global market performance since 2010the anticipated benefits of mergers, acquisitions, joint...
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Copyright © 2016 Boeing. All rights reserved.
Randy TinsethVice President, Marketing
Boeing Commercial AirplanesMarch 2016
Copyright © 2016 Boeing. All rights reserved.
The statements contained herein are based on good faith assumptions are to be used for general information purposes only.These statements do not constitute an offer, promise, warranty or guarantee of performance.
MarketUpdate
Copyright © 2016 Boeing. All rights reserved.
Certain statements we make during this conference are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates,” and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to: (1) general conditions in the economy and our industry, including those due to regulatory changes; (2) our reliance on our commercial airline customers; (3) the overall health of our aircraft production system, planned production rate increases across multiple commercial airline programs, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards; (4) changing budget and appropriation levels and acquisition priorities of the U.S. government; (5) our dependence on U.S. government contracts; (6) our reliance on fixed-price contracts; (7) our reliance on cost-type contracts; (8) uncertainties concerning contracts that include in-orbit incentive payments; (9) our dependence on our subcontractors and suppliers, as well as the availability of raw materials, (10) changes in accounting estimates; (11) changes in the competitive landscape in our markets; (12) our non-U.S. operations, including sales to non-U.S. customers; (13) potential adverse developments in new or pending litigation and/or government investigations; (14) customer and aircraft concentration in Boeing Capital’s customer financing portfolio; (15) changes in our ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments; (16) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures; (17) the adequacy of our insurance coverage to cover significant risk exposures; (18) potential business disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, sanctions or natural disasters; (19) work stoppages or other labor disruptions; (20) significant changes in discount rates and actual investment return on pension assets; (21) potential environmental liabilities; and (22) threats to the security of our or our customers’ information.
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
Copyright © 2016 Boeing. All rights reserved.
NOTE: Annual growth rates (%) and cumulative profit ($B)
Cargo market weak, challenging
Passenger market resilient, growing
Global economic growth rate below average
Airlines managing better than ever before
Copyright © 2016 Boeing. All rights reserved.
Backlog and deliveries growing near same rate over the last 10 years
0
500
1000
1500
2000
0
1000
2000
3000
4000
5000
6000
7000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Del
iver
ies
Bac
klog
Backlog DeliveriesSource: Flightglobal Ascend Year-end 2015
CAGR 2005 – 2015Backlog – 10.1%
Deliveries – 12.5%
Copyright © 2016 Boeing. All rights reserved.
Backlog movement at a historical low
0
1000
2000
3000
4000
5000
6000
7000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Backlog Net Deferals/Accelerations Debookings/Cancelations
9%3%
9% 7%2% 1%
# of
airp
lane
s
(Total change as a % of backlog)
30%20% 6% 0% 1% 2% 4% 2% 1%
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0%
5%
10%
2010 2011 2012 2013 2014 2015 2016
Healthy consumer economy supports travel
Emerging markets middle class growth
New airline business models
Demographics support leisure travel
Air travel relative affordability
Business travel – revenue focus, travel intensive sectors outperforming
Annual Growth (RPKs)
Source: ICAO, BCA
above trendgrowth
Traffic growth continues at above-average levels
Copyright © 2016 Boeing. All rights reserved.Sources: IATA Carrier Tracker (industry international scheduled freight) and A4A US domestic cargo traffic.
• Traffic growth > long-term average
• Load factors at/near record highs
• Parked fleet - typical seasonal trends
• Utilization at historic peaks
Year-over-year growth – 12 month rolling avg
0%
1%
2%
3%
4%
5%
6%
7%
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15
Available Seat Kilometers (capacity)Revenue Passenger Kilometers (traffic)
Airline traffic growth exceeding airline capacity growth
Copyright © 2016 Boeing. All rights reserved.
60%
65%
70%
75%
80%
85%
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Aver
age
Ann
ual P
asse
nger
Load
Fac
tor
Source: ICAO
Airplane load factors indicate that assets are fully utilized…. no overcapacity
Copyright © 2016 Boeing. All rights reserved.
