Boeing Says 777 Backlog Damps Sales as Airlines Shun Wait
Stock Chart for Boeing Co/The (BA)
Boeing Co. (BA) said a wait of more than three years to deliver new 777 jets is crimping sales of the wide-body aircraft, which has become airlines’ top choice for international flights.
To meet demand, Boeing plans to boost production of the twin-engine jet to 8.3 per month by the first quarter of next year from seven now. The output increase can’t come soon enough for John Wojick, chief of Boeing’s North American sales, who called the wait “frustrating” in an interview.
“That’s probably our biggest challenge in the sales department right now,” he said. “To be honest with you, if we could build more today, we could sell more today.”
Last year, carriers snapped up 202 of Chicago-based Boeing’s 777s as they seek to cut fuel costs on international routes. The success of the 777, the largest twin-engine plane on the market, contributed to Airbus’s halting production of its four-engine A340 in November. It’s also putting pressure on the European planemaker to redesign the largest variant of the twin- engine A350, which boosts range and passenger capacity.
The 777 is the best plane for international routes, such as those to China and Brazil, where traffic is growing the most, said Michael Derchin, an analyst with CRT Capital Group LLC in Stamford, Connecticut. The aircraft is also popular as a long- distance freighter, he said.
“There’s a real, immediate demand for 777 capacity, particularly in these longer-haul growth markets,” Derchin said.
Boeing fell 0.6 percent to $73.12 at the close of trading in New York. The shares have dropped 7.5 percent in the past year.
Chief Executive Officer Jim McNerney and Jim Albaugh, head of the commercial airplanes unit, will update shareholders on their strategy at an investor meeting in St. Louis tomorrow,
Boeing won’t boost 777 production for now beyond the planned ramp-up next year because of “significant investment that we would incur to go above that rate,” Wojick said in an interview May 11 at the Dallas/Fort Worth International Airport, where the 787 Dreamliner arrived as part of a worldwide tour. Output of the 777 increased to seven a month from five last year.
The company is looking at making improvements to the 777-300ER, introduced in 2004, which will keep the plane popular into the future, he said.
Dreamliner Waiting List
Boeing, which delivered the 1,000th 777 last quarter after entering it into service in 1995, had 358 unfilled orders for the plane through April. New orders of the 777 have dropped to seven for the first four months of the year. Wojick said orders, which “come in clumps typically,” declined after all-time highs in 2011.
“We had a record year last year,” he said. “That speaks for itself on the demand and attractiveness of the 777.”
The 787 Dreamliner, the first composite-plastic passenger jet, will also suffer because of the waiting list, Wojick said. The plane entered into service last year after a three-year delay because of design-to-production complications. Through April, there were 843 unfilled orders for the 787, which is being produced at a rate of 3.5 per month.
“We’re still seeing people firming up options and some incremental customers for the product, which is great,” Wojick said of the 787.
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