Boeing Decides to Boost Financing Exposure
Despite his keen interest in moderating his company’s backlogs, Boeing Commercial Airplanes CEO Jim Albaugh said the company decided “about six or nine months ago” to boost Boeing Capital’s market exposure, primarily because the company’s customers have expressed a desire for more financial support. Not long ago the company had made a strategic resolution to draw down its exposure to aircraft financing. However, said Albaugh, “I wasn’t here then.”
During a roundtable discussion with journalists on the eve of this week’s Dubai Air Show, Albaugh expressed optimism about the Gulf region in general, notwithstanding the complications presented by the so-called Arab Spring. He did acknowledge, however, the possibility of “contagion” from the looming financial crisis in Europe.
A region known for its hunger for big commercial airplanes, the Middle East will continue to generate considerable demand for Boeing’s 777, which this year has drawn orders for 132 examples and for which Albaugh said the company has entered contract talks with “half a dozen” airlines.
On the prospects of a new, so-called 777X, Albaugh reiterated the need to wait first for Airbus’s definition of an A350-1000. If the Airbus product enters the market some time around 2018, Boeing would react soon afterward.
Although the company’s $273 billion backlog “sounds great” to Wall Street, “it’s hard to tell customers to stand in line” for as many as eight years for an aircraft,” said Albaugh. “If we get to 10 [Dreamliners] per month, we’ve got to take a hard look at 11, and then 12,” he added. “Burning the backlog” for virtually all its models stands as one of the company’s biggest challenges, said Albaugh, despite warnings by some analysts of market saturation and over-production.
The BCA CEO sounded particularly bullish about the prospects for the new re-engined version of the 737 narrowbody known as the 737 MAX. Now holding commitments for some 700 of the CFM Leap-1B-powered airplanes, Albaugh predicted that Boeing would “pretty much” equal the Airbus A320neo’s backlog within six months or so. To date Airbus holds firm orders for 1,100 A320neos, and total commitments for 1,300.