Boeing: 787, pension will hurt 2011 earnings

Delays in its 787 schedule and high pension costs will eat away at the Boeing Co.’s 2011 profit, the company said Wednesday.

Boeing estimates its earnings per share for 2011 will be between $3.80 and $4. That’s below Wall Street’s expectations of $4.59 per share and down from its 2010 earnings of $4.45 per share, which includes a favorable tax settlement that boosted fourth quarter earnings to $1.56 per share.

“We’re entering 2011 well-positioned for growth, with a large order book, increasing global demand for commercial airplanes, greater clarity around our domestic defense outlook, and significant international defense sales opportunities,” said Jim McNerney, Boeing’s chief executive, in a statement.

Boeing said its 2011 pension expense will increase to $1.8 billion, or $1.58 per share. That’s an increase of 58 cents per share over 2010.

Boeing expects to deliver between 485 and 500 commercial airplanes this year, including the first deliveries of its much-delayed 787 and 747-8. The delivery estimate includes between 25 and 40 deliveries of the 787 and 747-8, which are scheduled for first delivery in the third quarter and mid-year respectively.

“Our focus for the year is to deliver the 787 and 747-8; manage disciplined increases in commercial airplane production rates and drive improved competitiveness and financial performance throughout the business,” McNerney said.

The 787 program suffered a setback last November when an electrical fire broke out on a test plane. The company grounded its test fleet for roughly six weeks, delaying first delivery for the sixth time. Boeing resumed flight testing that will count toward Federal Aviation Administration certification last week.

About 75 percent of the 787 certification work has been completed, McNerney said, on a conference call Wednesday.

Boeing currently is building about two 787s monthly and will ramp up to a pace of 10 monthly by the end of 2013, he said. The company also will deliver the next derivative, the 787-9, in 2013.

On the 747-8 freighter, McNerney estimated that Boeing is two-thirds of the way through FAA certification. The company plans to put the first 747-8 passenger plane into flight testing by the end of the first quarter.

“We must complete 787 and 747-8 development and deliver these airplanes to our customers,” McNerney said.

James Bell, Boeing’s chief financial officer, noted that the company is still negotiating with customers and suppliers on the latest 787 schedule slide.

As of the fourth quarter, Bell said, “We have determined the program is not in a loss position” on the 787. However, the initial deliveries of the 787 will be zero margin.

Boeing’s McNerney said the company continues to lean toward devising a 737 replacement, rather than offering the plane with new engines, as its competitor Airbus has done with its single-aisle jet.

“If we can come up with the right airplane (by 2019 or 2020), the market will wait for us,” McNerney said.

Boeing’s shares were down 3.7 percent in early trading Wednesday.

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