Boeing Sees Dip in '06 Plane Orders After '05 Peak

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Boeing Co. (BA) expects a dip in commercial plane orders next year after a record-setting surge in 2005, a senior executive at the plane maker said on Tuesday.

Boeing, along with European rival Airbus, is on track for its best-ever year, with 806 firm commercial plane orders already in the book for 2005, helped by a recovery in air travel and strong demand from Middle Eastern and Asian carriers.

That may be the peak in the current cycle, said Randy Baseler, Boeing's vice president of marketing for commercial airplanes, speaking at the Reuters Aerospace and Defense Summit in Washington.

"The only thing you can do is look historically. The next year tends not to be as high," said Baseler. "Every cycle is different. The tendency is that orders will be somewhat lower than this year."

Boeing has been helped this year with 185 orders for its new 787 Dreamliner, which is scheduled for first delivery in 2008.

Last month, the company launched its biggest aircraft ever, announcing orders worth $5 billion for a stretched and upgraded version of its 747 from freight carriers.

Demand for the passenger version of the new 747 plane should start to pick up next year once the industry works through some of its current large plane supply, Baseler said.

"You have to absorb that excess lift and then it should take off again," Baseler said.

The new 747 is part of Boeing's strategy to surpass Airbus, which has been muscling into the large plane market with its mammoth A380 double-decker due to begin commercial flights late next year.

Airbus overtook Boeing by aircraft deliveries in 2003, and repeated the feat in 2004. This year, the European plane maker forecasts deliveries to top 400 aircraft, while Boeing targets 290 deliveries.

Baseler, however, sees the new mid-sized 787 sparking a change in those rankings.

"We expect that when we start delivering the 787 in 2008, so several years out, we will probably have as many deliveries, or more deliveries than Airbus at that time," said Baseler.

Through the end of October, Airbus had nearly 500 orders this year, while Boeing said it has received 800 orders as of the end of November.

The improved orders outlook for Boeing has lifted the company's share price.

Year to date, Boeing shares have risen 35 percent, outperforming a 10 percent rise on the Amex Defense index. The stock rose 48 cents to $69.68 on the New York Stock Exchange.

Baseler said he expects price competition with Airbus to continue over the next few years, forcing Boeing to keep manufacturing costs as low as possible.

While airlines in the Middle East and Asia continue to thrive, the U.S. legacy carriers grapple with high overhead costs and intense competition.

Baseler, echoing a sentiment often heard in the industry, said consolidation is a long-term positive even if it means bankruptcy for the most troubled airlines and fewer orders for Boeing.

"In the short term, it doesn't look better for us," said Baseler. "It looks better for new entrants to come in, but that churning is not better for the long-term longevity of the industry."

When asked how long the airline industry consolidation would take, Baseler said it has already taken longer than he once thought but it could be another 10 years before the global industry finishes consolidating.

"If you look at it for a total industry for the rest of the world, we're talking at least a decade," said Baseler, noting that Europe has 13 national airlines when the market only needs three or four carriers.