The difference a year makes

As we all get back into the swing and we start 2009 business in earnest, I couldn’t help but go take a look in the archives to see what we posted last year at this time.

Last January we were talking about a great year which had just concluded. It’s a real eye-opener to read that post today. Little did I know how right I would be when I said 2008 was going to be a very busy year. It calls to mind the saying, “may you live in interesting times.”

No record-breaking year to talk about this time around. And I think you’ll agree that the overall mood right now is subdued, not just for us at Boeing but for our competitors and customers – the entire industry really.

I don’t think there’s any need to “sugar-coat” the outlook for 2009 and beyond. It’s going to be tough, challenging, difficult – you fill in the blank with your adjective if you like. No one knows in which direction the current economic environment will turn, or how long it will be before we see an uptick. Clearly, we all have more questions now than there are answers.

But looking back for a moment, despite the tumultuous year that was 2008, Boeing finished with 662 orders for commercial airplanes. Now, if you’re a glass-half-empty sort I suppose you could interpret that as less than half the record Boeing orders total we saw in 2007. But I think we all should step back and see that in the big picture, 662 orders amounts to a solid year of business in any year. This despite all of the well-publicized industry challenges in 2008.

Keep in mind that during other down years earlier in this decade and in the 1990s our annual orders were frequently in the 200s. So it all depends on how you want to view the glass right now.

As we look ahead, we will focus on execution - delivering our backlog – and on improving our productivity to remain competitive. We’ll also be moving forward on our development programs such as the 787 and 747-8.

On the production side, clearly, the work stoppage during the latter part of the year affected how many deliveries we could achieve. We delivered a total of 375 airplanes – including 290 737s, 14 747s, 10 767s, and 61 777s.

There are a lot of positives on the horizon, including first delivery of the new 777 Freighter, first flight and flight test of the 787, and further progress on the 747-8. So let’s all take a deep breath as we close one chapter, and set out to make 2009 a year for the history books.

Comments (9)

JAHC (Monterrey, MX):

Good to read from you again. Hope you had a nice holiday season. Interesting and struggling year 2008 really was. I think that after everything that happen, the results were OK, looking from a glass-half-full perspective. Just look at your backlog of unfilled orders!

I believe that 2009 is going to need a lot of hard work and effort to get things going. We shall see the 787 fly for the first time and hopefully more orders to come.

Anyway, I wish everybody at Boeing a very good 2009, full of success. Also, my best wishes to all the aviation community.

Norman (Long Beach, California, United States):

It's nice to be back. Even though things are going to be tough at least for this year, it is good to know that the 787 will fly for the first time this year and the 747-8 is going to be on the full swing of development.

P.Sumantri (France):

Indeed, nobody knows how deep and how long this economic crisis will be. However, some experts think there have been profound changes in the economic life. Implicitly, they say this crisis will be painful and long.

Aviation industry is a very important catalyst for the whole economy and people need to travel for business or for other reasons. Therefore it won't collapse any time soon. Perhaps there will be more consolidation in the airline industry with the weakest disappearing or eaten by the strongest, but air travel will persist. Old aircraft have to be replaced, so aircraft manufacturing will remain buoyant.

During this difficult period, there is an issue with which aircraft manufacturers have to be careful. It is about the suppliers' economic and financial performance. You may have heard about the terrible situation in the automotive industry. Many stakeholders in the car industry are in a difficult position, some of them may even go under. When I was looking at automotive supplier list, I found out that many of them are also aerospace suppliers. I therefore believe that some of Boeing's and Airbus' suppliers could be trapped in a very-very-very tough situation because a double trouble might be ahead. We all know that a healthy supplier base is part of a good execution. Thus, aircraft manufacturers need to make sure their suppliers are not wiped out by this severe global storm.

Chris C (South Africa):

During 2008, the aviation world in particular was adversely affected by record high fuel prices. We also experienced the beginnings of a financial crisis, leading to a recession in many countries around the globe. This ultimately led to many airlines experiencing declining passenger demand, and air-freight demand, due to slowing economies. And this is set to continue well into 2009, or beyond.

