The Boeing Company (BA)
Q1 2010 Earnings Call
April 21, 2010 10:30 am ET
Diana Sands - VP of IR and Financial Planning and Analysis
Jim McNerney - Chairman, President and CEO
James Bell - EVP, Corporate President and CFO
Rob Spingarn - Credit Suisse
Cai von Rumohr - Cowen & Company
David Strauss - UBS
Joe Campbell - Barclays Capital
Ron Epstein - Banc of America/Merrill Lynch
Heidi Wood - Morgan Stanley
Doug Harnett - Sanford Bernstein
Howard Rubel - Jefferies & Company
Joe Nadol - JPMorgan
Troy Lahr - Stifel Nicolaus
Rob Stallard - Macquarie Research
Peter Arment - Broadpoint Gleacher
Sam Pearlstein - Wells Fargo Securities
Noah Poponak - Goldman Sachs
Susanna Ray - Bloomberg News
Dominic Gates - The Seattle Times
Previous Statements by BA
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Thank you for standing by. Good day everyone and welcome to the Boeing Company's first quarter 2010 Earnings Call. Today's call is being recorded. The management discussion and slide presentation plus the analyst and media question-and-answer session are being broadcast live over the internet.
At this time for opening remarks and introductions, I am turning the call over to Ms. Diana Sands, Vice President of Investor Relations and Financial Planning and Analysis for the Boeing Company. Ms. Sands, please go ahead.
Thank you and good morning. Welcome to Boeing's first quarter earnings call. I'm Diana Sands, and with me today are Jim McNerney, Boeing's Chairman, President, and Chief Executive Officer; and James Bell, Boeing's Corporate President and Chief Financial Officer. After comments by Jim and James, we'll take your questions.
In fairness to others on the call, we do ask that you limit yourself to one question. As always, we have provided detailed financial information in the press release issued earlier today. And as a reminder you can follow today's broadcast and slide presentation through our website at boeing.com.
Before we begin, I need to remind you that any projections and goals we may include in our discussions this morning are likely to involve risks, which are detailed in our news release, in our various SEC filings, and in the forward-looking disclosures at the end of this web presentation.
Now I will turn the call over to Jim McNerney.
Thank you Diana and good morning to all. Let me start today by addressing the evolving business environment, and highlighting some of our key accomplishments during the quarter. James will walk you through our results and then we would be glad to take your questions.
Starting with the business environment on slide 2. With clear indications that a global economic recovery is underway, we are also seeing tangible signs of improvement in the commercial airplane market. Passenger air traffic is increasing led by activity in emerging markets and freighter traffic has rebounded strongly from the severely depressed levels of last year.
Consequently the financial outlook for the world's airlines has improved noticeably since last quarter. Having aggressively cut cost and capacity during the downturn, many of our airline customers are positioning for this economic recovery by ensuring that they have the most efficient airplanes with which to compete. While some customers continue to differ or cancel orders, we are seeing growing demand from other customers for those delivery slot, through both acceleration of planned deliveries and new orders.
During the first quarter, the rate of accelerations we processed was notably higher than average. The number of deferrals we processed was about the same as last quarter. But the backlog of deferral request continues to decrease.
The improving market conditions and the disciplined approach we have taken in managing production rates are paying off. As we announced last month we have accelerated plans to increase production rate on both the 777 and 747-8. And with 787 deliveries expected to ramp up over the next several years, these increases will help ensure our continued market leadership in wide body commercial airplanes. On the 737, with its solid backlog and continued strong demand, we anticipate a decision this quarter on a possible rate increase from our current 737 production level of about 31 airplanes per month.
As I have discussed before, these rate adjustments are significant business decisions for us, and consider the long-term market outlook, customer contracts and lead time and customer contracts and lead times with suppliers. Rate decisions are made only after a through analysis of these another factors. On the defense side of the business, the US Defense Department, another US Government agencies continue to face significant budget pressures.
Given this environment, we are pleased that the fiscal 2010 defense budget and the fiscal 2011 budget request contains strong support for the majority of our key programs including the F/A-18, P-8A our Chinook, Apache and Osprey rotorcraft, the brigade combat T modernization program and others.
We also continue to see strong demand internationally for our core defense and services products. There are several international opportunities we are pursuing. The fighter jets, C-17's, our rotorcraft line up and our 737 based military derivates.
Our focus in defense continues to be three fold. Extend our existing programs by bringing capability and importantly, affordability to our customers, continue a healthy share of international and service opportunities where our footprint and relationships around the world provide a competitive advantage for expanding share and driving disproportionate growth in these markets, and accelerate our repositioning with investments in adjacent markets such as Cyber Security, intelligence and surveillance and unmanned systems where growth rates are higher than the overall defense budget.
Despite some uncertainties that remain in our business environment, we are in a fundamentally solid position and our opportunities are growing, particularly in the commercial market as the world regains its economic footing. Total company backlog helps steady through the quarter as new orders largely kept pace with deliveries. While we continue to expect the book-to-bill ratio of commercial to be below one this year, we do anticipate higher orders than last year across both of our businesses.