Boeing feels pain of airline losses
Published 9:00 pm Friday, September 7, 2001
By Bryan Corliss
Herald Writer
The Boeing Co.’s stock price fell to its lowest level in the past 12 months Friday after an announcement of mounting airline losses.
Shares in Boeing stock finished the day trading at $45.18, down $3.66 from Thursday’s closing price.
The slide followed an announcement by AMR Corp., the parent of American and TWA airlines, that its third quarter losses will be "considerably larger" than the $105 million it lost in the second quarter. Fourth quarter losses will be "significant" as well, the company warned.
The losses prompted the company to pass on options to buy additional aircraft for delivery in 2002 and 2003.
AMR will continue to accept aircraft already on firm order and scheduled for delivery through 2004, the company said.
The news sparked investor fears that Boeing orders are going to tail off, said analyst Robert Toomey of Dain Rauscher in Seattle. They probably are, he said, adding, "The question is by how much."
The likely drop in orders and deliveries in 2003 prompted Morgan Stanley analyst Heidi Wood to drop her recommendation on the stock from "outperform" to "neutral."
"There is no sign yet of an imminent upturn in orders," Wood wrote in a report to clients Friday.
Boeing "may receive some nice orders" before the end of the year, she continued. "But the tone of the large jet demand overall continues to weaken. And we are increasingly skeptical (Boeing) will be able to achieve 400 orders for the year."
And if Boeing can’t hit its 400-plane sales target for this year, that will make it difficult for it to fill up all the production slots it will have available in 2003, Wood said. Basically, Boeing must sell about 220 planes over the next 16 months to keep the factories running full, "which looks challenging," she wrote.
Boeing Chairman Phil Condit and Commercial Airplanes Chief Executive Alan Mulally both said last week that they expect the company to hit the 400-plane target, unless there was a further slump in the economy.
But Friday’s announcement that national jobless rates had hit a four-year high, coupled with the AMR announcement, suggests a further slump is coming, Toomey said.
Toomey, too, lowered his forecast for Boeing earnings on Friday, but continued to recommend clients buy the stock as a long-term investment.
Boeing took orders for 10 new planes in August, bringing its total for the first eight months of the year to 202. It sold 608 last year, 319 of them in the first six months alone.
Look for Boeing to sign two deals to sell a total of 30 to 40 planes to China, Wood told clients. The first deal, for 737s, has been widely reported and could be concluded this month, according to published reports in China. The second would involve a few 747s or 777s, Wood wrote.
Boeing also could sell as many as 50 jets to Russian air carrier Aeroflot before the year’s end, Wood wrote. And there are discussions with a couple of Asian carriers interested in 777s, she added.
In addition, Boeing is likely to get at least a major share of the Joint Strike Fighter contract, Wood said.
You can call Herald Writer Bryan Corliss at 425-339-3454
or send e-mail to corliss@heraldnet.com.
