Delivery requests on the rise, Boeing says

Published 10:02 pm Wednesday, April 21, 2010

EVERETT — In the first three months of 2010, the Boeing Co. experienced something it didn’t see much of last year: requests to speed up airplane deliveries.

After a year filled with jet delivery deferrals and cancellations, Boeing has weathered the global downturn. The aerospace company is poised to boost production rates on its 777, 747 and possibly 737 lines, as airlines rebound from the recession.

“We’re seeing airlines that have not recently talked to us start talking,” Jim Albaugh, president of Boeing Commercial Airplanes, said in an interview.

On Wednesday, Boeing officials said they anticipate more orders in 2010, compared to 2009, even though first quarter deliveries and profits fell. The company’s earnings per share fell 15 percent to 70 cents per share, from 86 cents per share last year, due to a previously announced charge for health care and fewer aircraft deliveries, Boeing reported. But the company still came in ahead of analysts expectations. Analysts surveyed by Thomson Reuters had expected a profit of about 63 cents per share.

Equally important, Boeing said Wednesday that its delayed 787 Dreamliner remains on track to be delivered by year’s end. The company received on Tuesday the OK to bring Federal Aviation Administration officials on flights, an important step in certifying the aircraft.

“The airplane is performing very well,” said Jim McNerney, Boeing’s chief executive officer, in a conference call Wednesday.

Boeing has been able to gather more data during flight testing than it expected, which ultimately will reduce the number of hours the 787 flight test aircraft need to fly while working toward certification. And the company is looking to add more wiggle room to its schedule.

Absent some unforeseen obstacle, Albaugh said he feels “pretty comfortable” with the plan to hand over the first 787 to Japan’s All Nippon Airways by year’s end.

Airlines, which have placed orders for a total of 866 Boeing 787 aircraft, are interested in accelerating deliveries of fuel-efficient jets such as the 787 and Boeing’s single-aisle 737, Albaugh said. Albaugh said that both Asia and the Middle East are enjoying the strongest return in air traffic, while North America and Europe lag behind. The company will watch how the ban of flights in Europe caused by Iceland’s erupting volcano affects demand.

Boeing likely will make a decision whether to increase production on the 737 this quarter, McNerney said. Boeing first has to make sure that its suppliers can support a rate hike, Albaugh said.

Although Boeing is reducing production rates on its Everett-built 777 mid-year, it will increase production on that model next year. McNerney indicated that Boeing has orders for its 777 jet that haven’t been announced yet. Airlines sometimes make order announcements at major air shows such as the Farnborough Air Show this summer.

“We feel comfortable … that the demand will support moving up the rate,” McNerney said.

Boeing is contemplating its long-term plans for the 737 and 777. The company could update the two airplanes with new engines or offer completely new aircraft.

“I think before the end of this year, we’ll have charted a course on the narrow body,” McNerney said.

As for the 777’s future, McNerney was less clear. Boeing has been waiting to see what competitor Airbus will do with its new A350 XWB jet. Albaugh believes Boeing can make adjustments to the 777 to make it a “very formidable” competitor with the A350. However, Boeing could rule out a 787-10 model, based on what it plans to do with the 777 and 787-9, McNerney said.

“Whatever we do is going to be market driven,” Albaugh said.

Besides the 787, Boeing also has its new 747-8 freighter in flight testing and expects to deliver the first jumbo jet this year. Albaugh said that program has a “little higher risk” than does the 787. Boeing officials will decide in the next few weeks whether they will add a fourth flight test aircraft to the program.

Boeing revised its earnings estimates for 2010 to $3.50 per share from $3.80 per share to include among other things a health care charge. But the company kept its forecast of delivering between 460 and 465 aircraft this year despite fewer deliveries in the first quarter. A Japanese seat supplier caused Boeing to deliver fewer aircraft, 108 jets, in the first quarter than anticipated. Boeing’s Albaugh said the company has a fix in place for deliveries going forward.

On the defense side of Boeing’s business, the company is preparing to submit its bid for a $35 billion contract supplying the Air Force with aerial refueling tankers. Its rival, EADS, said Tuesday that it also will bid on the contract despite losing its original partner, Northrop Grumman. To win it, analysts believe EADS would have to offer an aggressive price, perhaps even offering their tanker at a loss.

That’s not an option for Boeing, said Albaugh, who says Boeing’s 767-based tanker is more fuel-efficient and less costly to maintain than EADS’ tanker, based on an Airbus A330 jet. EADS is the parent company of Boeing commercial rival Airbus. Bids are due July 9.

Wall Street liked Boeing’s earnings report, pushing the company’s shares up $2.75 to close at $74.16 Wednesday.