Boeing’s Carson speaks at JP Morgan conference

Boeing Commercial Airplanes President Scott Carson spoke today at the JP Morgan Aviation & Transportation Conference. Summarizing:

  • Carson predicts the new entrants in Russia, China, Japan and elsewhere will learn the hard lessons learned by Airbus and Boeing.
  • There are more MROs than the world needs; consolidation will result.
  • Proposed carbon regulations in Europe have rapidly spread around the world, but it is not easing in hard economic times. Airbus and Boeing have flown aircraft with bio fuels; the challenge will be to find the bio fuel with sufficient quantities.
  • A more efficient airspace management system needed in US and Europe, reducing the carbon footprints.
  • Credit markets remain uncertain and unstable. The Germans have now decided to bail out the banks, raising further uncertainty in the credit markets.
  • Boeing’s backlog remains strong. The regional balance gives us some protection against declines in any one market.
  • The 767 has significant life and value left in it, with product improvements and the addition of winglets.
  • 787 program: all fundamental designs and technologies working well. Production issues and global supply chain coming together to perform as intended, beginning with airplane 7. Reaffirms 2Q09 first flight and 1Q10 first delivery.
  • 747-8: disappointing last year to announce a forward loss on the program ($685m). Reaffirms 3Q10 first delivery for freighter and 2Q11 first delivery for passenger model. Fulfills gap between 777-300ER and A380.
  • In the process of implementing new wing production line in 737 for more efficiencies, reduction in employee risk. Continue to pursue lean manufacturing at 737 and 777 lines.
  • Industry faces challenges for next several quarters. At Boeing, we began right-sizing in advance of market turndowns (ie, layoffs). We remain confident we have the right products and services for future. Competition will remain intense, driving value forward, better products and technologies.
  • Our focus now is on product execution; our stumbles have been embarrassing for us and for our customers on 787 and 747-8 programs. Can’t take our eyes off complex production programs. This will require us to be humble, and not taken by our word but by our actions. Through it all, we’re tougher and harder than we were two years ago. We are humbled by our mistakes.

Q&A begins.

  • Available financing takes us through this year and, depending on model, half way into 2010. We expect every airplane produced this year to be delivered. We’re very cautious as we look at next year not to get too far ahead of our headlights. At this point we’ve said publicly to commit to $1bn in financing should it be needed. 2009 looks OK, 2010 a bit more questionable.
  • We’re managing all production rates on lead-time away; 737 has shortest lead time and feel best about this airplane as we move forward. Larger planes are harder to move between customers and are looking at planes about mid-point next year. On a weekly basis we look at customer-by-customer, and a fair number of campaigns underway, and look at this on a continuing basis.
  • AWAS representation concurs financing is available for deliveries but asks about funding sizable pre-delivery payments (PDPs). Carson responds: from our perspective is what we don’t want is to produce more aircraft than the world needs–adversely affects residual values. We resisted going up in production on 737 18 months ago. There will continue to be pressure on PDPs but believes there will be sufficient money available, though watching it carefully.
  • The initial reaction to downturn Boeing took was to announce layoffs of 4,500 people mainly in support areas, hourly and salary ranks. We pulled 787 program into our airplane programs instead of its previous “island” position.
  • Question: why would anyone want to order planes now with airplanes sitting idle. Answer: The demand that we see remaining in the market place is driven by volatility in the marketplace. As fuel penetrates $50, 737 Classics and MD-80s become less desirable and with long backlog, people need to get in line now for delivery four or five years from now.

Leave a Reply

Your email address will not be published. Required fields are marked *