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29 June 2005

Reality check

As I look through the surprising number of order announcements at the Paris Air Show, my mind quickly runs back to air shows of the past when there were similar feeding frenzies.

Farnborough Air Show 2000, for example. Back then, Boeing and Airbus announced a combined total of 369 airplane orders at the show. Of those, only 39 were actually firm orders!

To put it in context, Boeing that year announced 139 orders at the air show and ended the year with 589 orders. Airbus "won" in orders at the air show, with 230 orders, but "lost" the year with a total of 492 orders.

What this story should tell you is that air show "news" painted a distorted picture in 2000.

And it's no different five years later.

If you're going to measure with orders, full-year performance is what matters. An air show is just one week out of 52. And that's why several years ago Boeing got out of the business of saving up orders for big blockbuster announcements at air shows. Could we have asked customers to hold off on all the announcements we made from January of this year up until the air show? Sure. But what's the sense of that?

After Farnborough 2000, our policy has been to only announce orders that customers ask us to announce. We prefer them to lead the announcement and determine the timing.

So here's the story for 2005. Going into the Paris Air Show Boeing had 279 firm orders. We also had about an additional 200 announced customer commitments, where airlines have announced their intention to purchase our airplanes, but have yet to sign a firm contract. If you're counting, that totaled us at approximately 480 orders and commitments going into the show.

Alaska Airlines order 737-900 photo

A number of airlines announced orders for Boeing airplanes during the week of the Paris Air Show, including an Alaska Airlines order for 737-800s.

Then, during the week of the show we added 146 orders and commitments, some of which were customer announcements not made at the air show. Of these 146 orders, 88 were announced with firm contracts already in place. That's about 60% firm orders during show week.

We stuck to what we said we would do. Drawing a clear line between firm orders and customer announced commitments. And letting customers decide the timing of their announcements. (We even encouraged several of them not to announce their plans during the air show where they might get lost in the show news frenzy!)

Airbus announced something like 280 "orders" at the show. At this point, it's unclear how many of the Airbus orders were firm orders versus intents to buy. Clearly, with the yet-to-be-launched A350, more work needs to be done before the orders are firmed.

One report from Reuters at the end of air show week noted, "Airbus announced deals for 280 planes worth more than $33 billion at list prices, yet only orders for 10 planes appeared to be firm, with the rest to be finalized in coming weeks, months or years."

If that's accurate, it would amount to fewer than 4% firm orders.

All of this is why we don't believe that air shows are something that can be "won" or "lost." Especially with order announcements as the measuring stick.

So we will continue to steer away from the air show over-hype, and stick to our plan for how and when orders are announced and booked.

Speaking of which, you can keep track of Boeing's firm orders on our Orders and Deliveries Website. It's updated every Thursday.

Now it's off to the remaining 26 weeks of the year!


23 June 2005

Timing

One of the key stories to come out of the Paris Air Show last week had to do with the future of the Boeing 747.

In a news briefing during the show, Commercial Airplanes President and CEO Alan Mulally told reporters that we'll probably decide later this year whether to launch the 747 Advanced. He confirmed that we've gotten "extremely strong interest" from airlines in the Advanced. Boeing Chairman Lew Platt shared that the Board of Directors may be discussing the project at a meeting coming up.

747 Advanced image

The 747 Advanced passenger and freighter versions continue to generate interest around the world.

You may remember that earlier this year there was talk of announcing the end of the 747 line. There's no more talk of that now, thanks in part to strong demand for the 747-400. Last month Nippon Cargo Airlines ordered a 747-400F. And right now there are 24 orders for 747-400s, both passenger and freighter versions. We continue to market this airplane to our customers.

As for the Advanced, we know there's a need for a 747 with greater seating and cargo capacity and an extended range. This stretch version of the airplane would take it from the current 416 passengers to about 450 passengers. There's a lot of interest in the freighter version as well.

