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Boeing faces cancelled aircraft orders

snigletsniglet
edited May 2009 in The Economy
So much for the theory that Boeing's new aircraft will lead to permanent employment in the Puget Sound. If Boeing business slows down by a third I am sure that at least some local jobs would vanish.
As rising oil prices cause even the strongest airlines to struggle, Airbus and Boeing Co. face the possibility that as many as a third of their orders for new jets could be postponed or canceled.

http://online.wsj.com/article/SB121434090244301031.html?mod=hps_us_whats_news

This is yet another example as to how the pillars of our local economy may not be as invulnerable to global economic problems as we like to think.

Comments

  • RobroyRobroy
    sniglet wrote:
    So much for the theory that Boeing's new aircraft will lead to permanent employment in the Puget Sound. If Boeing business slows down by a third I am sure that at least some local jobs would vanish.
    As rising oil prices cause even the strongest airlines to struggle, Airbus and Boeing Co. face the possibility that as many as a third of their orders for new jets could be postponed or canceled.

    http://online.wsj.com/article/SB121434090244301031.html?mod=hps_us_whats_news

    This is yet another example as to how the pillars of our local economy may not be as invulnerable to global economic problems as we like to think.
    It's a good thing the local economy is strong or I'd start worrying about our real estate values.

    Interesting note: When I got in my car to go to work this morning, my favorite station was running an ad for a company helping you get rich buying foreclosures. Naturally I immediately changed the channel to my second favorite station. They were simultaneously running an ad by a different company for the exact same service.

    Interesting times...
  • RobroyRobroy
    I was wondering how the "real" this risk is, and then read this gem:

    "...they acknowledge that they are in almost daily talks with airlines seeking to cancel or defer deliveries. Although most of these discussions involve U.S. carriers, signs of stress have emerged from India to Europe."
  • WestSideBillyWestSideBilly
    Boeing and EADS both have backlogs in the range of 6 years. If 1/3 of them cancel, that puts their backlogs at about 4 years of 100% production. In 2012, Boeing will have the 787, 747-8, and hopefully a new tanker in production. EADS will have the A350XWB and A400M (and possibly a bunch of tankers getting shipped to Alabama).

    Whatever airlines are still in business then will still need new planes, especially the efficient 787 and A350XWB, to replace their aging gas hogs.

    Yes, this is very real, but it's not as grave as it may seem. There are still companies that have a lot of capital who will fill in some of the slack - ILFC, Dubai/Emirates, etc. Granted, if things don't pick up by 2011 or so, Boeing and EADS will be staring at a lot of empty manufacturing slots in 2013 and on. This is nothing new; airplanes have always been cyclical.
  • TJ_98370TJ_98370
    I'm going long on my shares of BA. Go Boeing!!!. :D
  • snigletsniglet
    Plagued with losses, some major airlines in India are considering deferring orders of new jets. India's largest airline by market share, Jet Airways (India) Ltd., said it is in talks with Boeing Co. to defer deliveries of two widebody Boeing 777s to next year from their planned handover in October.

    Some industry observers are closely watching China, which saw passenger volumes fall in June for the second straight month.

    But the rapid shift in the outlook for India's carriers shows how fast-moving developing markets can trip up industries, ranging from aerospace to autos to banking, that are counting on them for growth.

    The International Air Transport Association, an industry group, estimates that the global industry could lose as much as $6.1 billion this year if oil prices remain close to recent highs, with almost one-third of that coming from outside North America.

    http://online.wsj.com/article/SB121744399924297723.html?mod=hps_us_inside_today

    All is not well in the airline industry... It looks like those airlines in emerging markets might not provide the panacea of never-ending sales that aircraft manufacturers have been hoping for.

    Any guesses as to when the first Boeing lay-offs will occur in the Puget Sound? I am going out on a limb to say the second half of 2009.
  • RobroyRobroy
    I think the post election riots in November may have an impact on this.
  • WestSideBillyWestSideBilly
    They may all be on strike then, anyway.
  • snigletsniglet
    Any last hopes people have for Boeing continuing to hold up the local economy are quickly being dashed. Financing for aircraft is going up in smoke, and it now looks like a lot of NEW planes will be going directly to rot in the desert.

    So much for all that growing demand for air travel in emerging markets...

