Boeing Poised to Keep Crown From Airbus on 787

(Corrects date of A350’s entry into service to 2014 in 15th paragraph of story published on Jan. 3.)

Boeing Co. (BA) is poised to keep the title of world’s largest planemaker for at least two more years amid rising deliveries of the delayed 787 Dreamliner, the jet that helped it beat Airbus SAS (EAD) for the first time in a decade.

Boeing shipped 46 Dreamliners last year, pushing total commercial jet deliveries one higher than its top forecast of 600. Airbus, which had held the No. 1 spot since 2003, handed over 516 jets through November out of a yearlong goal of 580. The European planemaker won’t report 2012 data until Jan. 17.

While neither has given forecasts yet for 2013, Chicago- based Boeing’s announced production increases indicate it will build more than 660 aircraft this year, compared with Airbus’s planned output of over 600. That would be a record for Airbus and contribute to a combined industry high.

“It’s the Dreamliner finally delivering on the dream,” said Yair Reiner, an analyst with Oppenheimer & Co. in New York who has an outperform rating on Boeing stock. “The aircraft that has been the bane of Boeing’s existence for so long finished 2012 exceeding Boeing’s stated expectations.”

Photographer: Andrew Harrer/Bloomberg

Production of the 787 Dreamliner, the new composite-plastic jet that was more than three years behind when it entered service in late 2011, is set to double this year to a wide-body record of 10 jets a month. Close

Production of the 787 Dreamliner, the new composite-plastic jet that was more than... Read More

Close
Open
Photographer: Andrew Harrer/Bloomberg

Production of the 787 Dreamliner, the new composite-plastic jet that was more than three years behind when it entered service in late 2011, is set to double this year to a wide-body record of 10 jets a month.

The planemaker climbed 0.5 percent to $77.47 at the close of New York trading, the highest since May 2011.

Production of the 787, the new composite-plastic jet that was more than three years behind when it entered service in late 2011, is set to double this year to a wide-body record of 10 jets a month. Boeing is boosting total airliner output more than 60 percent in the four years through 2014 in response to customer demand for more fuel-efficient equipment.

Net Orders

Deliveries marked a 26 percent gain from 2011, when Boeing shipped 477 airliners and fell short of its target for 787s with just three. The company surpassed this year’s goal of as many as 42 Dreamliner deliveries by four.

Deliveries are important because that’s when planemakers get large bulk payments on the purchase price of a jet. While 2012 revenue will show a boost from the higher 787 deliveries, profit won’t be as enhanced because of the plane’s lower margins, Stephen Levenson, an analyst with Stifel Nicolaus & Co. Inc., wrote in a note today. Boeing reports earnings on Jan. 30.

Net orders climbed 49 percent to 1,203, led by purchases of single-aisle 737s, which more than doubled as Boeing offered an upgraded version with new engines. The total was the second- largest in the company’s history, boosting its backlog to a record 4,373 jets. Airbus had a target of 650 orders for 2012 and has already announced deals for more than 720 units.

Canceled Orders

“As I look at 2013, fundamentally it’s lining up a lot like we saw last year,” Randy Tinseth, Boeing’s marketing chief, said in an interview today. “We expect to see continued strong demand on the single-aisle side.”

Boeing won orders for 40 737s from unidentified customers in the past two weeks, according to an update today of its website tally. Orders were canceled for 25 of that model and for one 787.

Annual orders for 767s, 777s and 787s, all twin-aisle jetliners, fell from the previous year. Dreamliner orders ended the year in the negative, with 50 cancellations outstripping purchases by 12. Boeing still has unfilled orders for 799 of the new planes.

At Toulouse, France-based Airbus, output of the flagship four-engine A380 is sagging as the aircraft maker fixes a wing- component flaw that has caused cracking in parts of the plane. Airbus delivered 30 A380s in 2012.

‘The Solution’

Boeing is set to remain ahead of its rival in both 2013 and 2014, said Reiner and Howard Rubel, an analyst with Jefferies Group Inc. (JEF) in New York.

“After that, it will be whoever has the solution for that mid-range widebody, which they’re both going at hammer and tong,” Rubel said. Airbus’s new A350, the 787’s competitor, is scheduled to enter service in 2014.

Last year’s deliveries were a record for Boeing-labeled jets. The three other times in the 97-year-old company’s history when production was greater than 600 airliners each included now-discontinued models made by planemakers Boeing bought.

“What’s equally interesting is the large commercial transport market delivering over 1,200 airplanes, which will be the third record year in a row for deliveries,” Rubel said, referring to combined shipments by Airbus and Boeing. “We have it forecast as modestly up for the next two years, then we need traffic to really kick in again.”

Supply Chain

Airbus last year opted not to boost output of A320 family aircraft to 44 per month from 42, in part out of concern suppliers couldn’t keep pace.

“The challenge for both Airbus and Boeing will be to get the supply chain to deliver on the increased rates without any issues,” said Zafar Khan, a London-based analyst at Credit Suisse.

Boeing faces an additional risk meeting targets this year as the union representing 23,000 engineers and technical workers, mostly at Boeing’s manufacturing hub around Seattle, has warned of a possible strike.

Wage talks are set to restart Jan. 9, and the Society of Professional Engineering Employees in Aerospace has said it may call for a work stoppage the first week of February if no agreement is reached.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.