The Advanced would have new engines, similar to those designed for the 787, plus other improvements such as a new interior and an enhanced flight deck. The 747 Advanced would be the quietest and fastest commercial airplane in the world.

No doubt the 747 Advanced with the new-technology GEnx engines in development for the 787 Dreamliner would be more efficient than the much larger A380 - in both passenger and freighter versions. The 747 Advanced would have the same range as the A380, while still fitting into today's airport infrastructure.

So what is it going to take to launch? Right now we have a window of opportunity. Our customer airlines want us to make a decision this year. And some airlines have told us that they also need to make a decision this year. So, the window requires we both come together at the same time.

If we launch late this summer, rollout would be 2008, with entry into service in 2009. A lot depends on the 787 engines. You wouldn't see a 747 Advanced until after the first flight of the 787.

But I think it's safe to say we're feeling positive about it. We've definitely had strong interest. The key thing now is timing.


20 June 2005

Moving forward

Just as you're recovering from a couple of weeks of Air Show frenzy in Europe, you come home to some disappointing news.

Basically, over the weekend, Air Canada cancelled its order for 777s and 787 Dreamliners. The Air Canada Pilots Association voted to reject a contract agreement the airline had included as a condition of completing the sale. As a result, Air Canada has told us it won't be purchasing the airplanes.

I know Air Canada is disappointed, and certainly so are we. We thought it was a great opportunity for the airline to renew and modernize its fleet with two game-changing airplanes. The 777 and 787 combination offered attractive economics for Air Canada as well as tremendous benefits for passengers who desire more nonstop, point-to-point service.

Still, as disappointing as it is, there's no need to worry for Boeing here. We're seeing very strong demand for the 777 and 787. In fact, we've acknowledged that we're sold out on 787s for the first three years of production. And we have a lot of opportunities to place these very popular airplanes with customers.

And so we move forward.


16 June 2005

To the finish line

All I can say is, you just never can predict what's going to happen in this business. If you'd told me that Boeing would have ended the week with orders and commitments for nearly 150 airplanes, I wouldn't have believed you. But that's what happened.

And so I want to return to what I've said before. The timing of order announcements is up to our customers. They announce when and where they choose. Boeing doesn't stockpile orders and save them up for air shows. It just so happened that the timing and the orders all came together these past several days.

In fact, a big order coming in for Boeing on Wednesday didn't even come out of the Air Show: Alaska Airlines' order for 35 Next Generation 737s. That order would be big news any time of the year, as the single-aisle 737 continues to reign as our best-seller.

777-200LR Worldliner at Le Bourget 2005 photo

With more and more airlines making the 777 their twin-aisle of choice, you couldn't have asked for a more appropriate backdrop at Le Bourget than our 777-200LR Worldliner.

And we're also pleased by the demand for our twin-aisles - the 787, 777, and even the 767. These airplanes deliver more of the nonstop service passengers want. Successful airlines know it's all about the passengers.

Orders and commitments for 38 Boeing 777s were announced this week, with the emphasis on the 777-300ER. That's the largest 777, capable of taking 365 passengers and cargo from Paris to Los Angeles or Newark to Hong Kong. The 777-200LR, the world's longest range airplane, can connect almost any two cities in the world, even loaded with passengers and cargo.

I'm heading back home today. And I just realized that even though I've been in Europe for more than a week, I barely saw anything of London or Paris beyond the confines of buses and taxis.

On scene at the Air Show photo

On scene at the Air Show, presenting one of a dizzying series of media briefings.

On the bus back to Paris after yet another crazy day at the Air Show I was really trying to think of something pithy to say to wrap things up. I'm sure I'll have a lot more to say later, back in Seattle, when I get a chance to reflect on the week. But at the moment my mind is mush. And so are my feet.

Whoever said these shows slow down at mid-week should have been here. It was a flat-out race to the finish. I learned the many ways my colleagues can change a schedule. As a result, I must have walked several miles between meetings and interviews, nearly wearing out my shoes in the process.

