Boeing Delivers, Sizzling Quarter Profit Doubles

Like a forest fire crew battling hot spots that suddenly flare, The Boeing Co. is rushing reinforcements around the globe to help its 787 structural partners with manufacturing and assembly issues.

At home, meanwhile, Boeing engineers are continuing to grapple with weight problems - the plane is still too heavy.

But the Dreamliner program remains on schedule for rollout of the first plane in Everett in July, first flight in late August and first delivery to All Nippon Airways of Japan in May 2008.

That was the upbeat assessment Wednesday by Boeing boss Jim McNerney during a conference call with analysts and the media to discuss fourth-quarter earnings.

Boeing delivered a knockout quarter, with profits doubling on the strength of more commercial jetliner deliveries than a year ago.

Shares jumped $3.56 to $89.56 in trading on the New York Stock Exchange. That was the biggest gain since Nov. 7 and erased the loss last week when an analyst issued a critical report about 787 supplier bottlenecks in Japan and Italy, which he predicted would delay the program by several months or more.

For the quarter ended Dec. 31, Boeing's net income was $989 million, or $1.29 per share, compared with $460 million, or 58 cents a share, in the year-ago period. Adjusted earnings for the quarter were $1.16 a share, which easily beat Wall Street expectations. Revenue rose 26 percent to $17.5 billion.

Boeing, which beat Airbus in jetliner orders last year for the first time since 2000, could soon overtake its rival in delivering planes. Boeing is boosting production rates at its Renton and Everett plants to meet growing demand.

Boeing said it will deliver 440 to 445 planes this year, up from 398 last year. That is about the same number of planes that Airbus expects to deliver this year. Boeing raised its delivery forecast for 2008 to 515 to 520 jets and said it will deliver even more in 2009.

McNerney, Boeing's chairman and chief executive, acknowledged in his call with analysts that the 787 program is not without its challenges now that assembly of major structural parts is under way.

"It's an `Oh, my God' exercise to build airplanes," he said.

But even though partners in Italy and Japan have fallen behind, Boeing has rushed in its own resources where needed, McNerney said.

"We've continued to provide engineering and manufacturing support to our partners. We continue our process of robust contingency planning."

McNerney said he has visited some of the trouble spots. He just returned from Japan, where the three Japanese "heavies" - Mitsubishi, Kawasaki and Fuji heavy industries - are responsible for the wings and part of the fuselage of the new jet.

The Italian company Alenia, which is manufacturing the rear fuselage and horizontal stabilizer, is another trouble spot where Boeing has sent help.

"What we are doing with Mitsubishi and Alenia specifically is adding a lot of resources to supplement theirs to get them through the knothole," McNerney said. "We are not out of the woods yet, but the progress is good."

He also said that engineers are making progress on getting weight out of the 787, which will be the first large passenger jet with a composite airframe. Boeing expects to meet is contractual weight obligations with customers, he said. If the 787 is too heavy, which would hurt performance, Boeing would have to pay penalties to customers.

"I'm feeling pretty comfortable about the progress on that weight reduction program and getting the plane down to where we need to be to meet the commitments to our customers," McNerney said.

He stressed that he is telling analysts "exactly" what Boeing is telling its customers - that the 787 will be delivered on time.

But some analysts remain skeptical.

"To develop a plane with that sort of technological innovation not even a couple weeks late would be unheard of," Morningstar analyst Chris Lozier said. "I would be extremely, positively surprised if they delivered that plane even in June of next year. I would think when push comes to shove, there will be a couple of late-inning kinks that need to be worked out of the program, as you would expect."

Airbus, for example, has stumbled badly with the 555- passenger A380, which is about two years behind its original delivery schedule.

McNerney said Boeing has implemented about half of the eight contingency plans that are in place to meet the most risky 787 production challenges.

A key hub in the 787 production chain is Charleston, S.C. Global Aeronautica, a joint venture between Alenia and Vought Aircraft Industries, is joining various 787 fuselage sections in Charleston. They will then be flown to Everett for final assembly.

The first large 787 assembly recently arrived in Charleston from Japan. Some of the work that was supposed to have been done before the structure left Japan will have to be completed in Charleston. The Japanese companies have sent workers to Charleston to help, McNerney said.

This is the kind of "travel work" for which Boeing has contingency plans, he said.

Some travel work won't be made up until 787 structures arrive in Everett, where final assembly of the first 787 will begin in the second quarter.

"The kinds of things I'm talking about with contingency plans are having standby capability to make some tubes, clips and brackets in the state of Washington in case they don't show up in some of the components that have been stuffed before they get there," McNerney said.

He said the trouble areas, so far, have mostly involved only a few suppliers or partners. They are responsible for the 787 structure, rather than systems, he said.

"It's tended to be three or four suppliers that we have dedicated a lot of engineering and manufacturing resources to team together with theirs to address schedule and technical risks," McNerney said. "I think we've made good progress on them. Obviously there are flare-ups in the others from time to time that we address quickly. We have standby engineering capability that is waiting to move quickly to help."

P-I aerospace reporter James Wallace

can be reached at 206-448-8040


Fourth quarter

For the quarter ended July 1

Revenue, in billions

2005: $13.9

2006: $17.5

Net earnings, in millions

2005: $460

2006 $989

Price per share

2005: $0.58

2006 $1.29

Source: THE BOEING CO. %%