With large airplanes carrying added risks such as filling all the seats available and limited niche market opportunities, as well as air-freight on the decline substantially at the moment, the 747-8 is going to have a tough year ahead in terms of securing additional orders.

Whilst I firmly believe the highly-efficient and phenomenal 747-8 is the right size, lower risk and higher reward approach to the 400seat and larger segment, it is really a disappointment that Boeing didn’t secure additional -8I orders in the months after Lufthansa’s massive order. It’s going to be a while now until further orders flow in I predict. As Lufthansa continues to attest to this day, the 747-8I will be a big success, period. All the best for your on-going sales campaigns for the -8I and -8F this year...let’s hope you can post a double-digit 747 order tally at the end of this year, with one or two more -8I customers!!

I have to agree wholeheartedly with you that securing more than 660 orders in 2008 is a really fantastic achievement, and further to have only 7 cancellations this whole year is really a great feat. I’m sure this year’s order tally will be similar in total orders.

Looking immensely forward to witnessing the first flight of the super-efficient 787 Dreamliner, as well as the 747-8F this year! Best wishes to you and the Boeing teams for 2009.

Paulo M (Johannesburg, RSA):

Achieving well over 600 orders in a year like 2008 is an excellent achievement irrespective of whether Airbus beat Boeing, or Boeing drew in far more orders in the preceding three years.

The next thing you do after getting an order is build the plane and send it off to its happy owner. Execution is very important. I think the experiences with the 787 Dreamliner, and the production issues across the assembly lines in Renton and Everett in 2008 highlight this effectively - both inside Boeing and at its suppliers.

P.Sumantri (France) says: "We all know that a healthy supplier base is part of a good execution."

I think the Boeing Company would be well advised to keep an eagle eye on the supply side of the equation.

Other than that, here's to 2009 and all the exciting milestones ahead.

martin nix (everett 787 program):

When I started at Boeing, I use to develop the multiple regression equation we use to predict aircraft sales. In that equation are various factors, such as inflation, price of fuel, etc. I have always maintained the "biggest" threat to aircraft sales is the price and AVAILABILITY of fuels.

For decades the company has been anti-alternative fuels, except O.I.L. Energy Efficiency was the ONLY important fuel, and somehow, new discoveries of oil, and low price of oil will always be there. Guess what it is 2009 and the company has changed it's policy, we have finally, finally, finally realized we need to develop new fuel sources such as converting garbage, trash, weeds and algae to aircraft fuels. An invention that was invented back in the 1980s. Why did it take the company so long to realize this?

Kinbin (Taipei, Taiwan):

As stated by the regular blog contributors, I concur that 2008 has been a good year for Boeing with medium-term future execution and supplier management being key to survival. In addition, one element requiring no less attention is the cancellation of orders.

Significant effort must be expended by Boeing to prevent defaults to the orders. Innovative, and pioneering financial solutions are required to assist airlines in flying over this downcycle, which some academic boffins indicate to be protracted and prolonged, spanning the next 5 years.

The infamous pricing escalations, hefty deposits, progress payments, depreciation, and / or residual values ought to be either removed entirely or significantly revamped and applied retroactively to manage and minimize the risk of order defaults.

As long as global aggregated demand for goods and services goes into reverse, airline customers are going to put fleet renewal, expansion, or start-up into the 'freezer-box'. Airlines would be willing cancel / default and take penalties for the deposits, instead of taking on more new aircraft to find that short-term accumulated losses from new aircraft introductions far exceed that of the deposits.

Ted (Mt. Vernon, WA):

For my favorites of 2008, I see three new 777-200LR were ordered. Boeing Business Jet sold several 747-8i and even a 767-400ER.

James (Palo Alto, California):

I agree with Kinbin, every order not cancelled will be effectively a win in 2009. Here hoping airlines can find the resources to take delivery of efficient new aircraft to replace less efficient aging aircraft.

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