Airplane Utilization
7.0
7.5
8.0
8.5
9.0
9.5
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Hours/Day
Airline Productivity RisingAssets are being efficiently utilized
Sources: Utilization – BCA RMT; Load Factors – ICAO
World Load Factors
70%
72%
74%
76%
78%
80%
82%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Copyright © 2016 Boeing. All rights reserved.
high
oil
lo
w o
il
Airlines adjust fleet to market conditionsFlexibility adds to industry stability
~50% growth~50% replacement
(2003)
~20% growth~80% replacement
(2008)
~60% growth~40% replacement
(2011)
~70% growth~30% replacement
(2004-07)
low growth high growth
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Growth vs replacement fluctuates over timeReplacement of 2.5-3% annually, plus Growth of 3.5-4% makes up delivery mix
11
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Growth Replacement
Source: Ascend
Copyright © 2016 Boeing. All rights reserved.
Deliveries tracking with historical ratiosReplacement of 2.5-3% plus Growth of 3.5-4%
12
Annual deliveries Deliveries as % of fleet
Source: Ascend
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
0
200
400
600
800
1000
1200
1400
1600
1800
2000
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Single Aisle replacement demand increasingSome replacements delayed, others accelerated
0
100
200
300
400
500
600
700
800
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Airp
lane
s tu
rnin
g 25
yrs
old
SOURCE: Flightglobal Ascend Online database & BCA Analysis
Excludes over 700 airplanes that are older than 25 years
Copyright © 2016 Boeing. All rights reserved.
Widebody replacement demand increasingSome replacements delayed, others accelerated
0
50
100
150
200
250
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Airp
lane
s tu
rnin
g 25
yrs
old
SOURCE: Flightglobal Ascend Online database & BCA Analysis
Excludes over 300 airplanes that are older than 25 years
Copyright © 2016 Boeing. All rights reserved.
30
35
40
45
50
55
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
Service driven economy emerging
Shar
e of
GD
P in
%
services
industry
4
6
8
10
12
14
16
2011
2012
2013
2014
2015
Year
-ove
r-ye
ar g
row
th ra
te
RPKs
GDP
forecast
China’s economic transition supports air travel
Heavy industry growth slowdown
Service sector continuing growth
Air passenger travel strong
Cargo impact from weak industryRisks:
• Weakness spills into consumption• Large exchange rate devaluation• Financial market / debt crisis• Geopolitical (South China Sea)
Copyright © 2016 Boeing. All rights reserved.
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
1st-half2011
1st-half2012
1st-half2013
1st-half2014
1st-half2015
Then
yea
r dol
lars
(mill
ions
)
Market Value of 3-year old 737-800
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
2011 2012 2013 2014 2015
Aver
age
leas
e ra
tes (
mill
ions
)
New 737-800 lease rates
Lease Rate Source:, IBA, ASG, AVAC, CV, MBA, ASCENDData through 12/7/15Lease Rate data tends to lag by a few monthsLease Rates exclude Maintenance Reserves
Market Value Source: Average bluebook values fromAscendAVITASIBA
Copyright © 2016 Boeing. All rights reserved.
$0
$20
$40
$60
$80
$100
$120
$140
$160
1st-half2011
1st-half2012
1st-half2013
1st-half2014
1st-half2015
Then
yea
r dol
lars
(mill
ions
)
Market Value 3 year old 777-300ER
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
2011 2012 2013 2014 2015
Aver
age
leas
e ra
tes (
mill
ions
)
New 777-300ER lease rates
Lease Rate Source:, IBA, ASG, AVAC, CV, MBA, ASCENDData through 12/7/15Lease Rate data tends to lag by a few monthsLease Rates exclude Maintenance Reserves
Market Value Source: Average bluebook values fromAscendAVITASIBA
Copyright © 2016 Boeing. All rights reserved.
Improving airline profitability is the primary driver of aircraft order peaksSource: FG Ascend, ICAO, World Bank, St. Louis Fed, Boeing analysis
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
0
500
1000
1500
2000
2500
3000
3500
4000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Airli
ne N
et M
argi
n
Net
Ord
ers
• Stronger passenger traffic demand
• Fuel efficient airplanes operating hedge against price volatility (near-term deliveries)
• Airlines planning for higher fuel prices (longer-term orders)
• Deferred retirements provide only marginal, short-term capacity
• Incremental capacity from low utilization airplanes, for peak demand periods
• Heavy check capex limits longer-term prospects
• Airline orders more closely track airline profitability
Copyright © 2016 Boeing. All rights reserved.