Boeing’s outstanding year

Dec. 27, 2017, © Leeham Co.: Boeing had an outstanding year.

For the first time since 2013, it booked more sales of the 787 than it produced, the so-called book:bill ratio.

The bridge for the 777 Classic to the 777X was all but filled, a point of controversy for the past several years.

Total net orders through November were 633, almost twice that of Airbus through the same period.

This excludes orders announced at the Dubai Air Show which have yet to be booked.

The only lump of coal, coming just before Christmas: Airbus won a major deal from Delta Air Lines for 100 A321neos plus 100 options.

Other events propelled Boeing to an outstanding 2017.

Win at the WTO

Boeing won an appeal at the World Trade Organization that overturned a finding the $8.7bn in tax breaks granted by Washington State for the 777X were illegal. (In reality, the US government won the appeal, but we all know this case was Boeing’s.)

This was a major victory for Boeing. The WTO found the tax breaks to be a “prohibited” subsidy. The appeal overturned this finding.

A previous ruling that tax breaks issued in 2003 from Washington for the 787—on which the 777 tax breaks were based—found these to be “illegal,” which is different than “prohibited.” “Illegal” means the subsidy can be cured. “Prohibited” means it’s not allowed at all. This earlier finding remains under appeal.

Preliminary win over Bombardier

Boeing also swept a preliminary win the US Department of Commerce, which concluded Bombardier received illegal subsidies and engaged in price dumping in its C Series program. The DOC preliminarily levied a 300% tariff on the C Series sale of 75 orders and 50 options to Delta Air Lines.

The case moved over to the US International Trade Commission, where hearings were held starting Dec. 18. A decision is due next month.

Looking ahead to 2018

The first 737-9 delivery is this year. Flight tests for the poor-selling 737-7 begin this year. Development continues on the 737-10.

Production rates go up to 52/mo. The transition from the 737NG to the 737 MAX at the Renton production plant picked up speed.

All-in-all, things are smooth sailing for the 737.


This airplane continues to be on life support.


The production bridge for the 777 Classic to the 777X looks in good shape. Line production of the 777X begins this year. New production techniques are being used for the 777X and Boeing has had some teething issues as it’s tried some of these out on the 777 Classic line.

Nothing stands out as a problem, other than the lack of sales for the 777X, which have been stalled in recent years.


The first 787-10 gets delivered this year, rounding out the family. It’s steady as she goes.


Here’s where the real interest level lies when it comes to watching Boeing in 2018. Will they or won’t they? goes the refrain.

Will Boeing launch the NMA program this year, or not?

Conventional wisdom says yes, if it wants to deliver the airplane for entry into service in 2024/25. History of all the recent airplane programs requires a seven-year launch-to-EIS timeline. Boeing wants to cut this to six years—but is this a wise target, given the 787 experience (which had a four-year timeline)?

If not 2018, then when? The year after is also mentioned (1Q2019, to be specific) as a launch timeline.

While Boeing is publicly sticking to its 2024-25 timeline, LNC is told by the supply chain and customers that Boeing is telling them 2027 is now the target date—a report Boeing calls “inaccurate.” But if the reports (plural) are accurate, then a program launch won’t happen in 2018, or even 2019.

The business case of the NMA hasn’t been closed. The size of the market remains a matter of debate. Getting costs down to a point where Boeing can sell the airplane starting with a 6 or a 7 is a real challenge. Wrapping Boeing Global Services into the business plan appears to be crucial.

And then there is the Airbus response.

Airbus publicly refers to an A321neo Plus, which would eat into the need for a smaller NMA, of the anticipated two-member family. Airbus also has a new design ready to go, if needed.

Finally, Bernstein Research—which has been skeptical of the NMA all along—floated an idea that takes the NMA design but reduces the range to a maximum of 4,000nm instead of the most commonly talked about 4,500nm to 5,000nm.

The NMA isn’t a slam-dunk by any means.

