Boeing’s CEO gives investors upbeat message on 787, 747-8

Published 12:01 am Wednesday, May 25, 2011

As flight testing on the 787 and 747-8 programs wind down, the Boeing Co. sees big opportunities ahead.

“This is a company with potential to soar,” said Jim McNerney, Boeing’s chief executive. McNerney spoke at the company’s investor conference Tuesday in Seattle.

Having dealt with the

company’s missteps on the 787, Boeing “is a fundamentally stronger company than what we were two years ago,” McNerney said.

Boeing officials tried to ease investor anxiety about its two jets in flight testing during the conference Tuesday. Boeing is 18 months behind schedule on its 747-8 jumbo jet and more than three years late in delivering its fuel-efficient 787.

McNerney acknowledged that early mistakes with outsourcing on the 787 have cost Boeing “billions upon billions” of dollars. The company will give a better idea of just when it begin showing a profit on the Dreamliner program when it delivers the first jet to launch customer All Nippon Airways of Japan in the third quarter.

By the time Boeing gets to first delivery, it will have roughly 40 787s in inventory, said James Bell, Boeing’s chief financial officer. Through the first quarter, Boeing estimated its 787 inventory at $14.5 billion, he said.

But Boeing’s Scott Fancher, general manager of the 787 program, expressed confidence that the worst problems are in the past on the 787.

“We really are in the endgame on flight test,” Fancher said.

Boeing has completed 96 percent of the testing on its 787s powered by Rolls-Royce engines, said Boeing’s Jim Albaugh, president of commercial airplanes. The company has finished 75 percent of the testing required on the 787s powered by General Electric engines, Fancher said.

Boeing is gearing up at its South Carolina facility, which will open the company’s second 787 line this summer. South Carolina’s “workforce has grown and has gone through training,” Fancher said.

As it looks forward on the Dreamliner program, Boeing already has brought back design work on the 787-9. Jim Albaugh, president of commercial airplanes, hinted at bringing back production work on the 787-9 horizontal stabilizer to the Puget Sound area. The company also continues to eye a larger version of the 787, a 787-10.

Boeing is about 90 percent of the way through flight testing on the 747-8, Albaugh said. He anticipates the company will resolve one outstanding issue — on flight software — with the Federal Aviation Administration later this month. The company plans to deliver the first 747-8 freighter mid-year.

Orders and production

Boeing’s outlook for orders is good news for its workforce here in Everett.

Although Albaugh estimated the company will receive fewer orders in 2011 than last year, he believes about 40 percent of those orders will be for widebody jets, which are more profitable for the company.

To keep up with demand, over the next few years, Boeing will increase its jet output by more than 40 percent, McNerney said. But Boeing is mindful of increasing production rates.

“This company went to hell and back on rate increases in the late ’90s,” McNerney said. “The disciplines around rate increases are far more robust.”

Boeing’s commercial airplanes division has a backlog of $263 billion. It’s sold out on the 737 through 2015, has more than four years worth of unfilled orders on the 777 and is sold out on the 787 until 2019.

However, the backlog concerns Boeing’s Albaugh.

“In my mind, seven years of backlog is too much,” Albaugh said.

“It’s not about having the best airplane, it’s about having the best airplane that’s available,” he said.

Boeing is looking seriously at increasing production on the 737 up to 42 aircraft monthly, Albaugh said. However, he doesn’t see an additional rate increase on the 777 beyond the announced 8.3 jets monthly.

For the second time this year, Albaugh hinted at increasing the 787’s rate beyond 10 aircraft monthly. That’s a rate the company hopes to hit in 2013 when both its production lines — one in Everett and one in South Carolina — are up and running.

“If we can get to 10 (airplanes monthly), we’ll get to 11. If we can get to 11, we’ll get to 12,” Albaugh said.