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The Honolulu Advertiser
Posted on: Saturday, January 7, 2006

Boeing saw orders surge in 2005

By Ameet Sachdev
Chicago Tribune

CHICAGO Boeing Co. this week released its official tally of orders for 2005 and will be hard-pressed to top the interest in its commercial airplanes last year.

The Chicago-based aerospace giant said it booked 1,002 jet orders in 2005, the most in its history, as demand surged from Asian and Middle Eastern carriers for its fuel-efficient 777 and 787 models to fly international routes. The total is nearly four times as large as the 272 placed in 2004.

With the order boom, Boeing is likely to recapture its lead in airplane sales from European rival Airbus SAS for the first time in five years. Airbus will not release its year-end tally until Jan. 17, but through November the aircraft maker had reported 687 orders.

But Boeing officials did not have much time to enjoy the milestone. Shares of Boeing fell 84 cents, or 1.1 percent, to $70.33 in New York Stock Exchange trading after a stock analyst issued a downgrade, saying he expected 2006 orders to be about half of 2005's total.

Boeing's stock is very sensitive to shifts in commercial orders as underscored by the 36 percent gain in its shares in 2005, despite signs of a slowdown in the company's defense business.

"We believe that after a strong run in the shares since March 2003, they are now more likely to become range-bound," Banc of America analyst Nick Fothergill said in a note to clients. He cut his rating on Boeing to "neutral" from "buy" and reduced his 12-month price target on the stock by $1, to $72.

Fothergill did not step out on a ledge in making his prediction that orders may have peaked in 2005. Boeing executives have said that commercial orders may decline in 2006, as pent-up demand is satisfied.

Still, 2005 turned out better than Boeing or Airbus had expected, considering that U.S. airlines are still hurting. The industry had been in a slump since the terrorist attacks in 2001 cut demand for global air travel. Asian carriers suffered another blow two years later as the outbreak of SARS kept people home.

But a number of fast-growing airlines in growth markets like China and India could no longer avoid expanding their fleets. Key customers such as Air India and Cathay Pacific Airways chose Boeing over Airbus. As more carriers placed orders with Boeing, others accelerated negotiations to lock in future delivery dates.

The order book also highlighted the continued growth of low-cost carriers. Ireland-based Ryanair ordered 84 Boeing 737s, its single-aisle workhorse.

The total orders could represent more than $100 billion in future revenues for Boeing, based on current list prices. Airlines typically negotiate discounts off catalog prices. Boeing will recognize revenue from orders when the planes are delivered.

The 2005 total surpasses Boeing's previous high of 877 in 1988, including models made by McDonnell Douglas, which Boeing acquired in 1997.