37 Comments on “Boeing’s outstanding year

  1. this has been Boeing’s year by some margin on sales and production. In the widebody arena they have won big and calmly dominated. The B777 Bridge is a significant achievement in itself as commented previously here over the past couple of years. Not bad for a company that has a poor portfolio according to some

  2. Thanks Scott, the positive outlook on BA is reflected by its very strong share performance this year.

    I have picked on rumors about a HGW 787-9 and/or 10, any news/truth on such development/s? If true this could be more headaches for AB on the wide body front.

    • High gross weight usually means more fuel for more range, maybe a
      ULR version for Qantas is being looked at

  3. So many 787s sold, so little money made. As opposed to airbus and the A380 so few sold, so little money made.

    Good for Boeing. Nice to have a government backing their dominant place in the market for a change. Long may it continue. 7yrs at least

    • Maybe the 787 is not a great success story from an accounting point but its generating cash flow an hurting/weakening AB in the wide-body market limiting AB’s ability to develop new products. The 777-9 could also be the final nail in the 380 coffin?

    • The 787 is projected to make money over the accounting block, which seems like it could easily be expanded further at this point. Given the high preference for 787 now that slots are becoming available, it will likely turn into a mint, as many of those 772 replacements will be -10s

      • Rather strange way to develop a new airliner, start out as a 767 replacement and then change direction and build a 772 replacement. One plane type that really is two different planes, 778 and the 779/10, with costs to match

        • Seems similar to the A350 strategy of competing with 787 and 777. Though I don’t think the -10 was in the original plan

          • They never built the A350-8, I think it wasnt such a good value proposition when the A330 neo was launched and extra range was available for the -9
            The 1000 seems to have been on the plans from early on, at XWB launch in 2006.
            ” Finally, the decision was reached to fund the development from cash flow, and the go-ahead was given for the first delivery of the A350 900 XWB in mid-2013, the first A350 800 XWB in 2014 and the A350 1000 XWB in 2015.

  4. Apparently no love, not even a comment on, the 767, Scott? And isn’t the 747 at least off life support—given its UPS orders and options, and the Airbridge Cargo orders? (How about we at least take it off “life support” and move it into “intensive care”, with a strong survival prospect-based on nascent world economic growth recovery? LOL)

    • @Montana: 767 future is the tanker. I stand by the assessment of the 747.

      • Are it technically realistic and could there be any benefits/merits to offer the 777F’s with the GE9X engines? Boeing rules the freighter side of things, but an 330-100oF could salvage a shaky 330NEO program?

        • I would not think a 777F NEO comes close to meeting an ROI case. The F of any series has always piggy backed onto the PAX (747-8 excluded of course!)

          As for an A330NEOF, they didn’t get the first one to sell.

          As the A330CEO continues and the A330MRT is based off that model, still the low cost solution and still not selling.

          • Its true, orphans of the sky on crutches (sometimes), 727-200’s some of the classics. But those birds work hard and often not in the most gentle hands. If you can knock down fuel burn by 10-15% it could add up but acquisition cost the killer.

          • Its interesting that the first new 767-300F was delivered to UPS way back in 1995, N301UP and 4 others ….it must be nearing retirement after nearly 23 years.

  5. Mixed feelings on the 747-8. Obviously purely depends on F orders.

    Does the 777F put it under or is there enough pickup in air freight (much better) to justify others ordering it as is? I tunred off my crhiay ball and just in wait and see mode.

    I would like to see the 8F keep on trucking. Its the best looking of all the 747s and truly impressive to watch lift off and land. One of the finest looking jets of all time (up there with the DC-8 stretch)

    767 need an eye kept on it. UPS has to be looking to see if they need to pick up 767F while FedEx has the production going.

    Amazon Prime is sucking a large number of the pax up and if that changes things as far as appeal of the new vs a converted.

    Its certainly shaping up to be an interesting year ahead.

