The 787 and the F-15 share a moment during the Dream Tour’s stop in St. Louis. Ed Turner photo.

Now that we’re almost five full months into 2012, I wanted to take a closer look at how the market is fairing so far. We expected 5 percent passenger growth this year, and things certainly seem to be tracking that way. Stability is also starting to come back to the cargo market.

The airlines can take a lot of credit for this year’s success. They’ve been managing their business very well, especially since we’ve seen a lot of risk and uncertainty in the market as well as high fuel prices. First quarter earnings for airlines have also been in line with their expectations.

The strength in the market is also reflected in our own numbers. We currently have 418 net orders for the year with almost 4,000 airplanes in our backlog. Demand continues to come from emerging and developing economies, low cost carriers and the need for replacement aircraft.

Speaking of replacement—here’s a staggering statistic. Every year over the next 20 years, we expect between 2 and 2.5 percent of the world’s fleet will need to be replaced. When you consider there are nearly 20 ,000 airplanes flying today, that becomes a really big number—a key reason we’re moving up our production rates.

It looks to be another exciting year to be in this business. And we look forward to meeting the challenges.

The 787 comes in for landing in DC.

After the airplane hosted thousands of guests in DC, the week was capped off last night at the Collier Trophy presentation dinner. The 787 received the prestigious award from the National Aeronautic Association for being the greatest aeronautic achievement in America last year. It’s an award we don’t take lightly and we’re truly honored to receive it.

Jim Albaugh, President & CEO of Boeing Commercial Airplanes, honors the 787 team during the Collier Trophy dinner.

Mike Sinnett (left), 787 vice president and 787 Chief Project Engineer, and Capt. Mike Carriker, the original 787 Chief Pilot, are part of the team that designed and developed the 787.

The events in DC weren’t the only big things happening with the 787 program this week. The first engine run of the first South Carolina-built 787 was completed as we draw ever closer to that airplane’s first flight in the coming days.

The first 787 built in South Carolina during its rollout last month.

And before the Collier Trophy presentation, the 787 was honored with the 2012 Hermes Awards for Innovation Grand Prize. The Hermes Awards, given by the European Institute for Creative Strategies and Innovation, honor innovative ideas and products that help advance society. Finally, the Dreamliner was honored by the American Institute of Aeronautics and Astronautics with the AIAA Foundation Award of Excellence.

Great things happen when you build great airplanes. Here’s hoping the rest of 2012 brings even greater things.

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The 777 Freighter on the production line in Everett. Gail Hanusa photo.

The 777 Freighter’s main deck cargo door is the largest and the heaviest cargo door that Boeing installs. Back in 2009 when the first 777 Freighter was built, it took about 20 days to rig the cargo door. Now, it takes only 16 hours.

From left to right, 777 door riggers Kiem Tran, Craig Morgan and Angelette Gambrell open the 777 Freighter’s main deck cargo door. Gail Hanusa photo.

Employees came up with a so called “smart pin” designed and patented by Boeing Tool Design. The smart pin allows mechanics to more easily rig the door, in less time and with improved quality. The team also came up with a new method that allows them to stop the moving line, stabilize the airplane, rig the door, get the necessary approvals to move forward, and return later in the process to tighten and seal the fasteners.

With a 20 percent rate increase for the 777— from seven airplanes per month to 8.3 — beginning this fall, this is just another incredible example of employee ingenuity paying off for our customers as we open the door to better ways of doing things.

The new winglet will provide airlines with an extra 1.5 percent fuel-burn improvement, depending on range. That’s on top of the 10-12 percent improvement we’re already promising. While our original focus on the MAX centered on engine improvements, this winglet opportunity is something we just couldn’t pass up. It provides our customers a substantial fuel savings with minimum risk to the MAX program on our end. To put this in real numbers, if an airline were to utilize a 737 MAX at the high-end of the range for a year, this would equate to a savings of $160,000 dollars per airplane. For a customer with 100 MAXs in their fleet, well you can do the math, this is huge!

As for the winglet itself, it will be built out of composite and metallic leading edge and will have similar tolerance for ‘ramp rash’ as devices used on today’s airplane. The weight of the new winglet is also similar to today’s. And when we call it the Advanced Technology winglet, we mean it. Boeing aerodynamicists used advanced computational fluid dynamics to combine rake tip technology with a dual feather winglet concept into one advanced treatment for the wings of the 737 MAX - now that’s a mouthful. The concept is more efficient than any other wingtip device in the single-aisle market because the effective wing span increase is balanced uniquely between the upper and lower parts. This moves the center of gravity of the system down minimizing weight penalty while allowing maximum aerodynamic efficiency. To see how it will work, check out this video.

