787, 747-8 charges drag Boeing to heavy third-quarter loss

Boeing's ongoing problems with the 787 and 747-8 hit home yesterday as previously announced charges totaling $3.5 billion resulted in a $1.56 billion third-quarter loss despite a 9% year-over-year lift in revenue to $16.69 billion.

The company earned $695 million in the third quarter of 2008, a period affected by a lengthy machinists strike. Third-quarter 2009 operating loss was $2.15 billion compared to a $1.15 billion surplus in the year-ago period. The charges related to the first three 787 flight test aircraft ($2.5 billion) (ATWOnline, Aug. 28) and the 747-8 freighter ($1 billion) (ATWOnline, Oct. 7).

"The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business," Chairman, President and CEO Jim McNerney said.

He also announced that Boeing will unveil the location of the second 787 production line, at either Puget Sound or Charleston S.C., within two weeks. During a conference call yesterday with analysts and reporters, he seemed to suggest Charleston had the edge as he downplayed the additional cost of operating production lines on opposite sides of the US. "We have got a pretty good-sized operation in Charleston today. There would be some duplication. We would obviously work to minimize that," he said, while stressing that major factors in the decision included last year's machinists strike and the company's aim to avoid similar disruptions in the future. "Diversifying our labor pool and labor relationships has some benefits," he said.

McNerney again reiterated that the 787 is on track for its first flight before year end, with first delivery to ANA scheduled for the 2010 fourth quarter (ATWOnline, Oct. 19). The first aircraft's wing/body fix will be completed by the end of this week and the six flight test aircraft will fly at monthly intervals from December.

Boeing Commercial Airplanes' third-quarter revenue increased 13% to $7.88 billion on higher deliveries (113 from 84), with last year's total impacted by the strike and supplier production problems. It secured 96 gross orders during the quarter and 17 were removed from the order book. Firm orders for the 787 stand at 840 from 55 customers including the 10 cancellations that occurred this month. It will deliver 480-485 aircraft this year and production is sold out.

by Geoffrey Thomas

Originally published 22 Oct 2009 at: http://feeds.atwonline.com/~r/AtwDailyNews/~3/LrFFhNuCt8s/story.html