    • The pax widebodies like the new 777-9 and A350-1000 carry quite a bit of cargo making it hard to design dedicated new freighters and make money unless there is a combination of fuel price spike and surge in cargo demand.

  6. “Boeing wants to cut this to six years—but is this a wise target, given the 787
    experience (which had a four-year timeline)?”

    It is fine for an aspirational target, but if Boeing executives use it as a real target they are dumber than I imagined. The risk is this becomes the official position emanating from the power point rangers in Chicago. One would hope that with the 787, 747-8 and tanker experience, the executives might finally see a pattern and have a fair dose of humility.

  7. All airbus has to worry about at the moment is probably the 787-9/787-10 combo.

    The 777X probably won’t go much further than it already has perhaps the same airlines who purchased the A380 and 777-200 LR.

    • The 787-9/10’s good aircraft to market to accountants, rubbish to fly in. BA has done good marketing, AB can sharpen up on its marketing to counter the 787’s.

  8. The new Airbus design on stand-by, any word on the market as to what that would look like?

  9. If the a380 is phased out (strong possibility if Emirates doesn’t get its guarantee of prolonged production), then the largest twin will be the 777-9. There is also a potential stretch to a hypothetical 777-10 which would place the aircraft close to 450+ seats. Quads are dead, at least for the next decade.

    Kudos to Boeing for getting the 777 gap closed. Now get the 777x through develpment and introduction without disaster…

    The 787 program is apparently popular enough that the rate will increase to 14 a month, so there must be enough to justify the this in the sales pipeline. Its costs to develop are already paid for, so its profits are now providing cash flow for development of new products.

    The 737 is trucking along and a money tree.

    To me, the pressing issue for Boeing is a response to the a321 and followed by the next generation single aisle replacement for the 737.

    • “Its costs to develop are already paid for, so its profits are now providing cash flow for development of new products.”

      AFAIK Boeing accounting uses a model, where development costs are paid for by the planes sold over the course of that program or a block of planes within that program.

      With that, and the higher than expected/projected developement costs in mind, do 787s already make a profit?

      I mean from an accounting point of view, not if they already sell them for more than the production costs (which I don’t doubt).

  10. Where I come from, a lump of coal is a good thing. It’s going to be fun year, Scott.

    • @Doug: Perhaps, but in the US there is no such thing as clean coal… Happy New Year.

  11. Airbus should let Boeing worry about the 777-10x and building planes just to please emirates. Get out of the VLA market and concentrate on A330 replacement, enhancing the A350, and creating a new single aisle product combining A320 and CS technologies.

  12. Scott:

    Did you write this article? You knew I was coming and honestly I am impressed. I tip my hat to you for being willing to see the positives of your death blow projections and you’ve seen fit to give Boeing credit on things you said were not possible. Maybe this will be a continued change of heart for 2018? No way!!!! Let’s take these things slowly and we’ll continue to hold out hope for you. I’m going to leave it at that, and just wish you a Happy New Year and all the best in 2018. Maybe we might work together on a few things in the coming year? Keep an an eye on the guy with no connections to aerospace. Maybe in 2018 things might change? All the best.

    • Yes a political correct Scott, focussing on what a majority of his local public likes, playing down what is less popular. Positive, supportive. No need to lie, just leave out bits and pieces. There’s alternative truths that are much more rewarding.

    • @Vincent: This is one of the more bizarre comments I’ve received in the duration of this blog. To say I’m befuddled sums it up nicely.

    • Scott sorry, I was just teasing I hope you understood. Leehamnews is probably one of the most knowledgeable and independent source of industry information.

      Analyzing in detail and confident enough to not only look back but also provide outlooks and educated opinions on bigger developments. Not repeating what the OE’s communicate or writing just what paying readers want to get confirmed.

      I and many others come to this blog to be surprized and challenged by unique quality content.

