Boeing CEO Sees 5-Year Edge On Airbus in Twin-Aisle Jets

Boeing Co. said lessons from the plastic-composite 787 have helped the planemaker build a five-year advantage over Airbus SAS in twin-aisle jets, the models that are the backbone of airlines’ long-haul fleets.

Airbus doesn’t “have an airframe that can compete” with the 777X, the upgraded version of Boeing’s biggest twin-engine plane, Chief Executive Officer Jim McNerney said at an investor conference today. “They don’t have the appetite to do a ground-up airplane, and they’d have to do a ground-up airplane.”

The 777X will include two new versions, Boeing said. It will have wings of lighter-weight composite plastic rather than aluminum and more efficient engines. That plane, projected to enter service near decade’s end, will compete with the Airbus A350-1000, the largest model in that aircraft family.

McNerney’s jab at Airbus underscored the jousting between Chicago-based Boeing and Toulouse, France-based Airbus over the wide-body aircraft market, where the U.S. planemaker is trying to defend its historic lead. Airbus has added sales this year of the A350-1000, which is scheduled for 2017, while Boeing rushed to fix battery flaws that grounded the 787.

The 787, Boeing’s first all-new model since the mid-1990s, was delivered three years behind schedule amid struggles with suppliers and new materials, then grounded for three months while regulators reviewed overheating lithium-ion batteries.

While Boeing is targeting a commercial debut for the 777X near the end of the decade, it doesn’t yet have board approval to start production.

Boeing fell 0.8 percent to $97.93 at the close in New York. The shares have gained 30 percent this year, outpacing the Standard & Poor’s 500 Index’s 16 percent increase.

‘Full Focus’

A larger version of Boeing’s Dreamliner, the -10, is also in the works, and McNerney said he anticipates introducing it by the end of the year.

Deliveries of the Dreamliner, halted during this year’s grounding, resumed this month. That will boost the company’s cash flow, since customers typically pay about 40 percent of the price when they receive their new planes.

“With the 787 fleet back in flight and new deliveries under way, our full focus returns to our ongoing commercial airplane priorities,” McNerney said.

Boeing is increasing aircraft production to trim a record backlog of about 4,400 commercial jetliners valued at $324 billion, boosting its cash earnings and attracting investors to its stock. The company forecasts demand of 34,000 new commercial airplanes worldwide over the next two decades, with half of those coming from replacement aircraft.

Share Buybacks

With most of the major development costs for the Dreamliner behind it, Boeing can lower spending while increasing dividends and share repurchases, McNerney said. Boeing will target returning 80 percent of free cash flow to investors.

The company suspended share buybacks after the Jan. 16 grounding and has now renewed the purchases, pledging to meet its original goal of as much as $2 billion this year.

Chief Financial Officer Greg Smith said Boeing expects operating cash flow of more than $11 billion in 2013, excluding discretionary pension funding and research-and-development costs.

Boeing plans to have a “777 family” including an 8X, which will have 20 percent lower fuel burn than the current 777-300ER and greater range, and the 9X, which will seat 40 to 50 more passengers than the 777-300ER while matching its range, said Ray Conner, chief of Boeing’s commercial airplane unit.

‘Boxed In’

The 777-8X “will go up against the A350-1000 while the 9X will be kind of sitting there by itself,” Conner said. “We’ve got them boxed in on the A350 at the top and we’ve got them boxed in at the bottom with the 787.”

Based on conversations with customers, production of the 777-9X probably will come first, Conner said.

“These aircraft are quite defined right now. We know exactly what they are. We’re just tweaking things as we move forward,” he said. “We’re in a lot more detailed discussions probably than you guys realize with our customers right now.”

Work on the Dreamliner battery fix caused some delays on the new 787-10 introduction, he said. About 90 percent of the retrofitting on lithium-ion battery systems for the 787 is finished, and the work will be completed next week, Conner said.

(Updates with closing share price in seventh paragraph.)
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