Then, after all that, as I left the Air Show, I was reminded again how maddening the traffic leaving Le Bourget can be. And ultimately, all you really can do at the end of the week is congratulate yourself for just surviving it all.


14 June 2005

Hot day in Paris

The weather and the activity heated up during the second day here at the Paris Air Show. As temperatures rose, so did Boeing's interactions with customers, suppliers, government officials, media and Wall Street types.

There's a positive buzz at the show this year. And it's a lot stronger than in the recent past. I'm talking about real excitement, instead of trepidation, about where the industry is heading.

It's been hot, too, in the order department. Over the past two days we've seen significant orders and commitments for more than 90 airplanes.

BCA CEO Alan Mulally (right) with ILFC CEO Steven F. Udvar-Hazy photo

BCA CEO Alan Mulally (right) with ILFC CEO Steven F. Udvar-Hazy on board the 777-200LR Worldliner at the Paris Air Show today.

Just today, two of the world's leading leasing companies and savviest airplane buyers ordered 48. International Lease Finance Corporation (ILFC) ordered 28 Next Generation 737s and 777s. GE Commercial Aviation Services (GECAS) ordered 20 Next Generation 737s.

In addition to announcing the 737 and 777 orders, ILFC CEO Steven F. Udvar-Hazy made very kind comments about the 787 Dreamliner and our approach to the commercial aviation market.

Also, Jet Airways, the largest private carrier based in India, announced its intent to order 20 737s and 777s.

Now, as I've mentioned before, Boeing doesn't save up and hold orders so we can announce them at air shows. So, I want to point out that these are examples of agreements that came together at the time of the show, and are opportunities for customers to highlight their activity this week.

Whatever the case might be, these announcements help demonstrate our airplanes' appeal and the soundness of our strategy. With validation like this we know we're doing things right.

And I have to add that it's also a great week for the men and women who design, build, sell, support, and operate our 747 and 767 airplanes. Several months ago many people were expecting us to announce the closing of those lines soon. Happily, the recovery that has taken hold is generating enough demand for those airplanes that Commercial Airplanes CEO Alan Mulally was able to announce at his Paris news conference that we don't expect to have to make those decisions any time soon. I can't tell you how great it was to hear that.

One last note. Airbus tried stirring things up a bit today. Their CEO Noel Forgeard held a news conference here and proceeded to criticize, it seemed, all things Boeing. Everything from our strategy and our 787 Dreamliner, to the way Boeing does public relations. At the same time, he tried offering us advice about our business practices!

Hmm. Could it be that the competition is just feeling the heat a bit?


13 June 2005

Monday at the show

The first full day of activity at the Paris Air Show sure bustled with events. And I mean from the moment we hit the road very early in the morning to the time we headed back to the hotel tonight, eleven hours later.

Boeing Commercial Airplanes CEO Alan Mulally started our day with interviews at 7:45 a.m. in front of our 777-200LR Worldliner. Bathed in the beautiful sunlight of early morning, it really is a gorgeous airplane. By my count, Commercial Airplanes officials had two dozen media sessions today, including a briefing by 787 Vice President Mike Bair that drew a standing-room only crowd.

Alan Mulally and 777 Vice President Lars Andersen photo

Alan Mulally (left) and 777 Vice President Lars Andersen view a special display inside the 777-200LR Worldliner on exhibit at the Paris Air Show.

This week we're going to continue telling the world about Boeing's momentum. We've sure come a long way since the last Paris Air Show two years ago, when a lot of people were asking what was wrong with Boeing.

Air shows always bring surprises, and today we got a nice one. Qatar Airways said it will order at least 20 777s, including the 777-200LR, the 777 Freighter, and the 777-300ER. What was particularly gratifying was that Qatar said the 777 will become its "standard large widebody." It's another demonstration of the 777 family's flexibility and appeal for airlines around the world.