  13. This month Airbus scored large A321 orders again. It sees 2017 was another year Boeing was not able to provide an answer. The discussion has been going on for 6-7 years. OK they prevented UA from ordering A321s by offering the 737-10, but despite all hurray’s in Paris, the firm 737-9/-10 order book remains weak. Better shrink the NMA.

    • An 220 seat NSA’s (4500Nm) wing will be to big to use in shrinked models. An 220 seat twin-aisle’s (5000Nm) wing will be two small for stretched models. The 2-3-2 layout not the most efficient use of aisles?

      Actually Airbus is in a position to force BA what the NMA must be by the launching or not of the A322.

      After soul searching I think your 321XR with moderately larger wing and 100-105T MTOW, 4000-4500Nm range (in standard seat layout) is where AB should start as it could potentially use current PW-GTF engines.

      The wing and landing gear (4 wheel bogeys) should be in place for a stretched 322 with 3500-4000Nm range and be able/require to take ultra-fans (don’t want a MAX9/10 situation).

      I see the currently developed 321LR basically as a HGW 321 that could be used with high density seating with moderate (3000Nm?) range to low density (150 seats) with 4000Nm range, or hot-and-high, etc

      Question on aux-tanks, is it 3 aux tanks or nothing, or can airlines choose between 1, 2, or 3?

  14. Sorry to interrupt the celebration of Boeing’s outstanding year, but according to one analyst, Boeing stock is about to run into a storm….

    BA Stock Buyback Is Badly Timed

    Boeing has had a fantastic 2017 on an operational front. Operating earnings out of its core business have doubled on the year, which sounds amazing at first glance.

    However, a more nuanced look shows that there’s less here than meets the eye. For one thing, Boeing recording gains on its pension program, presumably due to strong equity returns. As a result, its funding gap is smaller than before — and it can treat that as a profit. Don’t forget: What the stock market gives, the stock market can take away. There’s no guarantee that markets will remain strong in 2018. And if they go in the other direction, Boeing’s pension program may show a wider liability next year.

    And another big chunk of Boeing’s increase in profits came from lower reach-forward losses. This comes from fixed-price contracts that Boeing was able to deliver under budget. It’s certainly good news that they aren’t getting hit with cost overruns. However, executing ably on preexisting contracts is a different thing than attracting new revenue streams going forward.

    Bank analysts seem to have caught on to what’s happening here. The analyst consensus is just 2% earnings growth this year and 9% next year. Those are hardly the sort of numbers needed to justify BA stock’s 27 trailing and 27 forward price-to-earnings ratio. Again, we’re talking about a company that is supremely exposed to the economic cycle. It’s simply breathtaking that people are willing to pay 27x earnings for a company that is currently experiencing just about the best economic conditions possible for its business.

    BA Stock Buyback Is Badly Timed

    Boeing, like all too many companies nowadays, tends to time it share buybacks poorly. Between 2009 and 2012, when BA stock was in the dumps (as low as $30), Boeing’s shares outstanding steadily grew. Shareholders were diluted at rock bottom prices.

    Between 2013 and 2016, with BA shares now around $120, Boeing turned on the buyback faucet, taking the overall BA share count down from almost 800 million to just over 600 million. Now, with the stock up in the stratosphere, Boeing plans to hit the buyback button even more aggressively, with $18 billion of fresh capital committed to the endeavor.

    Boeing, it’s worth remembering, also bought back stock fairly aggressively during the prosperous period between 2004 and 2007. We all know what happened next. BA stock wasn’t immune. In fact it did way worse than the market, plunging from a pre-GFC (global financial crisis) high of $105 to just $30 in March 2009.

    Given that Boeing remains a hyper-cyclical business, why are company executives so intent on buying back stock now at record high prices and valuation levels? For many of these executives, the thinking is clear: anything that juices the stock price in the short run leads to bigger payouts on stock options and fawning media attention.

    • I wanted to tell Transworld, time to sell, take your dividend and buy the Buick.

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