Boeing reported a bigger-than-expected 19 percent drop in quarterly profit on Wednesday as it took a charge on a delayed military plane contract and suffered effects of its troubled 787 Dreamliner.
Boeing had lower sales at both its commercial and military operations, but held to its financial forecasts for this year and next, citing strong global demand for its products.
The Chicago-based company, along with Airbus, is hoping high oil prices will spur demand for its new fuel-efficient planes, but shares of both companies have suffered over the past few months as investors worry that prolonged increases in oil prices will drive more airlines into bankruptcy and prompt a global recession.
The shares dropped 3.7 percent to USD$66.68 on the New York Stock Exchange on Wednesday. The stock is now down 38 percent from its all-time high a year ago, hurt by repeated delays on the 787 and rising oil prices.
"The real surprise of this quarter is the unusually soft performance at commercial aircraft," Robert Stallard of Macquarie Securities said in a note to clients. "However, there is nothing in this quarter which we view as a fundamental, long-term problem."
Boeing Chief Executive Jim McNerney acknowledged its order book was at risk from failing airlines, but said he was still confident it would hit delivery targets for this year and next.
"Clearly, economic conditions are tough for many of our commercial customers," McNerney said. "So far we have experienced a minimal impact on backlog, with only a handful of deferrals by US carriers. We have had no cancellations to speak of."
Boeing does expect more deferrals and cancellations as a normal part of business, McNerney said, but added that the company was well-positioned to deal with it, with eight years worth of production in its order book and only 10 percent of its orders coming from US carriers.
Boeing reported second-quarter net profit fell to USD$852 million, from USD$1.05 billion a year earlier.
It recorded a charge of USD$248 million for delays on a surveillance plane the company is building for Australia, known as Wedgetail.
Overall revenue fell to USD$16.96 billion.
Boeing's commercial plane unit, which set an industry record for orders last year, reported a 2 percent drop in revenue to USD$8.6 billion. It delivered more planes to customers in the quarter than a year earlier, but mostly the less expensive, single-aisle 737s rather than the more profitable 777s.
The unit said it was also hurt by high fixed costs at its Seattle-area plant that builds its wide-body planes, exacerbated by slow progress on the 787.
According to its original timetable, Boeing was planning to have several completed 787s coming off its production line each month by this summer. Instead, it is still struggling to get the first batch out of the factory after repeated production delays.
The carbon composite 787, which is being put together in Seattle from parts manufactured across the globe, is now at least 14 months behind the original schedule and has not yet taken to the skies. The first 787 was supposed to be flown to Japan's All Nippon Airways in May.
Boeing said it was still having problems putting together the first 787s for testing, but stuck with its timetable for the first test flight in the fourth quarter and first delivery in the third quarter of 2009.
