Boeing 4Q15 Earnings Call Notes

Dennis Muilenburg

Export Import bank helps us complete in global markets

“A noteworthy milestone for our industry and others and for large and small U.S. exporters alike, was the five-year extension of the U.S. Export Import Bank. This reauthorization of the bank restores competitive balance in international trade and enables American exporters to compete on a level playing field in tough global markets. These developments in sum help to further de-risk our business going forward.”

Global passenger traffic increased 7% in 2015

“We continue to see a generally healthy commercial airplane marketplace driven by improving airline profitability, solid passenger traffic growth, and meaningful replacement. Traffic data for 2015 illustrates the strength of the passenger market with global passenger traffic increasing 7% for the year, which was above the 10-year average.”

Air freight traffic stalled though

“In contrast, as we highlighted in our rate reduction announcement last week on the 747-8, the global cargo market recovery stalled during 2015 with the air freight traffic growing a modest 2% during the year. We remain confident in the long-term recovery in the cargo market and the upcoming replacement cycle where we see approximately 240 large freighters that will be over 20 years old by 2019.”

Project passenger traffic to increase another 7% next year

“Additionally, passenger traffic in 2016 is forecast to grow 7%, and cargo is forecast to increase 3%. In addition, global GDP is forecast to increase 2.7% in 2016, a healthy level for our industry.”

Chinese passenger traffic increased 15%

“We also continued to see strong growth in Chinese airline traffic. In 2015, passenger traffic in China increased 15% compared to GDP growth of 7%, a steady trend we have seen for the past five years.”

Airlines buy aircraft for growth in a low oil price environment more than replacement

“notwithstanding a fuel price environment today that is well below the 15-year average, the value proposition for our airplanes remains a compelling one, and we have seen airlines in the past efficiently adjust to similar market conditions. In a period such as today with higher passenger demand and lower oil prices, airlines buy new aircraft more for growth rather than replace older assets.”

Airplane demand is 60% growth 40% replacement

“we continue to see about 40% of overall aircraft are in the replacement category, so it’s a combination of growth and replacement. About 60% growth, about 40% replacement on balance. It varies a bit year-to-year, region-by-region, but that gives you a sense for it. And the value proposition of our airplanes is compelling whether you’re looking at replacement of old assets or the need to satisfy passenger growth.”