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Boeing profit climbs on strong defense sales

July 23, 2009|Associated Press

Boeing Co. on Wednesday reported a 17% rise in second-quarter profit to beat Wall Street expectations, but the airplane maker said it was still assessing the financial effects of the latest delay of its new 787 jetliner.

The Chicago-based aerospace company expects to reevaluate its earnings forecast and announce a revised schedule for the eagerly anticipated 787, which is nearly two years behind schedule, in the current quarter. Boeing's credibility suffered a blow last month when the company postponed the plane's first test flight and deliveries for the fifth time, saying part of the aircraft needed to be reinforced.

"Much to our disappointment, the 787 continues to challenge us," Jim McNerney, Boeing's chairman, president and chief executive, said in a conference call. He defended the company's decision to postpone the test flight and said fixing the problem was "straightforward and involves a relatively small number of parts."

Production of the 787 has been fraught with problems. Boeing has taken a new approach to building airplanes with the 787, relying on overseas suppliers to build huge sections of the plane that are later assembled at its facilities near Seattle.

Glitches including ill-fitting parts have hampered production and led to the delays, which are expected to cost Boeing billions of dollars in expenses and penalties.

In an apparent attempt to resolve supplier problems, Boeing said this month that it had agreed to pay $580 million and forgive debt for a plant owned by Hawthorne-based Vought Aircraft Industries Inc. that makes large sections of the 787's fuselage.

Boeing, the world's second-largest commercial plane maker, said it earned $998 million, or $1.41 a share, for the three months ended June 30. That compares with $852 million, or $1.16 a share, during the same period last year, which included a charge of 22 cents a share for late delivery of military aircraft.

Revenue edged up 1% to $17.15 billion from $16.96 billion in the year-earlier period, helped by stronger sales in its defense division. Defense sales rose 9% to $8.7 billion. Commercial airplane revenue slid 2% to $8.4 billion.

The company reiterated its 2009 profit forecast of $4.70 to $5 per share. Boeing reduced its forecast in April, citing lower expected profit at its commercial aircraft division.

News of the latest 787 delay came June 23, when Boeing said it needed to reinforce the plane near the area where the wings meet the fuselage. On Wednesday, the company said it had identified a technical solution to the problem and was evaluating ways of implementing it. Boeing said it expected to issue a new schedule and reevaluate its earnings guidance this quarter.

The mid-size 787, designed to carry 210 to 330 passengers, includes wider seats and aisles, larger windows and a ventilation system that will allow for higher humidity, all of which Boeing says will make the cabin feel more comfortable. It is Boeing's first new aircraft since the 777 and the first commercial jet made mostly of carbon-fiber composites rather than aluminum. Boeing says it will be about 20% more fuel efficient than planes of comparable size.

The company said it booked 57 orders during the second quarter, down from 187 orders a year earlier, and that 52 orders were canceled. Boeing built up a hefty backlog during three years of booming demand that ended last year, when orders plunged. It said Wednesday the backlog was valued at $328 billion. That's down from $339 billion at the end of March.

So far, 56 customers have booked 850 orders for the 787, including 73 orders canceled this year through July 14.

Boeing shares lost $1.02, or 2.4%, to close at $42.

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