Boeing Co, the world’s second-biggest commercial-aircraft
maker, said fourth-quarter profit fell because of costs to halt production of its
717 and the US Air Force’s delay in awarding a refueling-plane contract.
Net income declined 84 percent to US$186 million or 23 cents a share, from US$1.13
billion, or US$1.40, a year earlier. Sales rose to US$13.3 billion from US$13.2
billion, Chicago-based Boeing said in a regulatory filing yesterday. The company
forecast earnings per share of between US$2.40 and US$2.60 in 2005 and between US$3
and US$3.20 in 2006.
CEO Harry Stonecipher completed his first year on the job by canceling the
slow-selling 717, Boeing’s smallest commercial plane, and recording spending to
develop a refueling tanker. Last year, the company fell further behind Airbus SAS,
which delivered more jetliners than Boeing for a second straight year.
“To maintain investors’ interest, more will have to come from the commercial side,”
said Richard Aboulafia, aerospace consultant for Teal Group.
The company’s forecast for commercial aircraft deliveries in 2005 was unchanged at
approximately 320 planes. It forecast 2006 deliveries of between 375 and 385
airplanes. The delivery forecast is sold out for 2005 and 78 percent sold out for
2006 at the low end of the range, the company said in its statement.
Shares of Boeing rose 44 cents to US$51.04 in New York Stock Exchange composite
trading on Tuesday. They climbed 23 percent last year, compared with a 9 percent
gain in the Standard & Poor’s 500 Index.
Mr. Stonecipher, 68, made repairing Boeing’s reputation as a defense contractor his
top priority for 2004. Defense sales surpassed commercial sales for the first time
in 2003.
Commercial demand is rebounding after a three-year slump, and Boeing is counting on
its new 787 model to regain market share. Boeing last month said it expects to
deliver 320 planes this year, up from 285 last year, and even more in 2006.
Boeing’s 100-seat 717 was developed by McDonnell Douglas as the MD-95 until Boeing
bought the company in 1997 and continued to develop the aircraft under the new name.
Airlines ordered nine 717s last year, the lowest total of the company’s six models.
It had a catalogue price of US$38 million.
The 717 is Boeing’s only aircraft assembled outside of Washington state. The company
plans to halt production at the assembly plant in Long Beach, California, in 2006
after it fills the remaining 32 orders.
The expense for development of the refueling tanker is mainly to recognize past
spending to design the tankers and fees to terminate contracts with suppliers,
Boeing said.
Congress rejected Boeing’s US$23 billion tanker proposal last year after former CFO
Michael Sears and former Air Force purchasing official Darleen Druyun were convicted
of violating federal conflict-of-interest laws. Ms. Druyun met Mr. Sears in late
2002 for a job interview while she was representing the military in contracts
involving Boeing.
Ms. Druyun admitted last year that she favored Boeing for some contracts because the
company hired her daughter, causing US Defense Secretary Donald Rumsfeld to order
more probes into favoritism in past Boeing contracts.
Mr. Stonecipher came out of retirement to become chief executive on Dec 1, 2003,
after Philip Condit resigned amid the Pentagon probe of Boeing’s hiring of Ms.
Druyun.
Mr. Stonecipher is counting on defense work to spur increases in profit through
programs such as the Army’s Future Combat Systems battlefield communications
program, the US missile defense shield and a classified satellite-intelligence
project.
The defence unit also sells F-18 fighter jets, C-17 cargo planes and modified Apache
attack helicopters. Boeing in December won a US$928 million contract to continue
work on part of the missile-defense shield. In October it won a US$766.7 million
contract to develop three unmanned combat aircraft.
Mr. Stonecipher has been a supporter of the commercial 787, which will have 200 to
300 seats and is scheduled for first delivery in 2008. The company on Jan 28 won a
US$7.2 billion contract from Chinese airlines for 60 of the 787s, its biggest order
for its new model and the first from the country.
Boeing’s commercial-aircraft deliveries, which also include the 150-seat 737 and
300-seat 777, fell to 67 planes in the fourth quarter, down three from the previous
year. Boeing had orders for 56 of its new 787s in 2004, well below Mr. Stonecipher’s
target of 200, amid a challenge from Airbus’s new A350.
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