At the Dubai Air Show in November, Boeing announced na historic $100 billion order for 259 of the yet-to-be-built 777X. The order marked the largest commercial aircraft launch in history.
But that was the peak. On Jan. 29, Boeing beat earnings estimates but issued disappointing current-year guidance, and shares fell 5% from the previous close to $129.78.
In the ensuing days, Boeing's problems seemed to mount. They included problems in Dreamliner 787 production that were disclosed in a Feb. 3 Seattle Times story, which said that 787 fuselage sections from North Charleston, S.C., arrived at the Everett final assembly line "seriously complete with wiring and hydraulics lines missing," according to sources. The problems occurred as Boeing seeks to ramp up 787 production to 10 a month.
Additionally, in a business where rising aircraft orders tend to trigger rising share prices, the Dubai Air Show order was a landmark that led unfortunately to the question, "Who is left to order?"
As McNerney said at the investor conference, "Dubai just had a show that ordered five times the number of airplanes as Paris and Farnborough combined the last two years."
McNerney was responding to an analyst's question about the prospect for Boeing orders at the Singapore Air Show, which opens Feb. 11. "I don't think it will be anywhere near the magnitude of what you saw in Dubai, but that is up to customers, not up to us," he said. "We are obviously in discussions with folks."
McNerney was responding to an analyst's question about the prospect for Boeing orders at the Singapore Air Show, which opens Feb. 11. "I don't think it will be anywhere near the magnitude of what you saw in Dubai, but that is up to customers, not up to us," he said. "We are obviously in discussions with folks."
On Thursday, Reuters quoted sources as saying that Thailand's Nok Airlines is close to placing an order for Boeing 737MAX jets despite domestic political turmoil. The order could be worth between $1.5 billion and $3 billion.
Major Singapore orders or not, Boeing appears to have entered a more stable period, with fewer peaks and valleys. "The decade out in front of us looks more stable than any decade I've seen in this industry," McNerney said, citing "strong market stability in our production environment only executing derivatives, not taking big development risks, which enables us to drive productivity and partnering for success on a more sustainable basis."
On Wednesday, Boeing ramped up production of a most-established prized product, the 737, to 42 airplanes a month. Since 2010, production of the 737 has increased from 31.5 airplanes a month to 42, with production scheduled to increase to 47 airplanes a month in 2017.
Also contributing to stability is the 10-year deal Boeing signed last month with the International Association of Machinists, after an agonized period when Boeing threatened not to put 777X work in Seattle, where most of its workers are. "We now have this unbelievable 10-year opportunity," McNerney said. "When we have a strike for six weeks, it costs us a couple of billion dollars."
As for 787 problems, McNerney said the company has been "adding people down in Charleston over the last couple of days to address a bottleneck we have in the mid-body assembly area, which I view as not any sign that the 787 is off the rails. This is what we do all the time, find bottlenecks and fix them." He said the mid-body is the aircraft section with the most differentiation between the 787-8 and the 787-9.
Sterne Agee analyst Peter Arment said he considers Boeing's pullback to represent a buying opportunity. He said Boeing faces the problem of selling current 777s when the updated 777X is projected to enter service around 2020, but said Boeing has the ability to discount the current model in order to maintain production flow, just as it has done for airlines anticipating the 737MAX.
(Ted Reed - TheStreet)
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