T773ER
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Boeing's 2007 Order Book

Sat Dec 16, 2006 8:55 am

After two consecutive years of very strong sales, I would see no reason why that trend would not continue into the coming year for Boeing. While the numbers may not be in the range of 900-1000, but more like 500-700.

I don't think that number is impossible to get either. We may see some US legacy carriers ordering, and that will boost the number too.

Does anyone know the record for best sales in consecutive years?
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NAV20
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 9:40 am

Quoting T773ER (Thread starter):
I would see no reason why that trend would not continue into the coming year for Boeing. While the numbers may not be in the range of 900-1000, but more like 500-700.

I think that Boeing will find itself facing some big strategic decisions in 2007. It's pretty clear that they will again be close to achieving around 1,000 firm orders in 2006. But they will only have delivered around 400 (total so far this year 364):-

http://active.boeing.com/commercial/...ReportType=CurYrDelv&pageid=m15520

What's more, orders received are spread evenly across their whole product range. Boeing must be close to the point where they have four or five years' production of ALL their models sewn up in firm orders. They have already said that they have declined orders for 737s because they could not meet the early delivery dates required by the customers concerned.

So my guess is that, as you say, the number of Boeing orders taken next year will be substantially less than for this year - but for the reason that Boeing simply do not have the production slots available to meet the demand.

That leaves Boeing with three choices:-

1. Leave production at present levels and just allow the scarcity of production slots to 'bid up' prices.

2. Build more production capacity (e.g. a second 787 line). That would involve huge commercial risks, due to the high capital cost and also the need to hire large numbers of extra people.

3. Explore the possibility of recruiting other firms to build Boeings under licence.

No indications as yet as to which of those three options they will choose.
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airlineaddict
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 1:10 pm

Quoting NAV20 (Reply 1):
1. Leave production at present levels and just allow the scarcity of production slots to 'bid up' prices.

Ironically, it's exactly what many of their customers are trying to do by limiting seat capcity.

Quoting NAV20 (Reply 1):
3. Explore the possibility of recruiting other firms to build Boeings under licence.

This is the most interesting... does CNAC have any desires for an A320 AND 737 line?
 
osiris30
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 1:17 pm

Quoting NAV20 (Reply 1):
3. Explore the possibility of recruiting other firms to build Boeings under licence.

This makes the most strategic sense and kills two birds with one stone depending on who the subcontractor is. Say they sub out to LM to build 737s, it keeps LM on the sideslines that much longer. (Note I don't have any inside info, just using LM as an example)

Quoting T773ER (Thread starter):
While the numbers may not be in the range of 900-1000, but more like 500-700.

I actually think next year will be even better... CX, BA, AA all need to place orders soon..
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 2:39 pm

Quoting AirlineAddict (Reply 2):
This is the most interesting... does CNAC have any desires for an A320 AND 737 line?

If Boeing had to add another 737 line, I would bet that they would do it with Wichita.

That being said, people here have said that there are two 737 lines...but what about the DoD line? Doesn't that make three?
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alexchao
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 3:05 pm

Quoting NAV20 (Reply 1):
2. Build more production capacity (e.g. a second 787 line). That would involve huge commercial risks, due to the high capital cost and also the need to hire large numbers of extra people.

Even if Boeing can justify the need for an additional 787 line, can their suppliers keep up with the increased production rate?
 
zvezda
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 3:55 pm

Quoting T773ER (Thread starter):
After two consecutive years of very strong sales, I would see no reason why that trend would not continue into the coming year for Boeing.

The reason, as given above, is that production is 400 frames/year. The backlog is already about five years for all models. Airlines are less willing to order airliners for delivery in the distant future then in the near future.
 
mnik101
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 10:09 pm

Why won't Boeing open a 737 line in Long Beach? They still run the C-17 line and they all ready have the facility. All they need to do is to re tool the old 717 lin for the 737.
 
NAV20
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 10:36 pm

Quoting Mnik101 (Reply 7):
Why won't Boeing open a 737 line in Long Beach?

They may well consider that, Mnik101. But in the end, business is about profit, not 'world domination.'

There's no particular advantage in just 'getting more orders,' if the result is that you have to invest untold further billions in satisfying them. The trick is to aim to win just enough orders to keep production going full blast without having to spend big to jack up capacity in the short term.

That way lies 'high margins at less risk.'
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11Bravo
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 11:07 pm

Quoting Mnik101 (Reply 7):
Why won't Boeing open a 737 line in Long Beach?

Money.