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aqmLa9UUq1Ks&refer=home
  • perfectfireperfectfire
    China asks airlines to suspend plane buying. Weren't people saying just a few months ago that gas prices + decoupling would result in strong airplane exports? Wrong and wrong.
  • SeattleMooseSeattleMoose
    More kerosene.....

    http://seattletimes.nwsource.com/html/businesstechnology/2008552976_webairlines23.html

    Could turn out to be more grim if "deferrals" turn into outright cancellations....
  • perfectfireperfectfire
    15 more 787s cancelled: http://uk.reuters.com/article/rbssIndus ... 9520090205
  • The_TimThe_Tim
    Boeing Co. reports sharply lower orders for Feb.
    Boeing, the world's second-largest airplane maker after Europe's Airbus SA, reported orders for just four planes last month, down from 125 during the same period last year, according to figures posted on its Web site Thursday.
    4 planes vs. 125?!? That's a 97% drop!

    I'd say "sharply lower" is something of an understatement here. Yikes.
  • SeattleMooseSeattleMoose
    Let's hope that the two cycles (commerical and defense) don't superimpose on top of each other creating a double sinusoidal "low" point.

    Global recession/depression = huge falloff in air travel
    Endless bailouts and declining tax revenue = more pressure to cut defense spending

    This could get ugly....

    Wasn't it just last year that our local economy was still "special"?

    "WILL CODE FOR FODD"
  • The_TimThe_Tim
    Boeing's 787 Dreamliner loses another 25 orders
    The Seattle Times wrote:
    With just weeks to go before its first flight, the Dreamliner program has now lost a total of 57 orders since the beginning of the year and taken in only one new Dreamliner order for eight of the jets, for a net decrease of 49 in the sales tally.

    The plane still has a hefty 861 orders on the books.
    ...
    So far this year, the net order tally stands at -1, with 50 canceled airplanes and 49 new orders.

    The impact of the losses is greater in dollar value, because most of the new orders are single-aisle jets, while most of the canceled orders are expensive widebodies.

    The net cancelations are valued at about $5.5 billion, using market pricing data from aircraft valuation firm Avitas. By the same estimates, the net new orders are worth just over $3 billion.
    So, if I'm understanding what they're saying here, Boeing's ledger sheet has taken a $1.5 billion hit so far this year? Ouch.
  • dlsdls
    sniglet wrote:
    Plagued with losses, some major airlines in India are considering deferring orders of new jets. India's largest airline by market share, Jet Airways (India) Ltd., said it is in talks with Boeing Co. to defer deliveries of two widebody Boeing 777s to next year from their planned handover in October.

    Some industry observers are closely watching China, which saw passenger volumes fall in June for the second straight month.

    But the rapid shift in the outlook for India's carriers shows how fast-moving developing markets can trip up industries, ranging from aerospace to autos to banking, that are counting on them for growth.

    The International Air Transport Association, an industry group, estimates that the global industry could lose as much as $6.1 billion this year if oil prices remain close to recent highs, with almost one-third of that coming from outside North America.

    http://online.wsj.com/article/SB121744399924297723.html?mod=hps_us_inside_today

    All is not well in the airline industry... It looks like those airlines in emerging markets might not provide the panacea of never-ending sales that aircraft manufacturers have been hoping for.

    Any guesses as to when the first Boeing lay-offs will occur in the Puget Sound? I am going out on a limb to say the second half of 2009.

    The first round of layoffs has already occurred. Other rounds will be spread over the remainder of the year. It's not been fun walking past large meeting rooms with 'Layoff Briefing' signs in front of them. It has also not been fun overhearing statements like 'I won't be at the meeting next week, I've been laid off and this is my last week'.

    The announced layoffs (so far) aren't as severe as 1995 (when my engineering division ceased to exist and I learned about South Snohomish county and Everett [not all bad]), 1997, and the big layoffs following the 9/11 attacks.

    Fortunately I'm on the design/cert side of things, not production, my work is pretty much the same whether 1 or 100 airplanes are produced. Not 'golden' or impervious by any means, but am somewhat buffered by direct production rate cuts. Of course, if the vendors ever do actually prove that they can do the work themselves then I'll likely find myself being tossed out the gate head first.
  • WestSideBillyWestSideBilly
    $2.5B by my math. But who's counting?

    ~2100 unfilled 737 orders = ~$105B
    ~100 unfilled 747 orders = ~$25B
    ~330 unfilled 777 orders = ~$70B
    ~860 unfilled 787 orders = ~$130B

    So yeah, the B lost $2.5B in backlog... but still has over $300B in orders.
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