Boeing to deliver at least 25 Dreamliners, 747-8s in 2011

Production cost overruns, penalty payments will offset near-term financial gains


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Jan. 27--Boeing Co. expects to deliver at least 25 of its delay-prone 787 Dreamliner and 747-8 jumbo jets this year, but it doesn't anticipate that the planes will give any near-term lift to its financial results.

Production cost overruns and penalty payments to pacify airline customers mean Boeing won't make money off those deliveries, executives said during a quarterly earnings call Wednesday, acknowledging concern about the overall profitability of the best-selling Dreamliner.

But first, the Chicago-based aerospace manufacturer will have to complete flight testing on both jets and hope that it won't suffer other setbacks that will push the initial 747-8 delivery past its midsummer target or cause the 787 to miss its third-quarter launch date, announced earlier this month.

The 787, running years behind schedule and plagued by design, production and software glitches, has been a drag on Boeing's earnings in recent years and is expected to continue to affect results through 2011. Boeing has kept design work on the plane's 787-9 derivative in-house, reverting to a more traditional approach that places less responsibility with suppliers, executives said.

The missed deadlines and three-year delay will cause the inventory of completed 787-8s to bulge to about $12 billion by year's end.

Workers are completing the 31st Dreamliner, Boeing CEO Jim McNerney said. But Boeing still needs to address problems with the first 20 to 25 Dreamliners, ranging from software that caused the plane's power system to fail during an onboard fire in November to condensation buildup that causes a phenomenon known as "rain in the plane."

The company's elaborate supply chain is finally getting in gear, McNerney said, and 787 components recently shipped to its Everett, Wash., factory require less input from Boeing's machinists.

As first reported by the Tribune, Boeing plans to provide its first customers with planes completed later in the production schedule that already have many of the design fixes that were unearthed during testing.

Boeing said it would deliver 25 to 40 of the 787 and 747-8 aircraft this year, with the total evenly divided between the two programs. Since plane-makers receive the bulk of aircraft payments once planes arrive, the deliveries would propel full-year 2011 revenues to $68 billion to $71 billion. Even so, Boeing anticipates its net income would decline to $3.80 to $4 per share.

Shareholders weren't thrilled at the news. Boeing's shares ended Wednesday at $70.02, down 3 percent.

Boeing reported a fourth-quarter profit of $1.2 billion, or $1.56 per share, on revenue of $16.6 billion, besting the $1.11-per-share results analysts had projected. Net income for the full year was $3.3 billion, or $4.45 per share, on revenue of $64.3 billion.

jjohnsson@tribune.com

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