After a strong 2012, Boeing faces challenging new year

The Boeing Co. didn’t disappoint in 2012.

Not much, at least.

Boeing won’t announce its final delivery and order numbers for 2012 until sometime in early January. But the Chicago-based aerospace company is expected to beat its European rival Airbus in both sales and jet deliveries.

Still, Boeing doesn’t have much time to rest on its laurels with a challenging 2013 ahead.

Here are a few highlights from 2012 and a look to 2013:

787 and 747-8

After years of embarrassing delays on the 787 and 747-8, Boeing handed over the first 747-8 passenger plane and ramped up 787 production to a pace of five jets per month in 2012.

“They certainly met their delivery goals on the 787 and 747,” said Scott Hamilton, an analyst with Issaquah-based Leeham Co.

The company planned to deliver between 70 and 85 aircraft among the 787-8 and 747-8 programs for the year. Boeing had delivered 62 by the end of November. And within a 24-hour period, Boeing handed over another seven 787s, Randy Tinseth, vice president of marketing for commercial airplanes, noted last week.

Boeing won’t silence its doubters on the 787 program until the company meets its production goal of 10 787s per month, which is targeted for the end of 2013. That’s a key milestone on the program’s path to being profitable.

David E. Strauss, an aerospace analyst at UBS Financial Services, said in a note to investors this month that his analysis indicates Dreamliner production “costs are not declining rapidly enough for (Boeing) to come close to its target for break-even 787 cash flow by early 2015.”

Another complication in the 787 ramp-up will be adding the next version of the Dreamliner, the 787-9, into the production system. Boeing will begin final assembly of the first 787-9, which seats about 40 passengers more than the 787-8, next summer and plans to have that aircraft in the air by the end of 2013.

Next year, analysts and customers alike also will expect Boeing to do something it didn’t get done in 2012: formally offer the larger 787-10 to customers. Boeing officials have expressed confidence in the 787-10’s technical performance and sales potential but hasn’t begun selling the next Dreamliner.

As for the 747-8, analyst Hamilton notes that in 2013 Boeing needs to fine-tune the aircraft so that it meets the specifications that Boeing used in selling the refreshed jumbo jet to customers.

777

Although Boeing increased production on the popular twin-aisle jet in 2012, the company left a major question unanswered: When will it come out with an updated 777X?

In October, Boeing CEO Jim McNerney indicated that the yet-to-be-launched 777X may not enter commercial service until after 2020, despite pressure from key 777 customers for a refreshed 777 before the end of the decade. Analysts have differing opinions on the urgency of a 777X plan.

Backpedaling on either the 787-10 or the 777X could be a “bad self-inflicted wound” to Boeing, analyst Richard Aboulafia, with the Teal Group, suggested in August.

“The two new planes would cement Boeing’s market dominance in the international long-haul market,” he noted.

Airbus’ latest challenger to the 777X is its A50-1000. Since the European jet maker hasn’t locked in the design on it and is behind on other versions of the A350, other industry observers think Boeing can bide its time.

Labor

All of Boeing’s plans for 2013 could be for naught if the jetmaker doesn’t reach a deal with the Society of Professional Engineering Employees in Aerospace.

Next year “could be the year that SPEEA goes on strike,” Hamilton said.

The union represents 23,000 engineers and technical workers, who design, test and sign off on deliveries of Boeing aircraft. Although it’s not known for striking, SPEEA staged a 40-day strike in 2000, which led to Boeing delivering 50 fewer jets than planned that year.

Negotiations between Boeing and SPEEA began in April but the two sides seemed more at odds at the end of 2012 than they had been throughout contract talks. A federal mediator, who was brought in after negotiations broke down, suggested the two sides take most of December as a cooling-off period. Talks resume Jan. 9 but SPEEA’s executive director, Ray Goforth, has said the union could strike as early as February.

Herald news services contributed to this story.

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