Boeing Fails To Meet 2016 Order Goal

Boeing on Friday issued year-end commercial airplane sales figures that fell short of its 2016 guidance of a 1:1 book-to-bill ratio, suggesting a somewhat less robust market for its airliners than expected early in the year. While delivering 748 commercial airplanes in 2016, it booked net orders for 668 worth $94 billion at list prices. The total backlog at the end of the year stood at 5,715 unfilled orders.

The 777’s net order count of 17 airplanes made the company’s flagship widebody one of its weakest performers in terms of sales, as well as the biggest contributor to the shortfall in book-to-bill ratio. Boeing delivered ninety-nine 777s, resulting in a book-to-bill ratio of roughly .17 to 1 for the model.

“Softening” in the widebody market prompted Boeing to announce plans to cut production on the 777 to five airplanes a month in August, a move that it said will result in a loss of both jobs and a “modest” effect on financial results. Now building 8.3 of the twin-engine widebodies per month, Boeing had already announced a rate reduction to seven to compensate for weakening demand for the legacy 777 as the company prepares to transition production to the new 777X. A production rate of five per month effectively translates into a delivery rate of 3.5 as Boeing institutes plans to “fire blanks” down the line as part of its “Lean” implementation and dedicate some airplanes to 777X flight testing.

Meanwhile, the 787 also registered a relatively weak year in terms of sales, as the Dreamliner family drew 58 net orders compared with 137 deliveries during the year. Order cancellations proved particularly high for the 787, given its gross order intake of 80 airplanes.

While the 737 line, as usual, accounted for most of the company’s net orders at 550, it too experienced a high number of cancellations. Its gross order count of 701 equated to a cancellation total of 151.

Boeing’s recent loss of an order for eighteen 787s, originally placed by Northwest Airlines before its merger with Delta Air Lines, played a particularly large role in the Dreamliner’s contribution to the book-to-bill shortfall. Meanwhile, Boeing’s orderbook still does not reflect a recent agreement with Iran Air covering 80 airplanes. Boeing expects to register that order in its 2017 tally.

Happily for Boeing, a recent order for 75 Boeing 737 Max 8s from GECAS and five more from Czech leisure airline Travel Service did appear in its 2016 books, closing the book-to-bill gap considerably during the last week of December. In fact, those orders meant that Boeing collected orders for 60 more 737s than it delivered in 2016.

Boeing can also take some consolation that its European rival, Airbus, also appears unlikely to meet its 1:1 book-to-bill target for 2016. Although Airbus plans to announce its final sales and delivery tallies next Wednesday, sales announcements for December appear unlikely to compensate for a shortfall suggested at the end of November, by which time the company had drawn net orders for 410 airplanes. Its guidance for 2016 called for delivery of 650 airplanes, meaning it would have had to add net orders for 240 in December alone to reach its 1:1 book-to-bill target.