Published: Thursday, April 23, 2009
Deferrals on jet orders eat into Boeing's profits
"We're in unprecedented times right now," says CEO Jim McNerney
EVERETT -- In the first quarter, the Boeing Co. saw an increase not in profits but in requests from airlines to push out jet deliveries, the company said Wednesday.
"We're in unprecedented times right now," Jim McNerney, Boeing's chief executive, said in an earnings conference call.
The aerospace company reported a 50 percent drop in profit over the same quarter in 2008, due to previously disclosed aircraft production cuts and to lower airplane prices. Boeing's customers are grappling both with declines in air traffic and with finding funding for new airplane purchases.
"In the first quarter, we accommodated about 60 airplane deferrals from 2010 and 2011 into future periods," McNerney said. "We are in the process of working on more deferrals beyond that. ... Deferrals are occurring across all regions and all models."
At that pace, Boeing would have more than double the jet deferral requests -- 110 -- it received in 2008. The company announced earlier this month that it would slow the build rate for its Everett-built 777. Boeing also shelved plans to increase rates on its 747 and 767 wide-body aircraft, also assembled in Everett.
Although nearly half the deferral requests are for Boeing's single-aisle 737, the company has no plans to cut production rates on the Renton-built jet, McNerney said. Boeing had significantly overbooked that jet line into the 2011 time frame, said James Bell, Boeing's chief financial officer.
Boeing earned $610 million, or 86 cents per share, in the first quarter, compared with $1.21 billion, or $1.62 per share, during the same period last year. The company cut its 2009 profit forecast to a range of $4.70 to $5 per share, from $5.05 to $5.35, reflecting lower earnings at its commercial airplane business.
To control costs this year, Boeing plans to reduce its work force by 10,000 positions -- with more than 4,500 jobs to cut from its commercial airplanes division here in the Puget Sound region. But further layoffs to accommodate the recently announced 777 production rate cuts are likely.
On the upside, Boeing reported progress on its delayed 787 jet, which is nearly two years behind schedule. Boeing reaffirmed its latest schedule, which has the company delivering the first Dreamliner in the first quarter of 2010.
"Earlier this week, we completed a full simulation of the first flight using the actual airplane," McNerney said. "In the coming days airplane one will move out of the factory to the flight line. There it will be fueled and its engines operated prior to doing a final systems check and the high-speed taxi tests that lead to first flight."
Boeing plans to put the 787 into flight by the end of June, kicking off an aggressive flight-test schedule during which the company will prove the aircraft's flight worthiness to the Federal Aviation Administration.
Boeing still has weight issues to resolve on its mostly composite 787. The flight-test aircraft are over the weight that Boeing promised to its Dreamliner customers.
"I think weight is always a challenge in new airplanes," McNerney said. "We are working down the weight and we are working with our customers and we're satisfying their requirements with where we are on weight."
Boeing's shares increased 65 cents, or 1.8 percent, to close at $37.30.
Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.
"We're in unprecedented times right now," Jim McNerney, Boeing's chief executive, said in an earnings conference call.
The aerospace company reported a 50 percent drop in profit over the same quarter in 2008, due to previously disclosed aircraft production cuts and to lower airplane prices. Boeing's customers are grappling both with declines in air traffic and with finding funding for new airplane purchases.
"In the first quarter, we accommodated about 60 airplane deferrals from 2010 and 2011 into future periods," McNerney said. "We are in the process of working on more deferrals beyond that. ... Deferrals are occurring across all regions and all models."
At that pace, Boeing would have more than double the jet deferral requests -- 110 -- it received in 2008. The company announced earlier this month that it would slow the build rate for its Everett-built 777. Boeing also shelved plans to increase rates on its 747 and 767 wide-body aircraft, also assembled in Everett.
Although nearly half the deferral requests are for Boeing's single-aisle 737, the company has no plans to cut production rates on the Renton-built jet, McNerney said. Boeing had significantly overbooked that jet line into the 2011 time frame, said James Bell, Boeing's chief financial officer.
Boeing earned $610 million, or 86 cents per share, in the first quarter, compared with $1.21 billion, or $1.62 per share, during the same period last year. The company cut its 2009 profit forecast to a range of $4.70 to $5 per share, from $5.05 to $5.35, reflecting lower earnings at its commercial airplane business.
To control costs this year, Boeing plans to reduce its work force by 10,000 positions -- with more than 4,500 jobs to cut from its commercial airplanes division here in the Puget Sound region. But further layoffs to accommodate the recently announced 777 production rate cuts are likely.
On the upside, Boeing reported progress on its delayed 787 jet, which is nearly two years behind schedule. Boeing reaffirmed its latest schedule, which has the company delivering the first Dreamliner in the first quarter of 2010.
"Earlier this week, we completed a full simulation of the first flight using the actual airplane," McNerney said. "In the coming days airplane one will move out of the factory to the flight line. There it will be fueled and its engines operated prior to doing a final systems check and the high-speed taxi tests that lead to first flight."
Boeing plans to put the 787 into flight by the end of June, kicking off an aggressive flight-test schedule during which the company will prove the aircraft's flight worthiness to the Federal Aviation Administration.
Boeing still has weight issues to resolve on its mostly composite 787. The flight-test aircraft are over the weight that Boeing promised to its Dreamliner customers.
"I think weight is always a challenge in new airplanes," McNerney said. "We are working down the weight and we are working with our customers and we're satisfying their requirements with where we are on weight."
Boeing's shares increased 65 cents, or 1.8 percent, to close at $37.30.
Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.
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