First, southern California is a very expensive place to operate a production facility. If, and I think that's a very big if, Boeing were to build a second B737 facility, it would almost certainly be located elsewhere. Everything is more expensive in SoCal; labor, utilities, transportation, etc.

Second, Boeing isn't going to invest billions to build facilities to fill the current demand unless there is an absolute certainty that those new production levels are sustainable over time. What will be the production demand in 10 years? How about 20 or 30 years?

Both Airbus and Boeing need to be careful here and resist the temptation to significantly increase production capacity unless they are very, very sure it's sustainable in the longer run.
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mrcomet
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 11:22 pm

I think its clear from the huge backlogs and the orders of the A330 and 767 747 that many sales are being made by availability. That means both Boeing and Airbus need to have more lines on future products. This appears to be the case as I bet Boeing wishes they could have arranged for suppliers to have contingency plans in place for increasing production on the 787. This is a very cyclical industry and the ability to provide products quickly is becoming more important. If the two could immediately provide any customer who wanted one any airplanes in any of their lines, they would sell some airplanes today.

The same way Boeing worked hard to reduce the timeframe to design, build and certify an airplane, they need to work to have flexibility on production rates. It may cost $1 billion to set up a new line but one order for one airline will pay for that. I'd say Airbus is ahead of them on that.

The key will be in the new 737/A320. I wouldn't be surprised if they designed for rates of 70 per month or more.
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trex8
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RE: Boeing's 2007 Order Book

Sat Dec 16, 2006 11:45 pm

Quoting NAV20 (Reply 8):
There's no particular advantage in just 'getting more orders,' if the result is that you have to invest untold further billions in satisfying them. The trick is to aim to win just enough orders to keep production going full blast without having to spend big to jack up capacity in the short term.

a lesson they learned the hard way almost 10 years ago
 
11Bravo
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 12:06 am

Quoting MrComet (Reply 10):
It may cost $1 billion to set up a new line but one order for one airline will pay for that.

I would be very surprised, completely shocked actually, to learn that a billion dollars profit is realised from any one order. I suspect you would have to sell many hundreds of aircraft to produce a profit for your shareholders AND pay for a new $1 billion facility.
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trex8
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 12:14 am

plus its not just Boeing who have to come up with the capital but many suppliers who may not be able to do so
 
atmx2000
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 12:45 am

Quoting Zvezda (Reply 6):
The reason, as given above, is that production is 400 frames/year. The backlog is already about five years for all models. Airlines are less willing to order airliners for delivery in the distant future then in the near future.

Which really makes you wonder about the A350 orders, with EIS being 7 years away. At least with the old A350 proposal from 2005, EIS would have been 5 years away in 2010. How can you plan to take aircraft so far in the future?
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trex8
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 1:29 am

Quoting Atmx2000 (Reply 14):
How can you plan to take aircraft so far in the future?

that would certainly inject a degree of uncertainty into things but if you have aircraft of a certain age you can foresee when they may need replacement, exactly how many you may need given possible growth may be a more nebulous factor. its only a little less uncertain than making a firm order for say delivery in 2 years and having options out to 10 years.
 
DAYflyer
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 2:56 am

Quoting NAV20 (Reply 1):
So my guess is that, as you say, the number of Boeing orders taken next year will be substantially less than for this year - but for the reason that Boeing simply do not have the production slots available to meet the demand.

That leaves Boeing with three choices:-

1. Leave production at present levels and just allow the scarcity of production slots to 'bid up' prices.

2. Build more production capacity (e.g. a second 787 line). That would involve huge commercial risks, due to the high capital cost and also the need to hire large numbers of extra people.

3. Explore the possibility of recruiting other firms to build Boeings under licence.

No indications as yet as to which of those three options they will choose.

Thats exactly what I was thinking. I hope the go for option 2 on both the 737 lines and the 787 line.
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T773ER
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 4:42 am

I would be very supprised if Boeing were to hire a another firm to make the 737. With the smaller profits coming from the 737, hiring out work to just to ramp up production would cut into those profits even more.
"Fixed fortifications are monuments to the stupidity of man."
 
futurecaptain
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 5:58 am

I think Boeing is smart keeping production around where it is. They can still turn up the speed on the moving lines if suppliers can keep up and that will increase production without the expense of a new line.
With the current backlog there are firm orders to be built, and cashflow coming in, that can carry the company over through Y1 and Y3 development. Perhaps when Y1 is developed it will be on 2 production lines from the start as we can expect the NG narrowbody to sell in the thousands over many years.

