Boeing to deliver 25 787s, 747s in 2011

By Julie Johnsson
Posted Jan. 26 at 12:19 p.m.

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

Production cost over-runs and penalty payments to pacify airline customers mean Boeing won’t make money off those deliveries, executives told analysts and reporters during a quarterly earnings call, admitting the Chicago-based aerospace manufacturer remains concerned about the overall profitability of the best-selling Dreamliner.

But first Boeing 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 mid-summer target or cause the 787 to miss its third-quarter launch date, announced earlier this month.

Running years behind schedule and plagued by design, production and software glitches, the 787 has been a drag on Boeing’s earnings in recent years and is expected continue to affect results through 2011. Learning from its mistakes, 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 years’ end.

Workers are completing the 31st Dreamliner, said Boeing CEO Jim McNerney. But Boeing still faces significant rework on the first 20 to 25 Dreamliners parked near its assembly line to ailments ranging from software that caused the plane’s power system to fail during an onboard fire in early November, to condensation build-up that causes a phenomenon known as “rain in the plane.”

Boeing’s elaborate supply chain is finally getting in gear and 787 components recently shipped to its Everett, Wash., factory require less input from Boeing’s machinists, McNerney said. “Our production system is getting stable. In the first 20-plus airplanes there’s still some work to be done and we’re going through it.”

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

Boeing said it would deliver between 25 and 40 of the 787 and 747-8 aircraft, with the total evenly divided between the two programs. Since plane-makers receive the bulk of aircraft payments once the planes arrive, the deliveries would propel full year 2011 revenues to between $68 billion and $71 billion. Even so, Boeing anticipates its net income would decline to between $3.80 and $4.00 per share.

Shareholders weren’t thrilled at the news and Boeing’s shares were priced at $69.70 in mid-day trading, down 3.5 percent.

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

In a note to investors, aerospace analyst Joseph Nadol of J.P. Morgan said he predicted that Boeing would delivery 26 of the new aircraft and that Boeing’s “initial guidance is substantially better than we had feared.”

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