While it's true we were disappointed Qatar went for the A350 rather than our 787 Dreamliner, overall the announcement is a further validation of our product strategy of twin-engine, long-haul flight. That strategy was on the minds of everyone we talked with today. I think people now understand the transformation Boeing has made. We're focused more than ever on creating unbeatable value for our customers with the 737, 787, and 777 families.

Italian Air Force tanker (KC-767A) and 777-200LR  photo

Italian Air Force tanker (KC-767A) and 777-200LR on display at Le Bourget.

It's certainly not surprising that the 787 and 777 are getting most of the attention at the show, especially since the 777-200LR is parked right in front of our building. But I'm also pleasantly surprised by the interest in the 747 Advanced. I get a real sense that Boeing-watchers really want us to do that airplane. And as we've said, we're seeing the kind of customer interest that, if I were a betting man, would lead me to wager that we will do that airplane. I'm hoping we'll get the go ahead this summer. It's going to be a great airplane.

Finally, a tip of the hat to Airbus. Most of us had our first opportunity this afternoon to see the A380 fly. Without question it is an impressive technological achievement, and its flight demonstration was a big highlight today. But as I've reminded many people, our strategic difference with Airbus in the very large airplane market has little to do with the airplane itself. It has to do with the fact that the A380 is a very large (and now having seen it up close, I do mean very large) airplane for a very small part of the commercial airplane market.

Tuesday promises to be just as busy as today. I'll let you know how it goes!


10 June 2005

Bonjour de Paris

Well, I'm on the ground in Paris. And the whirlwind is under way. I've already met with dozens of reporters both here and in London, and we're just getting warmed up. Le Cirque du Bourget has begun!

Boeing's big blue airplane arrived this morning to kick off our presence at the Air Show. The 777-200LR Worldliner touched down at 8:53 a.m. Paris time. She flew in from Montreal overnight, after a huge event with Air Canada on Thursday. About 3,000 Air Canada employees and their families came out to tour the airplane. In April, you may remember, Air Canada ordered a couple dozen 787s and 777s, including some 777-200LR Worldliners.

Boeing 777-200LR Worldliner arriving at Le Bourget photo

The Worldliner arriving at Le Bourget this morning, completing its first intercontinental flight.

The Paris visit is all part of a "Going the Distance" world tour for the Worldliner. The first leg, in fact, was the Seattle to Montreal trip. Paris is stop number two.

Later this year, the Worldliner will attempt to set a new world record for a commercial airplane for traveling nonstop. The current record is 10,823 nautical miles (20,044 km), set in 1997 by the 777-200ER (Extended Range).

Here at Le Bourget today the 777-200LR was the first major commercial airplane to be positioned in its static display. It will be joined by the 767 tanker and the Boeing Dreamspace, a kind of walk-through multi-media experience.

Right now we're waiting for the arrival of the Airbus A380. I'm hearing it will be here Sunday. It will be interesting to see it up close and in person. I'm sure the pictures we've all seen don't do justice to its size.

In the meantime, there's plenty of buzz around the Worldliner. Groups of media photographers and other curious onlookers have been taking in the sight. A lot of them snapping pictures with camera phones. Maybe you opened up a phone message today with a photo of the world's longest range commercial airplane painted in the bright blue Boeing livery!

What was really interesting was that people literally surrounded the airplane as it was tugged into position this morning. They sure got a rare close-up view. Some of them were French visitors to the show from all walks of life, remarking, "beautiful airplane" and "magnificent."

Que le spectacle commence!


08 June 2005

2024 vision

I'm in London today, presenting Boeing's 2005 Current Market Outlook (CMO).

Typically we do this each year around the time of the big international air shows in June and July. With the Paris Air Show coming up next week, it's a chance for us to publicly present our forecast for the commercial aviation market for the next 20 years.

What's so important about a 20-year forecast? To put it simply, the CMO influences our whole business approach to the market place.

We've been talking for many years about how our forecast is driving product strategy. We see the market continuing to be more and more liberalized and competitive. Airlines are responding to that competitive environment by providing what passengers want: more nonstop, point-to-point flights with more frequency choices.