I agree that Boeing needs to be careful here and resist the temptation to up production to the point of building a whole new line for the current product line-up.
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Lumberton
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 7:09 am

Quoting NAV20 (Reply 1):
3. Explore the possibility of recruiting other firms to build Boeings under licence.



Quoting Osiris30 (Reply 3):
Say they sub out to LM to build 737s, it keeps LM on the sideslines that much longer. (Note I don't have any inside info, just using LM as an example)

I actually started a thread several months back proposing a joint venture between BCA and LM on the 737 successor. It fizzled out and the idea met with a less than warm response here. Personally, I think NAV20 may be on to something WRT the existing 737. However...

Wouldn't this be a good idea for Boeing to talk about expanding production and get a quid pro quo from its unions along the lines of a 10 year contract or something in order to guarantee labor peace? I've long felt that the 787 program would eventually get a second production line and that by locating it in Japan might "strike proof" the Dreamliner. But I'm coming around to the view that the way forward might be offering the union some serious job security? Then expand production....

[Edited 2006-12-16 23:09:48]
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ebj1248650
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 8:22 am

Quoting Mnik101 (Reply 7):
Why won't Boeing open a 737 line in Long Beach? They still run the C-17 line and they all ready have the facility. All they need to do is to re tool the old 717 lin for the 737.

How about using the line where the MD-90s were built?
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Devilfish
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 8:46 am

Quoting 11Bravo (Reply 9):
Money.

First, southern California is a very expensive place to operate a production facility.



Quoting EBJ1248650 (Reply 20):
How about using the line where the MD-90s were built?

As they have just disposed of the Torrance facility, considering that Boeing is also intending to unload the Long Beach property, proceeds that could be realized from its sale might have already been earmarked for other capital intensive development projects - control of which their managers and bean counters possibly couldn't wait to have.

http://www.boeing.com/news/releases/2006/q4/061207e_nr.html
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futurecaptain
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 3:23 pm

Quoting Lumberton (Reply 19):
by locating it in Japan might "strike proof" the Dreamliner

Nah, they should locate it in Toulouse.  Smile  stirthepot 
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cobra27
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 7:18 pm

Nince reply, knowledgable

Quoting NAV20 (Reply 1):
That would involve huge commercial risks, due to the high capital cost and also the need to hire large numbers of extra people.

No, actually it wouldn't be, there is already around 500 orders to be fullfilled. That can be done with only 1 line, but in years . Airlines want their plane delivered as soon as possible. I don't think that they pay employees around 1 million dollars a month.

2 things seem strange:
1. why hasn't second line been confirmed yet (orders are throgh the roof)
2. there ihaven't launched the 787-10 yet
 
mrcomet
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RE: Boeing's 2007 Order Book

Sun Dec 17, 2006 8:47 pm

Quoting NAV20 (Reply 8):
There's no particular advantage in just 'getting more orders,' if the result is that you have to invest untold further billions in satisfying them. The trick is to aim to win just enough orders to keep production going full blast without having to spend big to jack up capacity in the short term.

As long as you are at least breaking even there is not problem. The advantage is you keep them out of a competitors hands, you establlish a positive precedent with an airline who hasn't bought your planes before, you sell them a bunch of your add on services and you gain market share.

I would think Rockefeller and Gates have proven this strategy by now. Sell below cost to kill competition and then raise rates. Hell, whole countries like China are doing it now.  Wink
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atmx2000
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RE: Boeing's 2007 Order Book

Mon Dec 18, 2006 12:49 am

Quoting Cobra27 (Reply 23):
2 things seem strange:
1. why hasn't second line been confirmed yet (orders are throgh the roof)
2. there ihaven't launched the 787-10 yet

It would be foolish to start a second line before the aircraft is up in the air considering the amount of new technology in it. Also you never know what kind of economic hardship will hit the aviation industry in the future, and you don't want to be caught in an expansion mode when your customers suddenly start to collapse. Any second line decision should only be made after EIS, and perhaps at the tail end of a recession where you know what the bottom is.
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cobra27
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RE: Boeing's 2007 Order Book

Mon Dec 18, 2006 1:08 am

Quoting Atmx2000 (Reply 25):
It would be foolish to start a second line before the aircraft is up in the air considering the amount of new technology in it.

Problems with new technology would be the case anyway, 1 line or 2 .

