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Boeing Goes to Zero

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June. The month means different things to different people. To kids: "School's out for the summer, hurray!" To parents: "School's out for the summer. Now what are we going to do with the kids?" And to Boeing (NYSE: BA  ) investors: The year's almost half over, and we're still stuck at square one.

Boeing goes to zero
As we enter the sixth month of the year, you see, Boeing's still right back where it was at the year's beginning -- at least as far as plane orders go. The past five months and change have seen the company book 65 news orders for planes of various stripes -- 737s and 747s, 767s, 777s, and of course the vaunted 787 Dreamliner. Which would be great ... except that Boeing can't seem to keep hold of the orders once it's got 'em.

So far this year, Boeing has lost precisely as many commercial jetliner orders as it has landed, with the result that right now, this instant, the company's stuck at zero. Not a single new order, net-net, all year long. That sounds like bad news for Boeing, and for the people who make its engines -- General Electric (NYSE: GE  ) and United Technologies (NYSE: UTX  ) , but ...

... appearances can be deceiving
That doesn't tell the whole story. Even if all of Boeing's planes are equally good, some are more equal than others. Last week, for example, Boeing lost five orders for variants of its 767 airliner. On the plus side of the ledger, it added five orders for its 787. That sounds like a wash, but really it isn't. According to Boeing's price list, the average price on a brand new 767 is about $150 million -- which is the least amount that the smallest 787 will set you back. Average sticker price on a Dreamliner: $178 million.

Less than zero
But it works the other way around, too. So far this year, Boeing's failure to get the 787 built and delivered on schedule has helped cost it 44 cancellations. Boeing bulls will tell you, however, that it's mitigated the damage by selling 41 737s, the plane that dominates the fleets at Continental (NYSE: CAL  ) and Southwest (NYSE: LUV  ) . Problem is, the narrow-body 737s go for $69 mil. a pop on average -- meaning that it takes roughly two-and-a-half 737 sales to offset every 787 wide-body order canceled.

Foolish takeaway
Next time someone tells you that "Boeing's a buy" because it has $350 billion in backlogged work and, well, maybe it's not booking any new orders, but at least it's holding steady, remember -- not all orders are created equal.

Class dismissed.

What's worse than losing plane orders? Losing a labor dispute:

Fool contributor Rich Smith owns shares of Boeing. The Motley Fool has a disclosure policy.

Read/Post Comments (7) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 03, 2009, at 4:47 PM, TxPublisher wrote:

    Nice story to fill space on an end of spring day. The real story is that Boeing still has a backlog of 350 billion. With financing hard to get and business slow for the airlines, I would not have been surprised to see a 50% drop in orders. The orders will return and, you might even see a backlog of 450-500 billion in two years. Doom and gloom are great to get people to read your stuff, but doesn't do anything to improve business attitude or outlook.

  • Report this Comment On June 03, 2009, at 6:36 PM, dividendgrowth wrote:

    What a pathetic article!

    You are basically bashing BA because it sees some cancellations during the worst economic slump since the end of WW2.

    But BA and EADS are the only game in town when it comes to commercial jets. It seems that EADS has even more trouble getting its A380 off the ground.

    If you believe the world economy will ever grow again and that emerging markets will lead the way, BA is a wonderful pick.

    Do you know the meaning of "buy low and sell high"?

  • Report this Comment On June 03, 2009, at 9:56 PM, TimothyVR wrote:

    This site has too many attention-getting "tabloid" headlines. This is another case of the story not matching the content.

  • Report this Comment On June 04, 2009, at 3:19 AM, dividendgrowth wrote:

    TMF has no idea about how to invest/trade stocks in cyclical industries.

  • Report this Comment On June 04, 2009, at 1:51 PM, kaizen4 wrote:

    Surely what is more important is the factory standard cost and profit margins to produce these different aircraft types. I would guess that the profit margin on the 737 and 767 are higher than the 787, these aircraft have been in production for many years, and the NRE costs have been fully absorbed.

  • Report this Comment On June 04, 2009, at 6:02 PM, jammer13 wrote:

    It's apparent TMF has not been following this story closely. Firstly, both Boeing and Airbus have had record numbers of orders the last couple years. Secondly, many analysts have been calling for the sky to fall on Boeing and Airbus by means of huge numbers of cancellations. That has not happened yet. The fact the orders are net zero for this current environment is actually pretty positive. As we come out of the trough we will see net positive order numbers. In the meantime the huge backlog will see Boeing through the trough. If you want to be an accurate analyst you have to consider the whole picture.

  • Report this Comment On June 08, 2009, at 5:29 PM, paulbverizonnet8 wrote:

    Hello Foo's

    . The piece that you wrote on Boeing is fun to read, but you mention that the sale of a '37 is different from the sale of an '87 or a '67.

    . Ok, this is true, but you forgot to account for the fact that the 737's have been manufactured for over thirty years, so the tools have been amortized. Lots. The 767's have been built for a long time too.

    . The numbers and relationships that you wrote about didn't seem to take that into account. Am I wrong?

    . Love: Pauly

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