There are a lot of reasons to be excited about the 737 MAX as it spreads its wings— with many more milestones to come.

What a picture! Joe Sutter, the father of the 747, poses next to Lufthansa’s new 747-8 Intercontinental. Marian Lockhart photo.

Flyaway for Frankfurt. Gail Hanusa photo.

The airplane dazzled everyone during a delivery celebration at the Future of Flight this afternoon. Lufthansa was our launch customer for the 747-8 Intercontinental and reaching this moment was special for every Boeing employee who played a role in handing her over to our customer. We’ve been incredibly pleased with the performance of the 747-8 Freighter that’s already in the hands of several customers—and we look forward to seeing what the Intercontinental can do.

Cutting the ribbon for the first 747-8 Intercontinental delivered to an airline customer. Gail Hanusa photo.

It wasn’t just the outside of the airplane that had people snapping photos. Lufthansa unveiled its new interior for the first time to rave reviews. Photos by Patrick Rodwell.

We’re proud of what the Intercontinental will bring to Lufthansa and all of our customers. I could point to the double-digit improvements in fuel burn and emissions over the 747-400, or the greater feeling of space and comfort that passengers will enjoy. But what we’ll be most proud of is watching a customer put the airplane into service and show off what it can really do.

The party continues Wednesday in Frankfurt when Lufthansa brings the airplane to its new home. Let the celebration continue!

Now, our attention turns to getting that first airplane into the hands of our customer Air India. The South Carolina facility will be key in our 787 production ramp up. We’ve already gone to a rate of 3.5 airplanes a month in Everett. When we eventually go to 10 a month as planned in late 2013, 7 of the airplanes will come out of Everett while another 3 will be produced in South Carolina. And if Friday’s enthusiasm in North Charleston was any indication—our employees there are more than ready to meet the challenge. Photos from the event by Alan Marts.

Fans line up to watch a demo flight in Manchester.

Going for a ride over Manchester.

A little creative marketing.

I met the Dream Tour airplane during the first of its two stops at London’s Heathrow Airport for a special event that featured our customers British Airways, Thomson Airways and Virgin Atlantic—along with 13 UK suppliers and partners. Our customers really helped drive the excitement at every stop in the UK this week. It’s clear they can’t wait to get their hands on the airplane.

Our great customers lined up next to the 787.

Here’s an angle you don’t see every day.

A rare chance for me to get inside the 787 cockpit during its stop at Heathrow.

The media response was also amazing. We were able to bring several reporters on board some of our demo flights. Check out this report featuring me in a Richard Quest piece on CNN. A big thanks to our UK fans for tweeting out some great photos of the airplane as well. We hope all the spotters enjoyed following the airplane’s many flights during the week.

The Dreamliner shines even on a cloudy day in London.

From left to right: Steve Ridgway, CEO Virgin Atlantic; Chris Browne, MD Thomson Airways; Willie Walsh, CEO IAG.

Catching a tow at Gatwick.

Boeing’s relationship with the UK goes back seven decades. In addition to the great partnership we have with our customers and suppliers, we also employ more than 1,200 people across the UK. This market is critically important to us from a customer base, supplier base and as a source of some of the world’s most inventive technology partners. Thank you Great Britain for playing host to the Dream Tour this week. We can’t wait to see the 787 flying your skies very soon.

Thanks for the great British hospitality!

I’ve touted 2012 as the Year of the MAX and that’s also shaping up to be the case. With 301 firm orders for the airplane in the first-quarter, the 737 MAX has helped to grow our record backlog of more than 4,000 airplanes valued at a record $308 billion.

So how did the quarter stack up against the competition? We booked 412 net orders compared to Airbus’ 90. We also delivered 137 airplanes compared to Airbus’ 131, an increase of more than 30 percent compared to this time last year.

Another great piece of news today. We contractually delivered the first 747-8 Intercontinental to an airline customer—our launch customer Lufthansa. We’ll celebrate the delivery on May 1 in Everett before the airplane heads to Germany for a celebration there on May 2. This is a huge milestone for the 747-8 program and I send my congratulations to the entire team as well as Lufthansa. You can see more photos here.

Lufthansa’s 747-8 Intercontinental during its first flight.

As always, I think our story is best told in video. I invite you to check out the clip below showcasing all of the accomplishments from the first-quarter, followed by a brief program by program summary.

