Sunday, January 29, 2017

Boeing Sees Lower Order Year In 2017

Boeing is taking a conservative position, signaling insightful knowledge about its upcoming product introduction with the Max and first flight of the 787-10.  Both events could move the buy needle if and only if there are no bumps encountered. Airbus suffered A320-NEO woes with its Pratt and Whitney GW-1000 engine maker who had a few problems to iron out for the NEO. Boeing needs a first delivery Max win and a clean testing outcome for the 787-10 until the end of 2017.

A Stalled Market Pace??

Image result for few people in the market

The 787-10 also needs to follow on the 787-9 example by going through its testing checklist without hesitation or any minor mishaps such as a broken seat recline. If and only if these things happen will Boeing make headway in 2017 while setting the table with a robust order year for 2018.

Analyzing the Boeing order year during 2017 suggests the best prediction is the opportunity quotient for Boeing's 2017 buy outlook. That is to say purchases from customers may come in close to 2016's outcome of 668 aircraft orders placed with Boeing. The company says 2017 a lower sales count is predicted as the "buy" market slumps, but opportunity exists as Airbus logjams its backlog.

·      Total New Airplanes 39,620

·      Value ($B) 5,930

Astounding numbers projected where Airbus will take a slice of that pie. Winging It projection numbers indicate a straight line estimation in units, reveals a 1980 units per year market potential each year from Boeing's 20 year prognostications. If Boeing can maintain a 50-50 split with Airbus in units the market could absorb 990 aircraft each year for Boeing in purchases. The Value would be 148 billion averaged each year in sales. Boeing sold about 94 billion during 2016 and expects a drop for 2017. 

Several conclusions can be assumed by this financial relationship of proportional sales. 

·      Fifty-Fifty is not a realistic market over the next 20 years. A-B 55%  A-B 45% split is more likely as backlog impediments will move the buying market towards having immediacy of delivery for its class of airplanes. Long waiting periods for delivery harms the buying customer.

·      Superiority of product moves the ratio off the 50-50 assumption pushing buyers towards a superior product in a gradual buying preference.

The conclusion can be reached Boeing has an opportunity to at least match 2016 in numbers, but necessarily not in value. Boeing has been conservative for its 2017 orders placed guess. A great Max introduction and successful 787-10 tests will move the needle for 2017 Boeing Orders. The projection of increased production capacity matching the 20 year demand will increase order placing by two fold each year over the next 10 years. This year maybe a pausing order year, but it should keep pace, as the competitor can't and won't take on more backlog from its customer's orders placed; since the customer needs immediacy of delivery in its corporate planning periods. The tangled web of what will happen starts with the 20 Year forecast of market needs as projected by Boeing.