Quoting Atmx2000 (Reply 25):
Also you never know what kind of economic hardship will hit the aviation industry in the future,

I am almost sure that it will grow 5% a year on (industry average), some carriers may loose, some may gain.
 
jacobin777
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RE: Boeing's 2007 Order Book

Mon Dec 18, 2006 1:09 am

Quoting Atmx2000 (Reply 14):
Which really makes you wonder about the A350 orders, with EIS being 7 years away. At least with the old A350 proposal from 2005, EIS would have been 5 years away in 2010. How can you plan to take aircraft so far in the future?

The difference here is that Airbus has a good "feel" for what the 787 is going to be. Given its going to be a multi-decade product (at least 15 years), and with the A350 flying 5-6 years later, Airbus will be able to develop a product which should be "in tune" with the market place...

Also, it's not as if Boeing is developing the 787, then Airbus with the A350, then Boeing with another product a couple of years later which will beat the economics of the 787/350.......these machines have long lead times, and longer times between the introduction and adoption of different technologies.

Thus, after all that said, while there is some ambiguity with the A350, its going to be much, much less ambigious than the A380 (at least the market is there for the A350), and will certainly achieve a positive ROI....

Cheers..
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trex8
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RE: Boeing's 2007 Order Book

Mon Dec 18, 2006 4:58 am

Quoting Cobra27 (Reply 23):
1. why hasn't second line been confirmed yet (orders are throgh the roof)

with the use of many farflung and independent risk sharing contractors for manufacturing Boeing does not have the direct ability to make these contractors just invest in new production capability. Alenia has already said before it will need to expand its factory size. While the capital investment may well be worth it long term it may also not be worth it especially since it was the Italian government which forked out what was it, over half a billion $ to get the original Alenia 787 manufacturing facilities into existence. Same problem may face the Japanese while I can see MHI, KHI and FHI having the resources and deeper pockets than Alenia, they needed a billion + from the Japanese government to get to where they are now with the manufacturing capacity they have presently. Now if Boeing has some hundreds of millions or a billion or two to give to these risk sharing contractors then you may find this 2nd line happening a lot sooner.
 
JAAlbert
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RE: Boeing's 2007 Order Book

Mon Dec 18, 2006 12:37 pm

I think the huge product liability (lawsuits) associated with aircraft manufacturing would deter Boeing from ever allowing another company to construct its product. It's just not realistic.
 
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N328KF
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RE: Boeing's 2007 Order Book

Tue Dec 19, 2006 12:29 am

Quoting JAAlbert (Reply 29):
I think the huge product liability (lawsuits) associated with aircraft manufacturing would deter Boeing from ever allowing another company to construct its product. It's just not realistic.

That's silly. Lots of civil aircraft have had final assembly done under license. I think Boeing even did it for the C-47 (DC-3).
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mptpa
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RE: Boeing's 2007 Order Book

Tue Dec 19, 2006 2:04 am

Quoting 11Bravo (Reply 12):
I would be very surprised, completely shocked actually, to learn that a billion dollars profit is realised from any one order. I suspect you would have to sell many hundreds of aircraft to produce a profit for your shareholders AND pay for a new $1 billion facility.

Well there are more than just the initial investment (fixed and sunk costs) that need to be recovered. This certainly is not based on a single order or a few years of production. Boeing has to calculate something called marginal cost, which includes Total costs (fixed, sunk and variable). They will be efficient and productivity sees optimum when MC equals marginal revenue (profit maximizing level). If they add another line, the MC goes higher, hence they will need to up the MR to maximize production or increase volume. They cannot just do this because of several factors: demand, scarce resources (labor, finance, subcontractor capabilities, etc.), and instable market (cyclic).

Quoting Cobra27 (Reply 23):
1. why hasn't second line been confirmed yet (orders are throgh the roof)

Boeing has at several occasions said that they will eventually boost production to 14-16 frames/month but only after 2 years of line production. This will allow them to tweak the processes both at Boeing and the risk sharing partners. It is not wise to boost production or add another line when you have not really mass produced anything yet. Producing one or two units does not qualify anyone to say the production process will be fine at 500 units. You really do not have enough data to create control charts to see if your process is in "a state of statistical control" or to state your are within 6 std deviations, or even to sense any developing trends.

Even if Boeing has the resources, the subs have to be equally prepared. Just one weak link will be enough to halt the process. Last but not the least, LCF needs to prove itself with the frequency and schedule as well as the material handling and logistics.

I believe Boeing is doing the right thing with balancing the demand and supply properly and adjusting accordingly. Airbus may be doing the right thing by creating a line in China, but we will still have to wait and see how the suppliers will handle the added load. This provides a great PR and other publicity, but all insiders know the delicate situation well. Time will tell how Boeing and Airbus are doing with their respective approaches, strategy and management.