Boeing's 2016 Orders Show Slowing Sales Boom - Update
January 06 2017 - 5:09PM
Dow Jones News
By Doug Cameron and Imani Moise
Boeing Co. on Friday reported its weakest year for new
commercial-jet orders since 2010 in a sign that the prolonged boom
in aircraft sales is drawing to a close.
The world's largest aerospace company by sales closed 2016 with
668 net new orders worth $94.1 billion at list price, missing its
goal of matching new deals with deliveries as it shipped 748 jets
over the year.
Rapid growth in air travel in Asia and the arrival of new
more-fuel-efficient jets, just as oil prices started to rebound,
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 those models.
Boeing still has a backlog stretching out for seven years of
production and this week added deals for almost 200 new jets
secured in the final days of last year. The late surge lifted its
book-to-bill ratio -- which measures incoming orders against
deliveries -- to 0.9.
"To many investors, a book-to-bill [below one] is traditionally
the end of the cycle," said Buckingham Research analyst Richard
Safran.
The Chicago-based plane maker had 768 net new jet orders in 2015
and an average of more than 1,300 in each of the prior three years
as the boom lasted longer than previous industry cycles. Airline
profits and jet purchases are closely tied to global economic
growth, which in turn fuels passenger and cargo traffic.
The sluggish pace of new orders in the second half of last year
led most investors to expect Boeing to miss its internal target of
matching orders and deliveries, with more attention focused on its
ability to deliver more jets as it prepares to boost output of its
best-selling 737 single-aisle jets.
The company secured deals for 848 new jets last year but had
cancellations for 180, the majority of them from customers
switching to the new 737 Max model that is due to start operating
later this year.
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 include 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 carriers such as Southwest Airlines Co. and Turkish
Airlines have deferred some deliveries, Boeing executives have said
such moves remain below their historical average.
Airlines pay the bulk of an aircraft's price on delivery, and
Boeing's 748 deliveries last year compared with 762 in 2015.
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 also
expects to receive the planes this year.
Write to Doug Cameron at doug.cameron@wsj.com and Imani Moise at
imani.moise@wsj.com
(END) Dow Jones Newswires
January 06, 2017 16:54 ET (21:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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