GRAHAM WARWICK / WASHINGTON DC

But manufacturer hopes to maintain profit margins and cash flow at current levels

Boeing's revenues will decrease this year and again in 2003 due to fewer deliveries of commercial aircraft, but the company hopes to maintain profit margins and cash flow at current levels as it weathers the airline industry recession.

In its results on 23 January, the company reported a strong financial performance for 2001, with all of its core businesses delivering higher revenues and margins. Net earnings excluding charges were up 20% from 2000 to $3 billion on revenues up 13% to $58.2 billion. The charges totalled $692 million after tax, the majority related to 11 September.

Boeing Commercial Airplanes (BCA) was able to deliver 527 aircraft in 2001, up from 489 in 2000, but the forecast for 2002 is 380 aircraft, dropping to between 275 and 300 in 2003. Boeing chief financial officer Mike Sears says the projected 2002 deliveries are "virtually sold out" while 2003 is "more than 75% sold out at the lower end of our forecast".

Customer financing was key to shoring up aircraft deliveries in 2001, with $4 billion of new volume at Boeing Capital (BCC) taking the financing arm's year-end portfolio to $9.1 billion, an increase of $2 billion. Boeing products and services make up 70% of the expanded portfolio. Sears expects an additional $3-4 billion of "prudent" customer financing volume this year.

With continued growth expected at the company's Military Aircraft and Missile Systems (A&M) and Space and Communications (S&C) sectors, as well as Boeing Capital, the company is hoping to offset some of the downturn in commercial aircraft deliveries. Sears expects revenues of around $54 billion this year, down from the previously projected $55 billion, dropping to around $52 billion in 2003. Operating margins are forecast to stay at around 8.25% and free cashflow at around $2.5-3 billion.

Chief executive Phil Condit says it is too early to say whether the commercial aircraft market will improve by 2004. "Our guess is that 2003 will be a down year, but we have no great insight into when it will start back up," he says. "The passenger traffic has to come back, the airlines have to earn money and we don't know how many aircraft in storage will come out."

For 2001, BCA's operating earnings were $2.6 billion on revenues of $35 billion. This compares with $1.3 billion on $12.5 billion revenue for A&M and $619 million on $10.4 billion revenues for S&C. BCC's revenues were up by 19% to $863 million and pre-tax earnings were $272 million after interest costs of $324 million.

Boeing's ability to shore up commercial aircraft deliveries in 2001 helped its suppliers. GE Aircraft Engines saw sales and profit increase 6% to $11.4 billion and $2.6 billion, respectively. United Technologies saw Pratt & Whitney's operating profit increase 14% to $1.3 billion on sales up 4% to $7.7 billion.

Source: Flight International