BA Boeing Co

By Doug Cameron and Imani Moise 

Boeing Co. said Friday that it won 668 net new orders last year worth $94.1 billion at list price, missing its goal of having orders match its deliveries and signaling that a seven-year boom in sales is drawing to a close.

The haul still lifted Boeing's backlog of jet deals to 5,715 planes, but the 668 orders fell short of the 748 deliveries the company booked in 2016, as it prepares to boost output of its best-selling 737 single-aisle jets.

Rapid growth in air travel in Asia and the arrival of new more fuel-efficient jets, just as oil prices started to spike, fueled demand from airlines and leasing companies for planes from Boeing and rival Airbus SE.

However, growth has cooled, particularly for larger twin-aisle jets used for international flights, leading both companies to trim production of these models.

Boeing's final order tally, including 180 cancellations over the year, was 848. Many cancellations were customers switching to the new 737 Max model that is due to start operating later this year.

While carriers such as Southwest Airlines Co. and Turkish Airlines have deferred some deliveries, Boeing executives have said such moves remain below their historical average.

The company's share price used to be closely correlated to order activity but this has waned in recent years, supplanted by free cash flow used to fund new jet development and a huge share buyback program.

Boeing spent more than $7 billion on buybacks last year and in December the company raised the authorization for future repurchases to $14 billion.

Airlines pay the bulk of an aircraft's price on delivery, and Boeing shipped 748 planes last year compared with 762 in 2015.

Deliveries of military jets and helicopters slipped to 185 last year from 186 in 2015.

Boeing shares climbed 8% last year, and Chief Executive Dennis Muilenburg has said he expects sales to be flat in 2016 while cash flow rises.

Mr. Muilenburg has played down the significance of matching orders to deliveries, and in September warned the target usually unveiled with fourth quarter earnings each January would be tough to achieve. However, he pointed to the huge backlog of undelivered planes as well as ongoing sales campaigns that could slip into 2017.

Boeing has yet to book an 80-plane contract completed with Iran Air in December, citing the need for further government approvals.

Airbus plans to book a 100-plane deal with Iran Air in its 2016 tally, due to be released on Jan. 11. Analysts expect the European manufacturer to have secured orders for around 600 jets last year compared with 1,080 in 2015.

While the big backlogs help counter the impact on investor sentiment from the dip in orders, it also focuses more attention on the fate of some big deals signed at the start of the boom.

Low-cost carriers such as Indonesia's Lion Air and Malaysia-based AirAsia Berhad rank among the top 10 customers of Airbus and Boeing, and some analysts doubt they will take all of the hundreds of planes they've ordered as airline industry profits decline.

Both manufacturers deliberately book more orders than they can produce, expecting some cancellations or deferrals. Such moves can actually help profits as bigger deals usually attract larger discounts, so parceling up smaller lots of aircraft to new customers eager to avoid a wait of several years for jets can enhance earnings.

Boeing aims to boost profit margins to the midteens from around 10%, excluding one-off charges at present. It has cut staff and introduced more automated manufacturing to boost productivity, as well as branching into more profitable services work. Analysts remain doubtful it can reach the target -- which is shared by its defense arm -- by the end of the decade, in part because of the dip in orders and its intense competition with Airbus.

The new 737 Max is central to Boeing's expansion plans, and unlike the 787 Dreamliner, its development has been relatively smooth. Norwegian Air Shuttle ASA expects to take its first planes in May, well ahead of Boeing's original target of delivering the initial planes by the third quarter. Southwest Airlines Co. also expects to receive the planes this year.

Boeing is boosting monthly 737 output to 47 jets this year and plans to raise this to 52 and then 57 as it transitions to the Max model.

Write to Doug Cameron at doug.cameron@wsj.com and Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

January 06, 2017 13:11 ET (18:11 GMT)

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