737

In January the program delivered the first 737 produced at the new 35-a-month rate — and also rolled out the 35th airplane at that new rate. In the largest-ever Boeing order from a European airline, Norwegian Air Shuttle ordered 22 Next-Generation 737-800s and 100 737 MAX airplanes, making Norwegian the first carrier in Europe to order the MAX. In February Boeing and Lion Air finalized the largest commercial order in Boeing history — for 201 737 MAXs and 29 Next-Generation 737-900ERs valued at $22.4 billion. The MAX program entered the final phase of wind-tunnel testing in February with low-speed tests at the QinetiQ facility in Farnborough, England, followed in March by high-speed wind tunnel testing at the Boeing Transonic Wind Tunnel in Seattle.

747

On Feb. 28 we delivered the first VIP 747-8 Intercontinental to an undisclosed customer. The program also delivered five freighters in the first quarter, including the first 747-8 Freighters for Korean Air and AirBridgeCargo Airlines. The Freighters continue to perform exceptionally well in service with better-than-plan dispatch reliability and fuel burn. Preparations are under way for a mid-year rate increase from 1.5 per month to two per month.

767

The program delivered three 767-300 Freighters and four 767-300ER passenger airplanes including the 96th - and final — 767 on order for All Nippon Airways, a 767 customer for more than 30 years. The program also received an order for four 767-300ERs for delivery to Air Astana, a new direct customer for the 767. On Feb. 24, Boeing marked the first anniversary of winning the U.S. Air Force contract to build the KC-46A aerial refueling tanker, which uses the 767-2C freighter as its platform. In the past year, the tanker program has reached several key design and development milestones on time or ahead of schedule. Boeing is on track to complete a Preliminary Design Review with the Air Force, a key milestone in the Tanker’s development, by the end of April.

777

On March 2 more than 5,000 employees, suppliers, customers and government officials celebrated completion of the 1,000th 777 - a 777-300ER that was delivered to Emirates on March 20. The program reached the 1,000 mark in 16 years - faster than any other twin-aisle airplane. In addition, the 777 engineering team achieved a remarkable 98 percent on-time rate for release of engineering work. Readers of Business Traveler magazine voted the 777 “Best Aircraft Type” for the fourth year in a row and the 777-300ER won the 2012 Aircraft of the Year award, presented by Aviation News.

787

The program delivered five Dreamliners: three to launch customer ANA and two to Japan Airlines - the first airline to take a 787 powered by GE’s GEnx engine. Those deliveries brought the fleet total to eight. The worldwide Dream Tour generated enthusiasm with stops in Singapore, Mexico, Chile, Canada, Thailand, Ireland and multiple cities across the U.S. The team is making great progress defining the 787-9.

Boeing South Carolina

Boeing South Carolina’s first production airplane (LN 46) moved into its final position, where it will go through interiors installation and production test before rolling out to the flight line this Friday. Delivery is still on track for mid-2012.

Commercial Aviation Services

At the Singapore Airshow in February, CAS launched the Boeing Edge, a new identify for the services, support and solutions Boeing offers its customers. Norwegian Air Shuttle signed a 12-year agreement to extend GoldCare, a comprehensive fleet maintenance and engineering management service, to the airline’s planned fleet of six 787 Dreamliners, and Singapore Airlines Cargo signed up to cover its fleet of 13 747-400 freighters. CAS also signed an agreement with Korean Air to establish a new training center and to continue providing all of the airline’s Boeing flight and operational training through 2020.

The vertical stabilizer sculpture is approximately a 1/3 scale model of the actual 787 vertical stabilizer.

That fin departed from the Dreamliner Gallery near our Everett factory being pulled by a truck driven by a husband and wife team. As it crosses several states, we’re encouraging everyone to snap a photo and post it on Twitter with the hashtag #followthefin or on the Boeing Store’s Facebook page.

The journey starts at the Dreamliner Gallery near the 787 factory in Everett.

Mount Rainier in the distance.

The fin will eventually make it to South Carolina in time for the rollout of our first 787 assembled at our North Charleston factory—where employees will be encouraged to sign their names on the fin. A few weeks later after the airplane makes its first flight, the fin will take off on another road show throughout the state of South Carolina to gather more signatures from residents.

Pit stop in Drummond, Montana.

Rapid City, South Dakota.

Eventually, the fin will come back to the factory in North Charleston where it will be part of a permanent display. So follow the fin and send us your best photos!

The new numbers show that 99.67 percent of all Next-Generation 737 flights are ready to depart within 15 minutes of their scheduled time. Compare that to the A320 at 99.35 percent. While the gap may not look that big, it means a world of difference for you and for our airline customers.

