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22 December 2005

Milestones

The first full day of winter is as good a time as any to reflect on the year that's coming to a close. Especially since we've reached some remarkable milestones that I'll talk about in a moment.

The onset of "winter" in the Puget Sound area typically means grey skies and drizzle. But in recent weeks we saw a heck of a lot of sunshine and blue skies in Seattle. The weather forecasters use a peculiar phrase around here: sun breaks. When the sun peaks out from the dreary overcast, that's a sun break. If I were a weatherman I guess I'd say we've had a lot of sun breaks this year at Boeing Commercial Airplanes.

I know that causes consternation for those locals who like to claim it rains nonstop here, and for those naysayers who've been predicting BCA's demise.

And it seems to me it wasn't too long ago I was fielding questions at media forums along the lines of, "Is Boeing going to stay in the commercial airplanes business?" Well, I can tell you, no one is asking that question any more.

Boeing Commercial Airplanes HQ photo

A view of Boeing Commercial Airplanes HQ in Renton, Washington this week. Or, as I like to call it, Blog Central.

And there are many reasons why they're not asking that question any more. Chief among them are the remarkable successes of the 787 and 777 models. Not to mention the record year for the Next-Generation 737. The market is speaking. And what it's saying is that Boeing has the right vision for the way people are going to fly. But as I mentioned a couple of weeks back, it's also about an evolving way of doing business. Of making our production system lean and efficient. And of listening and working closely with our customers so we can build the most reliable and cost-efficient products using the latest breakthrough technologies. This is why you're now seeing a lot of stories in the media about the terrific year we've had.

It's a year in which we've sold more 777s than any year since the program began. In 2000, our previous best year, we sold 116 777s. As of today we have 131 orders for 777s on the books for 2005.

Boeing 737 and 777 photo

For the 737, we've set a sales milestone that's likely to remain in the books for a long while. And the 777 program is flying high as well.

This is a year in which the 737 program has hit all sorts of records and milestones. Just this week an order from Xiamen Airlines of China for 737-800s pushed the 737 program above the 6,000 mark for all-time orders. No jet airplane in commercial aviation history has ever had the sales success of the 737. And not surprisingly 2005 also set a single-year sales record for the program. Boeing has 497 orders for 737s this year alone. The previous record was 438 orders back in 1996.

2005 may well be an all-time orders year for BCA as a whole. At 870 firm orders on the books as of today, we're approaching the order high of 877 set in 1988 (including both Boeing and McDonnell Douglas legacy products). You can take a look at the firm order book for 2005 so far on our Orders and Deliveries Website.

Randy with the blogs photo

Corporate blogging got a lot of ink this year, and embarrassingly, so did my mug. This article was in "U.S. News and World Report" last July.

Finally, for me, on top of all the highs of the year, and all of my travels, this has been the year of the blog. This little experiment - launched on the eve of the first flight of a superjumbo in France - has taken off in ways I don't think any of us really expected. Over the past 11 months, we've had nearly 200,000 visits to this site, from blog readers around the globe.

You've certainly told me when you think we're off-base. And your suggestions have made this a better blog. Many of you have cheered along as we made history with the 777-200LR, and the launch of the 747-8. Your thoughtful and intelligent comments and your continued interest in the world of commercial aviation are what sustain this Journal. And I can't wait to see what the next year brings for blogging, aviation and Boeing.

Until then, I hope it's a great holiday time for you, and we'll have more fun discussions in 2006!


15 December 2005

Qantas leap

Yesterday we got the great news that Qantas has selected the Boeing 787. It's a big order, from a big player in the industry, in what's shaping up to be a big year for the Dreamliner.

But let's talk about just how significant this is going to be for Qantas. The Australian carrier describes the 787 order as the cornerstone of its domestic and international fleet renewal program.

Boeing 787 in Qantas livery image

Dreamliners for Oz: the Qantas Group has ordered up to 115 Boeing 787s.

The plan calls for orders for 45 Dreamliners, with options for 20 more and purchase rights for an additional 50. The airplanes would join the Qantas fleet, as well as that of its new Jetstar operations.

Qantas' Chief Executive Officer, Geoff Dixon, said it was a tough competition, but in the end, Boeing emerged the better choice, for a lot of reasons that readers of this blog will find familiar. Here's what Dixon said:

"The Boeing 787 provides breakthrough technology, enabling us to fly further to more point-to-point destinations throughout the world at a cost equivalent to operating larger aircraft like the Boeing 747-400."

The Qantas board recognized that adding 787s to their fleet means maximum flexibility, lower seat mile costs and greater fuel efficiency. As they pointed out in their announcement, these are airplanes that position Qantas strongly for the future in the face of increasing competition.

Now, from my point of view, this is a continued validation of the 787's capabilities and Boeing's strategic direction in the market. The Qantas order takes the total now to 26 customers who have ordered and committed to the 787 program. A total of 354 orders and commitments for airplanes so far. And it's interesting to note that 21 of those customers have joined the 787 family since Airbus offered the A350 about a year ago.

