Saturday, January 6, 2007

Boeing Takes Back the Skies

by Stanley Holmes

http://www.eastwestindustries.com/pixwork/gifs/logo%20boeing.gifThe airplane titan sailed past rival Airbus in sales after a record year for commercial orders, fueled by its new Dreamliner

Boeing (BA) surpassed even its own expectations and reported a record 1,044 commercial airplane orders for 2006, eclipsing its former mark, set in 2005, by 42 planes and wresting leadership of the industry from its struggling European rival, Airbus.

The aerospace goliath regained the leadership in the all-important sales category after getting clobbered by Airbus for four years. The key to Boeing's continued resurgence? Strong demand for twin-engine widebody airplanes such as its all-new, fuel-sipping 787 Dreamliner and its long-range 777 models, surging cargo aircraft sales, and its single-aisle workhorse 737 series.

Boeing fell behind Airbus for a fourth straight year in aircraft deliveries, which officially determines the world's No. 1 plane manufacturer. It reported 398 deliveries, up 37% but less than the 425 projected by Airbus, which announces yearend totals on Jan. 17. But Boeing's sales momentum should return it to the top of the jet-making business by 2008, analysts say.

Cautious 2007 Forecast

Boeing executives were celebrating over the combination of a sound product strategy that saw strong sales across the company's entire product line. But Chicago-based Boeing also was helped by Airbus production struggles and management discord, as well as higher fuel prices that made its large, fuel-efficient, twin-engine airplanes more attractive.

Still, Boeing executives are cautioning against a repeat performance in 2007. True, British Airways (BAB) and the big U.S. carriers have yet to join the sales party and are expected to purchase new aircraft this year. Still, it appears that 2006 could mark the peak of the airplane buying cycle. "I do not expect that in 2007 we will be able to sell airplanes like we did in the two previous years," said Larry Dickensen, Boeing's vice-president of sales. "That was an extraordinary experience and one that will never happen again—at least not in my lifetime."

Boeing exceeded its previous year's total of 1,002 net orders and fell short of Airbus' all-time industry record of 1,055 last year. Boeing's gross orders, which do not account for cancellations and conversions, totaled 1,050. Airbus has been losing market share to Boeing, reporting 635 orders as of Nov. 30. The European plane maker has been known for announcing big orders at the end of the year in its effort to surpass Boeing. But despite the recent AirAsia order for 100 A320 airplanes, it looks as if Airbus will have to settle for second place in orders when it announces 2006 totals.

Airbus' Year to Forget

Simply put, 2006 was not a good year for Airbus. It announced several production delays for its flagship A380 superjumbo that has pushed the first delivery back two years. Airbus and parent European Aeronautic Defence & Space have lost three chief executives, one A380 customer, possibly others, and $6.4 billion in forecast profits (see BusinessWeek.com, 10/10/06, "Airbus: The Ride Just Got Bumpier").

Boeing, on the other hand, has been turning on the afterburners. It received orders from 76 different customers last year. In the last 10 days of December, Boeing execs were able to finalize orders for a total of more than 100 planes from Korean Air, India's Jet Airways, Air Berlin, Delta Air Lines (DALRQ), and others. "We are very pleased that all of our products have done well," Boeing's Dickensen said. "We think we've got a very good product strategy."

Scott Carson, chief executive officer for Boeing's Commercial Airplane unit, said the airplane division has built a well-balanced backlog of orders after initially struggling as airlines were slow to recover from a deep slump. "The strong orders for the past two years are a validation of our strategy of focusing on our customers, simplifying our product and services offerings, and transforming our production system," Carson said in a statement. He succeeded Alan Mulally, who left to become CEO at Ford Motor (F).

Surging Freighter Sales

One pleasant surprise for Boeing: the demand for new freighter airplanes (see BusinessWeek, 1/8/07, "The Secret Weapon for Boeing"). A total of 81 freighters were sold and that accounted for 18.1% of the total sales and a list value of about $20.7 billion—a record for Boeing.

The company also recorded 157 orders last year for the 787, which is due to enter service in mid-2008 after test flights beginning later this year. It tallied a record 729 orders for its popular 737. It also had 76 orders for 777s, 10 for 767s, and 72 for 747s—the highest total for the latter program since 1990.

(c) www.businessweek.com

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