Aviation News, Boeing, Airbus

“Our goal is to get 67 percent of the airplane market in dollar terms” during the next two decades, says Nancy J. Bethel, vice president of marketing for Boeing’s commercial airplane group. “Traffic growth and sustained airline profitability are beginning to result in airplane orders,” she says. “Our industry appears to have made it through the bottom of the cycle.”

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Orders for new airliners began dropping in 1990 and remained depressed through the recession of the early nineties. Between 1990 and 1994, the number of surplus planes stored by the world’s airlines grew from 500 to 1,110. As of now, about 730 surplus airliners are sitting in desert parking lots and 245 of those will not be able to meet noise rules that come into effect in 1999, according to Boeing.

New orders started coming in last year, with the Saudi Arabian and Singaporean national airlines placing multibillion-dollar contracts — with Boeing getting close to 70 percent of the orders. The Seattle-based company predicts total industry sales of nearly 16,000 planes by 2016, worth more than $1 trillion.

Boeing is downplaying reports that United Airlines officials believe its 10 new Boeing 777s are “a major disappointment.” The 300-seat, twin-jet airliners have been out of service for too long, according to a representative of United, the original customer for the jumbo jet and first to put it into service last year. According to Boeing, none of the complaints involved safety and most were simply growing pains for an otherwise reliable aircraft. Chicago-based United issued an upbeat statement that “the 777 is an excellent airplane; we just want to make it better. The 777 is outperforming all other new airplanes we’ve introduced into our fleet.”

The Boeing Company has been working on the Y2K challenge since the
early 1990’s. Long lead times required during the regular course of
engineering and manufacturing processes allowed Boeing to identify
potential problem areas early and begin making the necessary changes
to products and internal business systems.

All safety of flight and mission critical issues were corrected as of
December 31, 1998. Boeing spent 1999 finalizing supplier
preparedness, testing contingency plans and coordinating with local,
state and federal governmental agencies.

The company’s Y2K strategy included a common companywide focus on
policies, methods and correction tools, and coordination with
customers and suppliers. Each operating unit had responsibility for
its own conversion, in line with overall guidance and oversight
provided by a corporate-level steering committee.

Commercial Airplanes — Commercial airplanes are minimally affected by
the Y2K problem. Following an extensive survey of thousands of
airborne systems, only three were found to be date sensitive. None of
them compromised the safety of flight or operation. Information
identifying software or hardware changes and instructions on how to
make the changes were sent to airlines.

On April 16, 1999, Alan Mulally, president, Commercial Airplane Group,
demonstrated his confidence in the readiness of Boeing aircraft by
being onboard a 737 that successfully turned its systems ahead to
January 1, 2000 while in flight. All systems remained operational and
communication with Traffic Controllers was normal.

Military Aircraft and Missiles — Military Aircraft and Missiles
employees worked closely with customers and suppliers to identify and
address any Y2K impact to products. No safety-of-flight issues were
found and few operational impacts of any kind have been identified.
Precautions were instituted to prevent the reintroduction of Y2K
problems back into systems that have been remediated.

Customers initiated operational flight tests for the C-17, F-15C,
AMRAAM missile and Apache helicopter. All testing was completed and
met customer requirements.

Space and Communications — Space and Communications has addressed
potential Y2K problems across its wide and varied product line. These
range from one-of-a-kind projects such as the International Space
Station to other programs such as the Space Shuttle, Sea Launch and
the Delta family of launch vehicles.

The nature of Space and Communications products and security
considerations preclude specificity in descriptions of remediation
efforts.

“A third competitor, I think it’s inevitable, but we all have different bets on who it will be,” McNerney said during a presentation to analysts in Chicago. “A lot of people think the Chinese have the combination of market size, technical capability and aerospace experience from military and commercial to pull it off.”

McNerny reaffirmed Boeing’s outlook for strong growth in 2007 and 2008, telling investors it remains on pace for double-digit increases in earnings and revenue as it rides momentum of the 787 jet.

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McNerney cited demand from airlines in China and Indonesia as leading a “sea change” in sales of commercial planes.

McNerney dismissed the notion of a tapering-off in orders for commercial jets amid sizzling sales of the 787, which has racked up 568 orders from at least 44 different customers even before the first model rolls off the assembly line.

WHEN NASA’s Mars Odyssey spacecraft rocketed skyward from the Kennedy Space Center recently, it rode atop a sleek Delta II rocket built by aerospace colossus Boeing. That was a giant leap for Boeing, whose name is synonymous with passenger jetliners. It means that the world’s largest aerospace manufacturer and the nation’s biggest exporter is hardly a one-trick pony. That should smooth the future flight plan for both the company and its shareholders.

Making all those 747s, 757s and so on is a monster business. About 60% of Boeing’s $51 billion in revenues last year came from passenger planes (average price for a 777:$192 million). The rest came from an array of other aerospace products, including military fighters, communications satellites and rockets. Profits rose 20% last year–to $2.5 billion, or $2.84 per share–and analysts expect a 33% improvement this year.

The passenger-plane business is booming. Boeing’s scheduled production of about 500 commercial jets this year is already sold out. Some 80% of the 500 planes scheduled for next year are also under contract.

Steadler workload. This growing backlog of orders is key to Boeing’s continued health, says Banc of America Securities analyst Ted Cho. Historically, jet manufacturing is a cyclical business. Profit margins wilt as production lines frenetically gear up to meet booms, then suffer again when sales eventually slump. But with a steady workload, Boeing “should enjoy significant profit-margin improvements over the next few years,” says Cho. That, in turn, should help the firm’s shares steadily gain altitude.

Meanwhile, Boeing faces fierce competition in the jumbo-jet business from Airbus Industrie, the European commercial-aircraft consortium. In response, Boeing is placing a greater emphasis on smaller, more fuel-efficient planes, such as its futuristic, delta-winged Sonic Cruiser.

Boeing’s increased reliance on sales of military aircraft, rockets and satellites insulates it to some degree from the vagaries of the commercial-aircraft business. The Department of Defense recently boosted its recommendation for military spending by $25 billion a year over the next seven years. That bodes well for Boeing, which acquired McDonnell Douglas in 1997 and now derives one-fourth of its sales from the military. Boeing’s satellite division, bought from Hughes Electronics last year, gives it a new line of business with $5 billion in satellite orders waiting to be built.