Boeing Says 737 Orders Mute Emerging-Market Currency Risk

Boeing Co. (BA), the world’s largest planemaker, says it’s cushioned against currency market turmoil by an order backlog for its best-selling 737 jet that’s large enough to keep factories busy for seven years.

Boeing can count on strong demand for the popular narrow-body jet to lessen the risks of order cancellations if currencies continue to plunge in developing nations from India to Indonesia, Beverly Wyse, a Boeing vice president and 737 general manager, said yesterday in an interview at the Renton, Washington, factory where the jets are assembled.

While Boeing and Airbus Group NV have amassed record order books, investors and analysts are paying closer attention to large purchases planned by upstart carriers and questioning whether the aerospace market is headed for a correction after four years of growth. Lessor BOC Aviation is among potential customers standing by if some 737 buyers postpone orders.

“If we could get more 737 Next Gens, we would have them because we’re constantly getting pinged” by airlines looking for the midsize jet, Terry Cooke, senior vice president for aircraft sales at BOC Aviation, said yesterday at a Seattle-area aerospace conference.

The state of planemakers’ backlogs has come into sharper focus with financial markets and currencies in some emerging countries falling into a tailspin as a result of the U.S. Federal Reserve Bank’s change in monetary policy. Boeing shares fell 0.8 percent to $122.04 yesterday in New York, declining for a sixth straight day.

Emerging Markets

About 47 percent of Chicago-based Boeing’s aircraft backlog is outside North America and Europe, as are 58 percent of remaining 2014 deliveries, Joseph Nadol, an aerospace analyst with JPMorgan Chase & Co. in New York, wrote in a Jan. 30 research report.

“This creates risk that economic dislocation in emerging markets could pressure aircraft demand and potentially even bring the cycle to an end,” said Nadol, who rates Boeing shares the equivalent of a buy.

Boeing is “not seeing a bubble in the single-aisle market,” where it has a backlog of 3,680 orders that is strong in terms of quantity, financial strength of customers and its global reach, Wyse said.

Boeing is planning to boost 737 production to 52 jets a month by the end of the decade from the current 37 as it forecasts continued strong demand for the current 737 models, known as “Next Generation,” and their Max series replacements, which are due to enter the market in 2017.

Unlike previous boom-and-bust cycles, aerospace manufacturers are doing a “much better job of monitoring production versus demand,” Wyse said.

Asian Orders

While the large volume of orders headed for Asia may test that prowess, so far there are no signs that airlines have overindulged on new jet purchases, said Steve Rimmer, chief executive officer of Guggenheim Aviation Partners LLC, at the Pacific Northwest Aerospace Alliance conference yesterday in Lynnwood, Washington.

“There are no white tails,” said Rimmer, referring to jets that roll out of a factory without any airline livery because orders have been canceled.

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net

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

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