But getting back to the Qantas announcement, I have to admit that this one really thrills me personally. I've been involved with the Australian airline industry since my early days as an airline financial analyst for Boeing. I've made more trips to Australia than I can count, and I've studied their market for 25 years.

This is yet another Qantas leap into the future for a great airline and a true aviation pioneer. To that I say, "Good onya!"


09 December 2005

D.C. flurries

There’s at least one thing Seattle, Washington, and Washington, D.C. have in common. They both go a little bonkers at the first sign of winter weather. Earlier this week I flew into D.C. in the midst of a few snow flurries. I was arriving on an evening flight to take part in something called the Aerospace and Defense Summit, held at the Reuters news bureau on H Street in Washington.

But what I didn’t count on was the minor pandemonium that a little frozen precipitation brings! Traffic tie-ups, school closings. It was enough to think I was back in Seattle where we went through our own version of this last week. Anyway, the snow flurries in the capital got me thinking about the flurry of airplane orders we’ve seen this year.

At more than 800 firm orders in 2005 so far, we’re approaching an all-time record year for orders for Boeing Commercial Airplanes. This milestone was also on the minds of the dozen or so Reuters reporters and editors I met with on Tuesday, who had a flurry of questions for me about Boeing’s year.

Randy Baseler photo

Some might say this airplanes thing has gone to my head, but this interesting photo from my presentation at the Aerospace and Defense Summit takes that concept to a whole new level. (Reuters photo)

The one thing I wanted to impress upon them was that this shift in momentum for BCA didn’t happen over night. This transformation - and that’s really what it is, a transformation - has been the result of a total, long-term effort to bring more value to our customers, shareholders, employees, and our communities. I told the Reuters group that market share is just one element of the turnaround.

To begin with, under the leadership of BCA President and CEO Alan Mulally, we’ve transformed our product line to a simpler, more capable family of airplanes covering 100 to 450 seats (737, 787, 777 and now the 747-8). I told Reuters that this strong product line has positioned us well for the market recovery. And as we’re seeing this year, the market is validating our approach.

But that’s just part of it. We’re transforming our entire production system. The goal is a production machine with a focus on large-scale systems integration, and a lean global operation that continuously improves its efficiency. Evidence that this approach is working is the 737 moving assembly line in Renton, which we are also putting in place on the 777 line in Everett. The bottom line is that these lean operations are allowing us to produce the best products at the lowest possible cost to our customers.

We’re transforming our customer relationships by working even more closely with them to get a feel for their unique requirements, and we’re meeting those requirements with total business solutions. I think this has led directly to more responsive and energetic sales campaigns and the successes we’ve seen this year.

In the course of my one-hour session with the Reuters reporters, I got a number of questions about the future of the 767 program. When do we need to make a decision? My answer is, right now we have 15 net orders on the books in 2005 for the 767. That means we don’t have to make a decision until some point next year. And there still could be additional orders from existing customers. But as a commercial passenger platform, yes, the 767 is going to go away when the 787 is delivered. That’s a couple of years out.

Now, as a military or freighter platform, we’ll continue to produce the 767 as long as customers ask for it. I told Reuters that once the Air Force defines its requirements for a tanker, I’m confident Boeing will have a suitable platform, whatever the size and needs may be, because we’ve got airplanes ranging from the 737 all the way up to the 747.

Another question at the session in D.C. was, “Have airplane orders peaked? Or will next year be bigger?” Well, the answer to that is, yes, no, maybe. If you had told me a year ago we’d top 800 orders in 2005 I might not have believed you. But here we are.

Now, historically speaking, after a year this high, the tendency is that the following year orders can be somewhat lower. The good news is that the market continues to look strong into next year. And the factors in our business environment that drive growth are solid. This is great news for our airline customers and for our passengers. We’re certainly looking forward to the New Year. But who can know with any certainty what 2006 will bring?

When will we see an order for the passenger version of the 747-8? We expect that in 2006. We’re talking with customers now about it. There’s plenty of interest. We see a need for about 300 airplanes in the 400-500 seat size, so there’s a lot of potential there.

And what about “pressure” to launch a 737 successor? Well, I replied that there’s not really a lot of pressure. From a market point of view, we’re very happy with how the 737 is doing. In fact 2005 is an all-time record year for 737 sales. Certainly we’re having conversations with airlines. A Reuters reporter pointed out recent comments coming from Southwest Airlines indicating interest in a new single-aisle. But what’s not quoted about the SWA comments, is that what they would want is a new single-aisle airplane that delivers higher value.

And that’s exactly what will determine when Boeing develops a 737 successor. As I’ve said here before, that value has to offset the new infrastructure airlines will need to build to support the new airplane. In addition you’d want to see improvements in fuel consumption, operating costs, and price.

Reuters conducted a brief on-camera interview with me following the Summit session. You can find the video clip on the Reuters Summit Webpage under Aerospace and Defense Summit.

All in all, the Washington flurries were kind of refreshing. It was amusing to see the local media reports of people rushing to the stores to horde milk, bread and toilet paper (toilet paper?). The TV stations even have an acronym for it, MBTP. Despite it all, the Nation’s Capital survived the storm. And so did I.