Wall Street Journal – Boeing Co. on Tuesday reported record annual orders and deliveries of its commercial jetliners alongside a drop in the number of canceled deals, easing investor concerns about a market bubble as the company prepares for another boost in production.
The world’s largest aerospace and defense company by sales secured net new orders for 1,432 jets last year to surpass the previous peak set in 2007 and the 1,355 recorded in 2013, setting up a close contest with rival Airbus Group NV, which is scheduled to report its final 2014 tally next week.
Boeing and Airbus are boosting production of existing jets and preparing to introduce new models at a time when some of their largest customers have started to pare growth because of overexpansion or economic pressures. However, Boeing said requests to cancel or defer deliveries of new planes remain at historically low levels.
Cancellations dipped to 118 from 176 the prior year, according to Boeing, with an order book of 5,789 jets stretching into the early 2020s. The company has yet to identify the buyers of more than 1,000 of the jets, with airlines opting to delay disclosure for commercial reasons.
Aircraft manufacturers also typically overbook orders beyond their production capacity in the knowledge that some customers may be unable to afford the planes or fly them profitably. Leasing companies such as Air Lease Corp. have said they are looking to pick up early delivery slots from other customers. Indonesia’s Lion Air and Norwegian Air Shuttle AS , two of the largest customers for Airbus and Boeing, have also set up leasing companies to rent out planes they don’t need.
The big order backlogs have made investors become more focused on deliveries as that is when the companies receive full payment. Boeing delivered a record 723 jets last year, at the top end of its guidance, with analysts forecasting a rise to more than 760 in 2015 and as high as 900 a year by the end of the decade.
Commercial aerospace stocks fell last year despite the continuing boom in orders, and companies are under pressure to return more cash from surging sales to shareholders. Boeing has boosted its dividend by 25% and its board in December authorized a new $12 billion share buyback program.
Boeing shares were recently down 2.3% at $126.79, though was the best- performing industrial stock on the Dow Industrials index, which was off 0.9% at 17,344.
While the slide in oil prices is boosting airline profits, some investors remain concerned carriers will defer buying new, more fuel-efficient planes and hold on to thirstier jets. However, aircraft analysts and traders said there is little evidence of any widespread changes in jet fleet planning, with new planes also offering lower maintenance costs and improved passenger amenities.
A more immediate issue for Boeing could be placing the estimated 30 new jets destined for Russian airlines this year. The country’s economic problems and the slide in the ruble have fueled concerns that some airlines may be unable to afford them. AerCap Holdings NV, another large leasing company, has already moved some planes out of the country. Boeing declined to comment on any individual customers.
The greenback’s rise could provide a broader headwind for Boeing as aircraft are priced in dollars, making them more expensive for overseas customers and providing Airbus with a competitive advantage.
Airbus is scheduled to announce its final 2014 orders and deliveries on Jan. 13. In its most recent update at the end of November, Airbus reported having booked 1,031 net orders, with a further 139 firm orders announced during December. The company, which has a history of completing late December deals, has said it planned to deliver 620 commercial aircraft for the year.
Posted on January 6, 2015
Written by Doug Cameron
Wall Street Journal | Boeing Delivers Record Number of Jets in 2014