April 25, 2012

Boeing: Tornado’s impact on business ‘manageable’

Boeing expects the tornado that hit key supplier Spirit AeroSystems to have a “manageable” impact on its business, Boeing’s top executive said Wednesday.

Boeing expects the tornado that hit key supplier Spirit AeroSystems to have a “manageable” impact on its business, Boeing’s top executive said Wednesday.

Spirit AeroSystems employees returned to work full-time Monday following the suspension of operations in Wichita last week after its facilities took a direct hit from an EF-3 tornado.

“We are cautiously optimistic that there will be no material impact to any of our programs this year,” Jim McNerney, Boeing chairman, president and CEO, told analysts and the media on a conference call about the company’s first-quarter financial results.

Spirit builds the fuselage for the 737 and parts of all Boeing products.

Boeing beat analysts’ expectations in the first quarter with a 30 percent increase in revenue and 58 percent increase in net income from healthy results in its commercial and defense businesses. Boeing recorded $19.4 billion in revenue in the quarter, up from $14.9 billion a year ago.

Net income totaled $92 million, or $1.22 earnings per share, up from $586 million, or 78 cents per share, a year ago.

“Strong core earnings performance from our production programs and services businesses continues to drive expanded earnings, revenue and cash flow for Boeing,” McNerney said.

Boeing’s order backlog rose to a record $380 billion in the quarter, which includes $42 billion in new orders, including more than 301 firm orders for the new 737 MAX and a contract for 84 F-15s for Saudi Arabia.

The backlog also includes orders for more than 4,000 commercial airplanes valued at $308 billion.

Boeing remains on track to increase 737 production to 38 per month in the second quarter of 2013 and up to 42 per month in the first half of 2014.

The 737 MAX, a program which replaces the engines on its popular single-aisle airplane with more fuel-efficient ones, is also on track, the company said. The plane competes with the Airbus A320 neo.

The company predicts it will gain half of single-aisle market with the re-engined airplane.

Passenger air traffic remains resilient, McNerney said, but high jet fuel costs are a concern to the airlines. That concern is a key driver of demand for the new jetliners, he said.

Boeing remains on track to deliver from 585 to 600 commercial planes this year, the company said.

The company is focused on bringing down costs on the 787 Dreamliner and 747-8 programs. Both programs have had delays and cost increases.

One analyst noted during the conference call that it was the “first quarter I can remember” in which the company did not report some kind of adverse problem with the 787 program.

“I don’t know whether to laugh or cry at the award you just gave us,” McNerney said.

Production of the 787 is improving, he said. And by this summer, the company should no longer have to make the modifications on the 787 after it comes out of production as it does now.

Boeing is confident by the time it produces its 60th or so unit this summer that the production line will be flowing the way they want it to, officials said.

In addition, costs per airplane are expected to drop by 50 percent on average from the time it delivered the first 787 to the 60th airplane.

Boeing still expects to increase 787 production from 3.5 per month to five a month later this year and to 10 per month by the end of 2013.

The company also is in competition with Brazil-based Embraer to supply fighters to Brazil. Boeing has offered the F-18.

“I think we have a good shot in Brazil,” McNerney said.

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