More Deferrals Possible Despite Boeing Profit
Madhu Unnikrishnan madhu_unnikrishnan@aviationweek.com
Despite the weak economy, Boeing eked out a first-quarter profit, and although the company's backlog remains strong, CEO James McNerney said Boeing is in talks for more deferrals beyond the 60 already announced this year.
The company reported $600 million in net income on revenues of $16.5 billion. Revenues at Boeing Commercial Airplanes rose $8.6 billion from $8.1 billion on strength of a 5% increase in the number of aircraft delivered. Margins for the unit fell from 12% in the first quarter last year to 4.9%. This was due to the company reducing production of the 777 from seven aircraft a month to five beginning in June of next year.
The global economic slowdown's effect on BCA customers is resulting in additional deferrals, McNerney said. The company announced that 60 orders -- evenly split between narrowbody and widebody aircraft -- have been deferred this year. Boeing is in talks with customers for further deferrals, although McNerney declined to name the airlines or to divulge details on how many additional orders could be deferred.
"We see customers are opting for deferrals rather than cancellations," he said. "Customers want to hang onto the products."
BCA took a charge of $347 million on the 747 program, which is currently in losses, McNerney said. The company remains committed to the aircraft and has begun fuselage assembly on the first 747-8 freighter. Talks on new orders are slow, but this is to be expected, said McNerney. "This is not a brand new innovation [like the 787], but it is a good niche airplane."
First flight of the 787 is expected later this quarter.
Boeing Capital Corp., the company's financing arm, is expected to provide up to $1 billion in new financing, as airlines face difficulty in securing funds from banks and the credit markets, McNerney said. Analysts say, however, that this could be optimistic. "We have a solid foundation with which to work through this environment," McNerney said, referring to the weak economy.
Photo credit: Boeing
