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Wednesday, December 23, 2015

Did The China Order In Its "Suspense File" Come In For Boeing?

The unannounced order book has grown mysteriously in Boeing's case. Here are the numbers:



2015 Net Orders5632495871743

Customers737747767777787Total
AerCap100----100
Air Austral----22
Air Tahiti Nui----22
AirBridgeCargo Airlines-2---2
Alaska Airlines6----6
ALC8----8
All Nippon Airways5---38
Atlas Air, Inc-1---1
Australia P-84----4
BOC Aviation23----23
Business Jets / VIP Customer(s)6---28
COPA Airlines51----51
Delta Air Lines20----20
EL AL Israel Airlines----33
Enter Air Sp. z o.o.1----1
Ethiopian Airlines----66
Etihad Airways---2-2
EVA Air---71825
FedEx--49--49
GECAS2----2
GOL Airlines9----9
Jet2.com Ltd30----30
Korean Air30--7-37
Norwegian----1919
Oman Air (SAOC)20----20
Qantas----55
Qatar Airways---14-14
Ruili Airlines30----30
Ryanair3----3
SilkAir6----6
Silk Way Airlines-3---3
SMBC Aviation Capital10----10
Sriwijaya Air2----2
Swiss Global Air Lines Ltd---3-3
TUI Travel PLC----11
Turkish Airlines10----10
Unidentified Customer(s)244--1536295
United Airlines---10-10
United States Navy9----9
Virgin Australia Airlines4----4
2015 Gross Orders6336495897843
Changes-70-4---26-100
2015 Net Orders5632495871743











737747767777787Total

Blue highlighted text in the chart above indicates updates for the current week.
Changes since last update: 166 new orders (Delta Air Lines for 20 737s, Jet 2.com Ltd for three 737s, and Unidentified Customer(s) for 143 737s).
One hundred and forty-three, unidentified 737's comes in near the China "omnibus" order mentioned earlier in the fall. It also speculated, wide body orders would be numbering in the 50's taking my estimation off track, since no mention of unidentified wide bodies even show up in the Boeing order updating. The order book may not reflect the China order at all. 

The seven hundred and forty three Boeing total net order count is year-to-date, and it comes in pairing within its initial guidance given at the first of 2015. Boeing proposed a 700-755 sales year would occur during 2015. I must admit, I factored a higher order count than this for its 787 program during 2015. It has occurred to me, Boeing still has an order moment up its sleeve (seven more days to go). Whether it's 2015 or 2016 is in the Boeing cards. 

 The 787 has already achieved 71 787's ordered this year, but order book changes today does not include any China intent announced earlier in the year. Even not knowing who the 143-737's are going to, I suspect a China order is in play, with having wide bodies orders announced later next year. The other comment is that Boeing knows if it will build or assemble 737's in China at this time.

 "China’s Boeing Order: China Business News November 27, 2015

Boeing, realizing how big the market for China is, has entered into an agreement with China for 300 airlines worth $38 billion at list price. Part of the general agreement includes 190 of the 737 aircraft and 50 of the wide body planes for the Chinese airlines. China is one of the biggest markets for Boeing, accounting for quarter of the deliveries this year."

At last the deal is done with China and the caveat is that Chinese participants announce when, what, and who the individual orders involve. Boeing may only reflect the announced identified portion of the larger China order in Suspense. 


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What's Happening In The Used Market, What does It Mean?

Recently a used 777 was just sold to Delta Airlines when they already signed off on a huge Airbus order for both A330-900 NEO and A350's. 


Motley Fool Quoted:

"Delta's own behavior belies its contention that there is a huge bubble in the wide-body market. Just a year ago, Delta ordered 50 new A350-900 and A330-900neo aircraft -- planes that are in roughly the same size class as the 777-200." 

Delta went with Airbus in a daring maneuver contrary to market trends towards buying Boeing. It seemed Delta succumbed to the Airbus' offering through its price strategy for new acquisitions. Now a new exhibit has emerged with the $7 Million dollar (usd) purchase for a used 777 in the face of the Airbus $6. plus billion order it had just completed last year, when it bonded with the European giant. Crazy stuff on the tarmac (surface) in Atlanta.

After reading Motley Fool's carefully presented interpretation of the Boeing "used buy", and last year's Airbus fleet renewal buying, I came up with another hypothesis than Motley Fool's view. They are correct with its initial assumptions on what all this means.

The other interpretation comes from Winging It, and it goes this way: 

 Delta made a decision within its own vacuum of its Vision/Mission statements:

"We invest in people and processes that ensure the reliable movement." 

Delta is at a point that it will shore up any gaps in its operation for its customers, through purchasing a 7 Million dollar acquisition with a used 777. It has nothing to do with Aviation's highly competitive air framer war or Delta's fleet renewal plan. It is an aberration coming from its Mission or Vision values thrusting forward. It's that simple. The initial plan with Airbus comes out of its many considerations observed before buying a "New" Airbus fleet. Unfortunately for Boeing this will have a lasting affect for many years to come.

A good exercise for Boeing is how to shorten "the many years to come" setting within any ten years goal, and win back Delta. It must look at Delta's Vision and Mission and match its offering with Delta at many levels of its vision/mission.

First: 

Examine what went wrong while competing with Airbus in the first place. This answer should be gained quickly. Price and value aligned with the Delta Mission Model significantly as Airbus proposed. Boeing must of had to stand its ground in the bid process, and did not competitively demonstrate a "Price and Value" within Delta's "Mission" scope. Boeing needed more sweeteners for future operations. They knew of the A330-900 but couldn't drop the 787 price enough, meeting Delta's corporate objective. Airbus made the case for long range travel while the 777X9 was too expensive for Delta's Vision, and year's far away. Airbus gave Delta a sweet deal for which Boeing could not approach at the time during the proposal year. 

Conclusion: Boeing needed the 777-8X at an introductory price sooner rather than later. Delta did not like the 787-10 middling range or high price, but may have even liked the airplane. The 787-9 once again too expensive, even when packaged with the 787-8 pricing, or against the A330-900 NEO. The whole Boeing package came in higher and not ready for delivery for Delta's top to bottom fleet coping with Delta's "Mission" and its five year plan!

Finally, Boeing is already squeezing down time with each passing day. The 787 breakeven point is rapidly approaching during 2016 where it could offer a special deal covering Boeing's family of aircraft. The 777X is so developmental, and many cost risk exists where it can't offer a Delta-Vision-Deal until cost are closed down, or when commercial production begins. The whole time, price and value components will be achieved by 2018. By 2025, Boeing can rule many a company’s "Mission Statements", thus win more battles. 

Used 777 are just used 777's costing Seven Million and fitting in a Mission Statement's parameters. This is the Used market not affecting the New Airplane Market.
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