Published May 2002

Boeing reports loss; sales lag for wide-body jets

By Bryan Corliss
Herald Business Writer

Sales of single-aisle jets are stronger than expected while wide-body planes have lagged, and that could have implications for the way the Boeing Co. spreads around its work force, the company’s chairman said in April.

It’s possible Boeing could shift jobs from Everett to Renton after the current layoffs end, Chairman Phil Condit said. “But none of that is firm at this point.”

Condit made the comments in a conference call with reporters following the company’s report on its first-quarter earnings.

The company reported its first quarterly loss since 1997 in April. A $1.8 billion write-down in the value of its 2000 purchase of its satellite division from Hughes Electronics led to Boeing showing a $1.25 billion loss for the quarter.

That compares with a $1.24 billion profit in the same period last year.

The loss came even though Boeing increased its operating revenues 4 percent during the quarter, to $13.8 billion, thanks to increased sales in its military division and increased aircraft leasing business at Boeing Capital Corp.

Excluding the write-down and other one-time items, Boeing reported adjusted net earnings of $602 million for the quarter, down 21 percent from last year’s first-quarter figure of $761 million. Adjusted earnings per share dropped 16 percent, from 89 cents to 75 cents.

The write-down was expected. Boeing had warned analysts in March that new accounting rules would lead it to lower the “goodwill value” that it was carrying on its books for the satellite unit.

But problems at the satellite unit also ate into Boeing’s operating profit for the quarter. Profits for the Space and Communications Group fell $42 million compared with the same period in 2001.

Condit and Chief Financial Officer Mike Sears praised the performance of the Seattle-based Commercial Airplanes Group. The commercial group managed to keep profit margins up, even while it slashed production rates and laid-off thousands, Sears said.

“The operating profitability of the commercial group is really terrific,” he said.

For the quarter, the commercial group increased profits 13 percent, to $973 million, even though revenue fell 2 percent, to $8.3 billion.

Part of that was do to cost savings linked to the new moving lines for 737 production in Renton, Sears said.

Boeing’s still following its plan to produce 380 jets this year, Condit said. Boeing delivered 110 jets during the first three months of this year, down from 122 in the same quarter last year.

The company likely will deliver a similar number of jets in the second quarter, he said. Production will slow significantly in the last six months of the year, and will remain near that level in 2003, when Boeing expects to deliver between 275 and 300 jets.

So far, Boeing has sold nearly 80 percent of next year’s targeted production, Sears said.

For now, Boeing will continue with its plan to cut 30,000 workers from its Commercial Airplane Group, Condit said.

After that, “We’re trying to go out farther and see what happens next,” he said. That will include a look at whether to raise production rates for single-aisle jets while lowering them for wide-bodies.

Intercontinental air travel was hit hardest by the post-Sept. 11 airline crisis, Condit said. Those airlines are struggling, and they are the best customers for wide-bodies. Meanwhile, the airlines who do have cash are discount carriers such as Ireland’s RyanAir and Southwest Airlines, and “they tend to be 737 users.”

Faced with that, it’s possible jobs could be shifted from Everett to Renton, but no decisions will be made until after June, when the last round of layoff notices goes out, he said.

Related: Aerospace Briefs

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