Our new airplane delivery forecast is based on that view of the market.

And the market we see is a strong one. Between now and 2024 we're projecting a $2.1 trillion market for new commercial airplanes.

In terms of numbers, we think airlines will need 25,700 new airplanes over the next 20 years - that includes passenger airplanes and freighters.

Current Market Outlook chart

When you look at the pie chart, you can see single-aisles (737-size) will be the bulk of those new airplane deliveries - 60%. Airplanes of 747-size and larger make up only a small piece of the pie - a little over 3%.

For more details and a more specific breakdown you can click over to the Current Market Outlook page.

Our forecast is based on a worldwide GDP growth of 2.9%. That's the foundation for our projection of around 5% growth in air passengers and a little over 6% growth in cargo traffic.

And with that kind of growth in passengers and cargo we will see the commercial airline fleet more than double over the next 20 years - to over 35,000 airplanes.

20-Year Forecast chart

In the chart above, the figure of 16,778 represents the current worldwide commercial airplane fleet. 35,300 represents the size of the fleet we predict in 20 years.

Getting us there is a projected 18,500 new commercial airplanes due to growth alone between now and 2024. Of course during that time period some airplanes will need to retire. We're estimating that number to be about 7,200 airplanes. And those will need to be replaced. So all in all, airlines will need about 25,700 new airplanes to handle growth and to replace retiring airplanes.

Combined with a retained fleet of about 9,600 airplanes (which are out flying today and will still be in the fleet in 2024) you get a total worldwide fleet of about 35,300 airplanes.

One of the more interesting projections in our outlook is that a lot of the growth will be in the Asia-Pacific market. In fact, in terms of delivery dollars, Asia-Pacific will make up 36% of the commercial airplanes market.

That will be just one of many topics to get into a bit further as we go forward in a robust commercial airplanes market. To get you started on the discussion, you can view my CMO presentation.

In the meantime, I'm heading to Paris. And I'll talk to you from Le Bourget.


03 June 2005

On to Le Bourget

It's almost Paris Air Show time again. It comes around every two years, and sometimes it seems as if we start working on the next one right after it's over. We're already planning for the 2006 air show in Farnborough, UK.

But one thing's for sure. There's a different atmosphere in the aviation world this year compared to 2003 when we last met at Le Bourget Airport.

There's a good preview of what to expect in Flight International. They make the point that the mood is going to be far more optimistic this time. And I have to agree.

WD002, the second 777-200LR Worldliner photo

WD002, the second 777-200LR Worldliner, will be visiting Le Bourget for the Paris Air Show. The airplane is seen here outside the paint hangar in Everett, WA last month.

Boeing has seen a good deal of momentum recently, not only in some significant order announcements for the 787 and 777 programs, but also continued strong interest in the best-selling 737.

And Europe's aerospace industry is flying high right now as the A380 goes through its test program.

I've attended a lot of air shows over the years. There are fun flying machines to see and friends to catch up with. And as always, there'll be some interesting news coming out of this year's show. I'm sure there'll also be a lot of back and forth about the on-going Airbus subsidies debate.

Something else comes to mind when I think of air shows past. Hype. These shows can often turn into a feeding frenzy of airplane order announcements, or announcements of intent to order, or intent to think about the intent to order!

Seriously, that's not Boeing's way of doing things. We don't save up orders for air shows. Of course, if our customers want to use the Air Show as the venue for an order announcement, we'll support them.

But our thinking is that while these annual or biennial events get a big splash in the media, they make up just one week out of the year. A lot of business gets done during the other 51 weeks.

You might be interested to know that many announcements made with much fanfare at air shows never actually turn into firm airplane orders by year's end.

If you want to see where Boeing is in terms of firm orders, you can see the latest info, updated weekly, on our orders and deliveries site.

Anyway, signs are definitely pointing to an improving year overall for the aviation industry, and that's great news for all of us. I'll let you know what the word is from Paris as I check in during the Air Show the week of June 13th.