• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Boeing's Commercial Plane Orders Pile Up As Its Factory Sits Empty

Posted on: Wednesday, 21 September 2005, 00:00 CDT

Sep. 21--Boeing Co. can't build a jetliner these days, but orders keep pouring in, as the aerospace and defense giant seeks to calm investors worried about a strike that has halted production of commercial aircraft for 20 days.

More than 18,000 Machinists at Boeing struck on Sept. 1, after rejecting a proposed contract that sought to increase their health care costs. The offer also would have increased pension benefits 10 percent, but the union wanted an increase of up to 33 percent.

Aerospace analysts estimate a 30-day strike by the commercial-aircraft workers could hurt Boeing's operating profit by several hundred million dollars this year. Boeing expects to delay the delivery of 25 to 30 planes this month.

"Clearly, this is an unfortunate situation," Chief Financial Officer James Bell said Tuesday at a Bank of America investment conference in San Francisco.

Later, in a 30-minute presentation to analysts and investors, Bell struck an upbeat tone when asked about the strike.

"I think we're going to have a good year in spite of the strike. I think we're going (to get around that) soon," Bell said.

He also emphasized to investors that Boeing isn't as one-dimensional as it was a decade ago.

With its St. Louis-based defense division that generates more than $30 billion a year in revenue, Boeing is sitting on about $8 billion in cash even though the commercial-aircraft division has been in a slump since the end of 2000.

A more-balanced portfolio of businesses has allowed Boeing to weather one of its worst commercial-airplane markets. Meanwhile, the commercial-airplanes unit managed to eke out a small profit.

Commercial aircraft's lean and hungry days may be over, though.

So far this year, Boeing has booked 620 orders for commercial aircraft, up from about 275 orders for all of 2004. And company executives expect to book more orders in 2005 than European rival Airbus SAS, which had 371 orders through the end of August.

"Clearly, this looks like a peak order year," Bell said.

The last time Boeing booked more than 600 orders for commercial jets was 1998 -- but even more remarkable was 1996, when the company landed 714 orders.

Orders are a good barometer for customer demand, but they don't always translate into sales. Customers need only to put down a modest deposit to place an order, and sometimes those deals quietly disappear for various reasons, such as an airline filing for bankruptcy.

The big money, though, comes when Boeing and Airbus deliver planes to customers. On that front, Airbus is expected to deliver 370 planes this year -- 50 more than Boeing. Airbus passed Boeing in deliveries in 2003.

Boeing commercial aircraft's immediate future hinges on the 787 Dreamliner, a fuel-efficient, twin-aisle plane primed and ready to entice airlines roiled by sky-high fuel costs. The 787 has captured 263 orders and commitments from 22 airlines, Bell said.

Northwest Airlines, the first U.S.-based carrier to order the 787, filed for bankruptcy protection last week, along with Delta Air Lines, which has a 55-aircraft order with Boeing.

"We expect Boeing's management to be actively looking to place these deliveries if need be," Fulcrum Global Partners analyst Susan Donofrio said in a research note Tuesday.

So far, crude oil prices that have topped $60 a barrel haven't hurt airline traffic. Costly fuel also forces airlines to evaluate whether older planes are worth keeping in the air, potentially driving demand for new aircraft.

Boeing's future meal ticket may not be just the U.S. market. The company said Tuesday that China will need more than 2,600 new airplanes worth $213 billion in the next 20 years. In the forecast period, China is and will remain the largest market outside the U.S. for new commercial planes, Boeing said.

-----

To see more of the St. Louis Post-Dispatch, or to subscribe to the newspaper, go to http://www.stltoday.com.

Copyright (c) 2005, St. Louis Post-Dispatch

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

BA, 7661, BAESY, EAD, DCX, NWACQ, DAL,

Source: St. Louis Post-Dispatch

More News in this Category