Published July 2002

Boeing: Single-aisle jets make up bulk of 2002 sales

By Bryan Corliss
Herald Business Writer

The Boeing Co. has sold nearly as many jets so far this year as it did through the first five months of 2001, but the market is not as strong as the raw numbers would suggest, an analyst said.

However, another analyst said in June that sales to low-cost carriers and a slow rebound in airline passenger traffic could be early signals of a gradual recovery in aerospace.

As of May 29, Boeing had taken 155 new orders since the start of the year. That’s only 5 percent fewer than its total for the first five months of last year, according to information from Boeing’s Web site.

The total doesn’t include a previously announced order that Boeing completed in the last week of May with KLM Royal Dutch Airlines, which has agreed to acquire 13 747s and 777s. And it also doesn’t include 24 orders that customers have either canceled or delayed this year.

Still, the net total of 144 new orders compares well with last year’s total of 163 orders through the end of May, said Peter Jacobs, an analyst with Regan McKenzie in Seattle.

“The total numbers actually aren’t bad,” he said.

But some of the other numbers are less encouraging, he said.

The first is the number of airlines in the market for new planes. In the first five months of last year, 22 airlines announced orders for Boeing jets, from Air 2000 to Xiamen Airlines.

So far this year, there have been only eight, including KLM and Alaska Airlines, which last week announced it had exercised options on two 737s. Boeing had already listed those two jets as being sold to an unidentified customer.

So far, RyanAir’s 100-jet order for 737s accounts for almost two-thirds of all the orders Boeing has booked in 2002, Jacobs noted.

“The RyanAir order drove the numbers,” he said. “That’s the better way to look at the weakness in the market.”

Boeing also has sold only a handful of Everett-built widebody jets: seven 777s, five 767s and one 747. By contrast, during the first five months of last year, Boeing took orders for 18 767s, 13 747s and 12 777s.

The fact that the bulk of this year’s sales have been for single-aisle jets will translate into reduced revenues, Jacobs said. A brand new 737-800 has a list price between $57 million and $64.5 million, about a third of the price for a new 777-200ER, which lists between $165 million and $182 million.

So “on a dollar basis, the value of the orders is quite a bit less,” Jacobs added.

British discount carrier EasyJet remains in the market for a major single-aisle jet order, but “other than that it’s probably going to be slim pickings” for the rest of the year, Jacobs said.

“Without an increase in the breadth of orders, overall, things are going to be pretty soft,” he said. “Things are slow out there.”

However, a report issued June 3 by Bear Stearns analyst Steve Binder in New York was more optimistic.

His survey of 50 airlines and leasing companies indicated that air travel was up in the United States, Europe and Asia, particularly among low-cost carriers.

“Low-cost carriers have already accounted for 70 percent of total order activity this year,” Binder said. “The low-cost carriers are simply prospering.”

Binder’s report predicts that Boeing will capture about half of the annual deliveries in 2003 and 2004, with 737s and 777s comprising a bigger proportion of sales. By 2005, almost 80 percent of Boeing’s production will be those two models, compared with the current 55 percent, he said.

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