Boeing orders could drop as airlines struggle through new financial woes

By Bryan Corliss

Herald Writer

The Boeing Co.’s new plane orders will likely crash in the wake of Tuesday’s terrorist attack, stock analysts said Friday.

"We don’t see Boeing achieving anything close to the 400 units predicted for 2001," Deutsche Bank Alex. Brown analyst Chris Mecray wrote. "Aircraft orders could remain at nil for coming quarters."

That would seriously push down Boeing’s production and employment levels for 2002 and 2003.

Mecray said Next year’s deliveries will likely fall by 20 to 25 percent, to some 390 to 400 jets. And for 2003, that could fall as low as 300 jets, if the attack triggers a serious recession.

By contrast, Boeing plans to deliver about 530 jets this year.

Portland-based analyst John Rogers of D.A. Davidson also warned clients Friday that Boeing faces turbulence. Admittedly, there’s some speculation involved, Rogers said.

"Ultimately, we just don’t know how the traveling public is going to react to this," Rogers said.

But airlines already were struggling, he noted. The two-day shutdown was costly, and the continuing disruptions will mean put a "significant financial crimp in the airlines," he said. "And when your major customers are suffering, you’re going to suffer, too."

Boeing officials say they’re in close contact with their airline customers.

"It looks like the airlines are going to go through a tough time," said Boeing corporate spokesman John Dern in Chicago.

But at this point, "It’s just too early to assess the impact," he said. The attack was "overwhelming."

The most recent comparison is the travel slump that followed declaration of the Persian Gulf War 10 years ago, Rogers said.

Compared to then, Boeing is in a much stronger position, he said. It has cut production costs and diversified into military aircraft and satellites — and it bought out McDonnell-Douglas, its former U.S. competitor.

Conventional wisdom says military stocks are a good investment at a time like this, Mecray noted. The federal government is likely to boost defense spending, but the "upside to (increased) defense spending is limited, with anti-terror efforts more manpower-intensive than equipment-intensive," he wrote.

Builders of spy satellites, like Boeing and Lockheed Martin, will benefit some from increased anti-terror spending, but not as much as they would if the United States was gearing up for a conventional war, Mecray added.

But while Boeing’s immediate future looks bad, Mecray recommends that investors hang on to its stock.

"The key message here is that aerospace remains a market with long-term healthy prospects," he wrote. There may be opportunities to buy aerospace stocks ahead, he added, with Goodrich Corp., which has a major facility in Everett, being one company he’d recommend.

You can call Herald Writer Bryan Corliss at 425-339-3454

or send e-mail to corliss@heraldnet.com.