Fewer jet deliveries pushed Boeing’s earnings down in the second quarter, but a recent surge in demand could lead company executives to boost 737 jet production rates again.
“With our commercial markets recovering, and the priorities of our government customers gaining clarity, we remain well positioned for growth in 2011 and beyond,” Boeing CEO Jim McNerney said Wednesday.
Boeing reported a 21 percent drop to $787 million in net income for the second quarter of 2010, compared with the same period in 2010. However, its earnings per share of $1.06 exceeded the $1.01 per share expected by analysts according to Thomson Reuters. Boeing also confirmed its earnings estimate for 2010 of $3.50 to $3.80 per share.
The company expects its 2011 revenues to rise as Boeing begins deliveries of its 787 and 747-8 aircraft. Boeing noted in its earnings, however, that delivery of its 747-8 Freighter may slide from late 2010 into the first part of 2011. Company executives had noted the likely slip last week during the Farnborough Airshow near London.
Of Boeing’s two airplanes in flight testing, the 787 and 747-8, the 747-8 is more likely to miss the end of the year delivery goal, said McNerney, during a call with media members.
Boeing’s commercial aircraft business was hurt by a drop in deliveries of 114 for the quarter, down from 125 a year earlier. The recession was one factor. Another was problems with a seat manufacturer in Japan, which delayed some deliveries. Boeing said the seat problems should clear up in the second half of the year. Commercial airplane revenue fell 12 percent to $7.4 billion, with operating profits down 16 percent to $683 million.
Boeing has several major decisions coming this year for its commercial airplanes division, including the future of its 777 and 737 programs. The company could put new engines on the airplanes or decide to come up with completely new replacement aircraft. After discussions last week with customers at the Farnborough Airshow, McNerney said the company was being pushed toward a new 737.
“We’ve got to figure out what’s technically feasible,” he said.
Air traffic has recovered from the downturn faster than what Boeing expected, leading to the greater demand for new aircraft.
The company already announced increases in the rate of production for its 737 and 777 airplanes. But McNerney said on Wednesday that the company is considering another rate hike for the 737 up to 40 airplanes monthly and will make that decision later this year.
McNerney expressed confidence in the company’s new 787 Dreamliner, which is more than two years behind schedule. The flight test program has logged in 400 flights and 1,300 flight hours with the five aircraft in testing. One more 787 will join the flight test fleet shortly.
Although the 787 is only about halfway through flight testing, McNerney said the program has “retired a majority of the risk” but acknowledged that the company has little wiggle room remaining if it is to meet its goal of delivering the first 787 by year’s end.
Boeing’s defense revenue fell 8 percent to $7.98 billion, with profits down 19 percent to $711 million. Tighter government budgets could mean layoffs in Boeing’s defense division. However, Boeing’s McNerney expressed confidence in the company’s recent bid submission for the $35 billion U.S. Air Force aerial refueling tanker contract. The company offered a tanker based on its Everett-built 767 commercial jet. The Air Force is expected to announce the contract winner in November.
Boeing shares fell $1.30 to close Wednesday down 1.9 percent at $67.32.
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