Every Thursday, every week, Boeing (NYSE:BA) updates investors on the status of its plane orders. This week, Boeing shareholders were treated to some exceptionally good news -- and some bad news, too -- that may not turn out to be so bad after all.
Good news first
Let's start off on a happy note: Boeing has booked 10 new orders over the past week from "unidentified Customer(s)" wanting to buy its widebody 777 commercial jet. While Boeing doesn't reveal which specific models of 777 are being bought, if we assume these are shiny new 777-8X or -9X airliners, the 10 planes now on order will add as much as $3.75 billion to Boeing's order book (at advertised list prices).
That's the good news. But what's even better news for Boeing investors is that, according to our analysis of airplane model profitability, Boeing's 777 is almost certainly one of Boeing's more profitable airplanes, and quite possibly its single mostprofitable airplane.
Bad news next
Now to break the bad news: At the same time as Boeing added 10 new 777 orders, it lost 15 orders for its new 787 Dreamliner due to cancelations. Boeing didn't say who's canceling. All we know is that, with a mid-range 787-9 Dreamliner setting a customer back $257 million, the loss of these plane orders works out to as much as a $3.86 billion hit to Boeing's revenue stream going forward.
In other words, on a revenue dollars basis, Boeing lost more business last week than it won.
And that's OK.
That's right. It's totally OK. You see, Boeing's 787 may be a pretty plane, and it may be revolutionary in its use of composite materials and fuel efficiency. But the 787 is also currently a drag on profits at Boeing. According to The Wall Street Journal, Boeing's last earnings report showed a 1.3-percentage point decline in profit margins at Boeing's Commercial Airplanes unit -- because, and I quote, "deliveries of the advanced 787 accelerated."
Translation: The more 787s Boeing sells, the less money Boeing makes. So in a sense, even though Boeing is getting fewer revenues after accounting for this past week's orders and cancelations, it's getting more of the right kind of orders. More profitable 777s sold, versus fewer unprofitable 787s -- that's good news for Boeing's profits, at least in the near term.
Updating the numbers
Of course, Boeing sells more than just 777s and 787s. Before we wrap up our status report for the past week, therefore, let's give you a quick rundown of where Boeing stands on all plane orders year to date. As of June 9, 2015, gross orders include:
- 90 single-aisle 737s
- 45 "Dreamliners"
- 35 widebody 777s
- four 747 jumbo jets
- and still just one single 767
Tally those up, and it makes for 175 "gross" plane orders received year to date. Subtract 44 cancelations, and Boeing's "net" new orders for the year now stand at 131 -- down five from last week.
And yes, for the record, that's still fewer net orders than Airbus has got. So here's hoping Boeing can turn things around at the International Paris Air Show, which gets under way in just three days (2 ... 1 ... contact!).
Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 333 out of more than 75,000 rated members.
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