Everett, Wash.
Published: Thursday, July 24, 2008

Boeing's income drops 19 percent

The company has delivered fewer of its money-making wide bodies but it still plans to reach its '08 and '09 goals.

By Michelle Dunlop
Herald Writer

 EVERETT -- Despite increased jet deliveries, the Boeing Co. saw its second- quarter income drop 19 percent on charges for a delayed defense program and a weak mix of plane deliveries.

"We had more single-aisle and fewer wide-body deliveries than we anticipated," said James Bell, chief financial officer for Boeing on Wednesday.

Overall, Boeing's second-quarter earnings decreased 14 percent to $1.16 per share on revenue of $16 billion. The company's defense business took a previously disclosed $248 million charge due to delays in its Airborne Early Warning and Control program. Boeing's commercial airplanes segment increased its backlog to $275 billion after picking up 187 gross orders in the April-to-June time frame. Commercial Airplanes' earnings were down to $777 million from $960 million a year ago, due the jet delivery mix and costs attributed to delays in the 787 Dreamliner program.

But Boeing officials remained upbeat about the company's outlook even as its commercial customers grapple with high oil prices. They reaffirmed Boeing's revenue estimate for 2008 of $67 billion to $68 billion with revenues climbing to between $72 billion and $73 billion in 2009.

"Clearly economic conditions are tough for many of our commercial customers," said Jim McNerney, Boeing's chief executive officer.

Rising oil prices have forced airlines -- U.S.-based carriers in particular -- to cut capacity, add fees and retire old aircraft. Boeing has seen only a handful of deferral requests from carriers and has seen no cancellations so far, McNerney said.

Boeing still anticipates delivering between 475 and 480 jets in 2008 and between 500 and 505 airplanes in 2009. The aerospace company plans to hand over the first of its delayed 787 aircraft in the third quarter of 2009.

The Chicago-based company has a diverse customer base with only about 10 percent of its commercial orders coming from American carriers, McNerney said. Therefore, Boeing expects to continue to do well even if U.S. carriers struggle.

"Right now the demand for fuel-efficient aircraft is still higher than what we can supply," McNerney said.

Boeing's most talked about fuel-efficient jet, its 787 Dreamliner, is about 15 months behind schedule. The aircraft has won nearly 900 orders and is expected to make its maiden flight in the fourth quarter.

The company made "steady" progress toward meeting its revised 787 schedule during the second quarter, achieving its goal of turning on the power in the first Dreamliner in Everett in June. Over the weekend, McNerney said, Boeing workers successfully tested the 787's hydraulic system.

McNerney noted that he personally visited each of Boeing's major global partners for the 787 during the last quarter. Boeing is seeing improvement in the condition of large assemblies coming from suppliers in Italy, Japan and South Carolina. The jet maker is making progress in talks with both suppliers and customers in regards to compensation for 787 delays.

Paul Nisbet, an analyst with JSA Research, said the quarterly results were "poor, surprisingly so."

"The company didn't telegraph anything that would have led us to believe that the costs were going to go up for the infrastructure for the complete commercial airplane operation because of the delay of the 787s," he said.

Boeing's shares slid 3.77 percent on Wednesday to close at $66.65.

The Associated Press contributed to this report.

Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.
© 2009The Daily Herald Co., Everett, WA