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Q1 2011 Earnings Call
April 27, 2011 10:30 am ET
James Bell - Corporate President, Chief Financial Officer, Executive Vice President and Member of Executive Council
Scott Fitterer -
W. McNerney - Executive Chairman, Chief Executive Officer, President, Chairman of Special Programs Committee and Member of Stock Plan Committee
Tom Downey - Senior Vice President of Communications
Doug Cameron - Financial Times
Robert Stallard - RBC Capital Markets, LLC
Cai Von Rumohr - Cowen and Company, LLC
Susanna Ray - Bloomberg
Howard Rubel - Jefferies & Company, Inc.
Hal Weitzman - Financial Times
Ronald Epstein - BofA Merrill Lynch
Joseph Nadol - JP Morgan Chase & Co
Joshua Freed - The Associated Press
Christopher Hinton - MarketWatch
Heidi Wood - Morgan Stanley
Douglas Harned - Sanford C. Bernstein & Co., Inc.
Carter Copeland - Barclays Capital
Robert Spingarn - Crédit Suisse AG
Dominic Gates - Seattle Times
Jason Gursky - Citigroup Inc
Samuel Pearlstein - Wells Fargo Securities, LLC
Noah Poponak - Goldman Sachs Group Inc.
Troy Lahr - Stifel, Nicolaus & Co., Inc.
Myles Walton - Deutsche Bank AG
David Strauss - UBS Investment Bank
Previous Statements by BA
» Boeing's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Boein Q2 2010 Earnings Call Transcript
» The Boeing Company Q1 2010 Earnings Call Transcript
Thank you, and good morning. Welcome to Boeing's First Quarter Earnings Call. I'm Scott Fitterer, 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 ask that you please limit yourself to one question. As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation on 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 disclaimers at the end of this web presentation.
Now I'll turn the call over to Jim McNerney.
Thank you, Scott, and good morning, everybody. Let me start today by addressing the evolving business environment, followed by some thoughts on our performance during the quarter. After that, James will walk through our results, and then we'll both be glad to take your questions.
Starting with the business environment on Slide 2. The global economy continues its transition to a sustained recovery despite some isolated regional uncertainties. This economic expansion continues to fuel global air traffic growth, which has moderated since reattaining peak levels last year, but is still increasing along expected long-term trends.
Utilization rates also continued to improve for both single-aisle and twin-aisle airplane categories. Notwithstanding the recent elevated oil prices, which we continued to monitor, the current combination of strong economic fundamentals, continued air traffic growth and increasing utilization is generating high demand for both growth and replacement airplanes. Wide-body interest has been especially strong as highlighted by the dramatic increase in orders we have taken so far this year on the 777, 46 to be exact, with more expected to follow.
In both anticipation and response to this demand, we previously announced the series of production rate increases across our product lines, including the 787 ramp up, these moves will increase our Commercial Airplane output by more than 40% during the next three years. This represents a significant and sustained growth opportunity for our company. We are working closely with our supplier partners to manage these moves to higher rates efficiently and effectively, focusing not only on increasing capacity, but also on improving quality, reducing flow times and lowering costs.
On a related supply chain topic, let me quickly touch on our assessment of the impact of the situation in Japan and the unrest in the Middle East. These events in Japan have not had a significant impact on our operations. Our major partners there are managing challenges with electric power availability and stressed infrastructure and transportation systems, but they are generally performing well. We have had no significant delays in parts deliveries. Certain sub-tier suppliers did sustain damage during the events, and we will continue to monitor that situation in the weeks ahead. We've also closely monitored events in the Middle East but at this time, don't expect a significant impact on our business.
Turning to Defense, Space & Security. The business environment remains influx due to the ongoing budget pressures in the United States and Europe and shifts in customer priorities. Despite these environmental pressures, the demand for Defense products and services remains high globally, driven primarily by the need to modernize current capabilities to meet existing and future threats, and upgrade or replace aging inventories.
Here in the U.S., we were pleased with the outcome of the 2011 budget agreement as it included strong support for many of our key domestic programs and platforms, from ground-based Midcourse Defense to multi-year procurement of F/A-18 Super Hornets and EA18 Growlers, and important buys of B22s, Apaches and Chinooks. The fiscal year 2012 budget request continues support for these programs, along with some of our targeted growth areas, such as Cyber security and unmanned aerial systems.
The international Defense and Security market remains strong, particularly in the Middle East and South Asia. We continue to see demand for our proven and reliable platforms and services, from Rotorcraft to tactical aircraft and the C-17. Despite the Mid-east unrest I mentioned earlier, sales campaigns to key customers in this area remain on track, and the sale of C-17 to India is moving forward as well.
Notwithstanding pockets of uncertainty and U.S. budget pressures, the Commercial and Defense and Security markets we serve remain large and are growing in the aggregate. Continued innovation, strong execution across our production programs and our international presence are sources of strength in this environment. We are making solid progress on the strategies we're pursuing.