Here’s another way to look at it. For a fleet of 100 Next-Generation 737 airplanes flying five flights a day, the 737s will have 590 fewer delays and avoid disrupting 66,600 fewer passengers each year when compared to a fleet of 100 A320s.

I recently showed this example during a series of presentations in Seoul and Taipei. People were genuinely surprised to see what a significant reliability advantage we have over the competition right now—and will continue to have in the future. The space between us is very telling.

Speaking with media about the MAX during stops in Taipei and Seoul.

While it saves you time, it saves the airlines money when it comes to maintenance, flight and crew costs. It’s a great story with many more chapters to come as the 737 MAX enters the scene.

Fueling up at Paine Field. The first 787 biofuel flight gets ready to leave.

ANA’s newest Dreamliner took off from Paine Field on a delivery flight to Tokyo. The fuel blend was 15 percent biofuel made up primarily of cooking oil, and 85 percent Jet-A. The flight wasn’t just a chance to make history. It also helped showcase the 787’s environmental performance.

At the end of the day, we estimate this flight put out 30 percent less CO2 emissions compared to other airplanes of the same size (biofuel can take about 10 percent of the credit—with the Dreamliner’s technology and efficiency taking the other 20 percent). It brings a whole new meaning to a gallon of gas.

The historic flight lands in Tokyo.

This 787 flight is just one of the many ways we’re generating awareness of sustainable biofuels and the potential they hold for our industry. As part of our new Innovations series, we’ve just released a new video showing how Boeing chemists are leading the way in this research and putting their findings to work. Just click on the video below.

The 4,000th Next-Generation 737 was shown off today at Boeing Field in front of employees, suppliers and customers. China Southern will take delivery of the airplane, a 737-700 with Boeing Sky Interior, next week. The livery includes a special logo to commemorate the 4,000th milestone.

When the 737 team throws a party—they pull out all the stops. In honor of our customer China Southern, a Chinese dragon dance was performed. And the surprise of the day came when Beverly Wyse, the Vice President and General Manager of the 737 program, showed up as a lion dancer.

The Chinese Lion Dance practiced in the United States originates from the Guangdong Province, which is the home of China Southern. It is usually performed as a ceremony to scare away evil spirits and to summon luck and fortune.

We also got a look inside this airplane’s beautiful Boeing Sky Interior.

As our production rates go up in Renton, these milestones will keep coming. Incredibly, it was just a little over two years ago that we delivered the 3,000th Next-Generation 737. All of this is a testament to our employees who build these airplanes—and to our customers who love to fly them. The 5,000th delivery will be here before you know it.

For the first time, a signing took place on board a 787 during a demonstration flight for Transaero’s executives, employees and special guests. The airline will purchase four 787-8s to be used on their domestic and international routes.

As Transaero executives handled the signing, Captain Evgeny Nikitin, Commander of Transaero’s 767/777 flying unit, was co-piloting the 787 during the flight.

I wanted to share some images from this special flight and congratulate Transaero. Welcome aboard! (All photos by Marian Lockhart)

A signing ceremony in the sky.

From left: Alexander Krinichansky, Transaero Airlines executive director; Alexander Pleshakov, Transaero Airlines chairman of the board; Marty Bentrott, vice president of Sales for Middle East, Russia and Central Asia, Boeing Commercial Airplanes; Serdar Gurz, director international Sales, Boeing Commercial Airplanes.

Captain Evgeny Nikitin (seated left), Commander of Transaero’s 767/777 flying unit, co-piloting the 787 during the flight.

Looking out over Russia during the signing ceremony on board the 787.

Transaero flight attendants hold a 787 model.

Cargolux put its 747-8F into service in October 2011.

Cathay Pacific took delivery in November 2011.

Our designers knew the airplane would give our customers double-digit improvements in fuel burn. But the in-service performance numbers show fuel burn is a full percentage point more efficient than we expected. On top of that, the airplane exceeded dispatch reliability targets and is also giving big improvements to airlines in capacity, allowing them to carry 16 percent more revenue-producing freight than the 747-400 Freighter. We also received news this week that the 747-8 is now approved to operate at 200 airports around the world, with London Heathrow Airport being the 200th to get the nod.

Atlas Air’s subsidiary, Global Supply Systems, is operating the 747-8F for British Airways World Cargo.

AirBridgeCargo took its first 747-8F in January of this year.

But the best endorsements for the 747-8F are coming from the pilots who fly them. One told us if you talk to the crews, the biggest problem is getting the smile off their faces. We intend to keep those smiles coming.

Korean Air Cargo took double delivery of a 747-8F and a 777 Freighter in February 2012.