earlier today, if there’s a more significant downturn, we think we’re in a good position to weather it.

Comments (6)

Paulo M (Johannesburg, RSA):

The headline here in a major business daily today was to this effect: Cheaper energy & Boeing give Wall Street a boost (in midday trading). Very nice - as such results should be.

This is interesting given the weakness in financial markets currently - and how companies progress going forward as a consequence of decisions & strategy going back a few years now.

Of course, a prominent feature of Boeing's robust Q1 figures is the proportion of widebody deliveries to narrowbodies - specifically noting the 777-300ER, which was launched in 2000 with Jack Welch & General Electric backing.

Back then, there was still the argument of 2 Vs. 4. Fuel prices where relatively low. Thus the longer-range Triple Seven's launch was indeed prudent; why try to predict the future when you can offer a product that'll work whatever the market conditions? And conversely, how can A company justify the launch of not merely one, but many products that have failed to create lasting (long-term) value for employees & shareholders?

Again, interesting, noting airplane launches over the past couple of years. What is it that constitutes a successful program? The 767-400ER & 717 were technically excellent planes but had limited market success.

The following stand out as noteworthy success stories.
The 747-400ER family made good on its promise as an improvement over the 747-400 family & set the stage for a smooth transition to the cost-effective 747-8. The 737-900ER improved on the 737-900 and took advantage of the 757's exit from production. The 777F is an excellent counter-weight to the 777-200LR's limited market, while being a brilliant new entrant in a market previously dominated by quad-jets.

But this is just half of Boeing's business.

G (France):

Boeing has been quite disciplined with 737 production rate increase. Because of the moderate output step-up, the 737 retains its good value in the market. This will also allow Boeing to weather any possible demand slowdown.

It is wise to keep margin high rather than trying to gain marketshare at any price.

Chris C (South Africa):

Boeing’s 1st Quarter ‘08 financial report is exceptional! It is remarkable that even with the disappointing production delays of the super-efficient 787 Dreamliner that Boeing continues to have such a phenomenally up-beat financial forecast for ’09.

Well Done!

2009 is going to be a very exciting year as not only will we see the first delivery of the revolutionary 787, but that she will share the stage with the 21st century next-generation 747-8 first delivery! I’ve recently completed a Flight Deck Crew Resource Management course where we discussed Boeing’s Working Together philosophies on the first 777...you guys have the right idea, period!! Keep up the excellent work Boeing! Roll them' 747-8 orders in.

Norman (Long Beach, California, United States):

I read the news about Boeing profits going up 38 percent (Yahoo via AP)in the first quarter,
congrats on the earnings.

Like I have written in early January the orders keep coming in, just the latest orders for Boeing airliners, the 777-300ER and the 787 for Biman Bangladesh was made on April 22(Boeing.com).

As the demand for replacement and new airliners only increases as the economies from around the world are getting stronger, the orders will keep coming, that means more orders for the delayed 787 "the good news for the Dreamliner" and the 777-300ER that has brought a new production lifecycle for the 777 series bringing the orders well above 1,000, the best for any widebody twinjet, and only second to the 747, but expect both records to be surpassed by the 787 in the future.

I think the positive economies in East and South Asia as well as the Middle East will be strong for years to come and well into the next decade, I think that the relationships that Boeing Made in East and South Asia and the new relationships the Boeing made in the Middle East that was mostly all Airbus in the past has worked well and has contributed to the new surge of orders from this area of the world.

Chris C (South Africa):

Having read the full Boeing 1st Quarter ’08 financial conference call transcript, it is exceptionally encouraging to read that Jim McNerney indicated that Boeing is in “serious discussions” with 8 to 10 key, blue-chip airlines for further sales of the phenomenal 747-8Intercontinental. Whilst the R&D expenditure on the 747-8 family has increased naturally due to the increased work on the aerodynamically all-new, super-critical, aft-loaded and re-designed 747-400 wing, this airplane family without a doubt is going to form an integral part of the ultra-large airplane market in the coming decades and every expense needed to further optimise this incredible airplane is therefore well justified.

The 747-8I will no doubt serve a very small, yet vital 400seat to 500seat market, and whilst I do indeed predict that sales will be nowhere near that of the 747-400, I firmly believe we will see the -8I order book garner in excess of 200 orders. The economics of the -8I are stellar...2,6 – 2,8lts/pax/100km is incredible. Again, I have every bit of confidence that Boeing will secure at least 3 new -8I customers this year...all the best for these campaigns Boeing and let’s get them’ 747 order rollin’ in!!

Josh (Los Angeles, CA, USA):

I'm wondering what Boeing will do to play catch up with the 787. Naturally I'm rooting for it to be a huge success, however with Monarch announcing a delay of their order, it makes me wonder what Boeing can do to put everything back on track and avoid steep penalities.

Maybe a temporary 2nd 787 line production line to assist in fulfilling additional orders?

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