Boeing 2Q16 Earnings Call Notes

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The Boeing (BA) Dennis A. Muilenburg on Q2 2016 Results

Reduced future production expectations on 747 due to weak cargo market

“On the 747 program, we decided to reduce future production expectations and revenue assumptions to account for current and anticipated weakness in the air cargo market”

Passenger traffic continues to outpace GDP

“Our overall view of the business environment remains generally positive due to healthy industry fundamentals. We recently updated our 20-year commercial market outlook and based on solid traffic growth and continued replacement demand, we now forecast nearly $6 trillion of demand for 39,620 commercial airplanes, an increase of nearly 1,600 from last year. Global passenger traffic continues to solidly outpace GDP, with IATA reporting 6% growth year to date. On the cargo side, the market remains sluggish with year to date freight traffic down approximately 1%.

Oil prices have not substantially changed customer fleet planning

“We continue to keep a watchful eye on global market conditions for both passenger travel and cargo to ensure that supply and demand are balanced, with particular attention being paid to the wide body segment. While oil prices have meaningfully rebounded from lows earlier this year, our customers continue to tell us that movements in oil prices have not substantially changed their view on future fleet planning or their commitment to existing delivery schedules.”

Requests for changes in delivery are holding below historical average

“New order activity is continuing at a moderate but healthy pace as indicated by the flow of announcements at the Farnborough Air Show. As a result of the compelling and enduring value proposition of our airplanes, requests to change deliveries are holding well below the historical average. Over the past 12 months, deferrals, accelerations, debookings and cancellations remain at about 1% of our backlog. We continue to expect commercial aircraft deliveries to ramp up beyond 900 aircraft per year through the end of this decade, driven by ongoing market demand in our sizable and diverse backlog.”

57 737s per month by 2019

“demand remains strong for the 737 with a robust backlog of nearly 4,400 firm orders. We remain on track to raise 737 production from the current 42 per month to 47 in 2017 followed by 52 per month in 2018 and then 57 per month in 2019. And importantly, even at the 57 per month rate, we continue to be oversold.”

Have seen some hesitation in twin aisle market

“Turning to the twin aisle market, while long-term demand remains strong, we have seen some hesitation in near-term demand in recent months varying by program. For the current generation 777, our backlog as of the end of the quarter stood at 175 airplanes.”

Gregory D. Smith – Chief Financial Officer & Executive Vice President

Backlog is $417B ni commercial airplanes

“Commercial Airplanes captured $11 billion of net orders during the second quarter and backlog remains very strong at $417 billion and nearly 5,700 aircraft, again equating to seven years of production. ”

Moved payables from daily frequency to twice a month

“When it comes to payables, we have changed our frequency of pay that we have gone from daily to twice a month. Again, that’s in line with industry practices. At the same time, we’re looking at terms across all of our contracts and again looking to get those to industry standards, but ultimately we want to get those to top quartile standards. And there’s no reason why we shouldn’t, and frankly a lot of our supply chain is already there.”