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Boeing's 2018 profit hits $10.5bn as production soars

A record number of aircraft deliveries and a rapidly expanding aircraft services business lifted Boeing's net profit up 24% year-on-year in 2018 to $10.5 billion.

The results punctuate a year during which Boeing undertook a number of high-profile projects, including 777X development, hiking 737 production, tackling significant supply-chain issues and studying a potential new aircraft known as the New Mid-market Airplane (NMA).

"It is clear that there is a market need, but we are working through the details of the business case," Boeing chief executive Dennis Muilenburg says of the NMA. "We are not up to our decision point yet."

The decision, he adds, will come in 2019.

The Chicago-based company posted a 2018 operating profit of $12 billion, a 16% improvement from 2017. Boeing's full-year revenue surged 8% to a record-high $101 billion, while expenses crept up just 6.4% to $81 billion, Boeing reports.

Boeing also announced it expects to deliver 895 to 905 commercial aircraft next year – about 12% more than in 2018.

Many of those will be 737s, but Boeing intends also to boost 787 production from 12 to 14 aircraft monthly by the second quarter of this year, it says.

"We have seen steady orders for the 787 and 777, and have high confidence" widebody demand will increase in the next decade as airlines begin replacing existing models, Boeing chief executive Dennis Muilenburg says during the company's earnings call on 30 January.

Boeing expects new aircraft orders will "moderate" but remain "healthy" in 2019, Muilenburg says. The company landed 893 new commercial aircraft orders in 2018.

COMMERCIAL AIRCRAFT PROFITS SOAR

The Boeing Commercial Airplanes unit stood out in 2018, its operating profit surging 45% year-on-year to $7.9 billion.

That profit largely reflects the record 806 commercial aircraft Boeing delivered last year. Those included 580 737s, 145 787s and dozens of 767s and 777s.

The profits came in a challenging time, as Boeing upped 737 production last year to 52 aircraft monthly amid significant supply chain issues, not all of which have been resolved.

"737 production system health remains a key focus for us," says Muilenburg.

"We still have work to do on the recovery efforts," he adds. "We have seen some good, solid progress."

The issues affected two major 737 suppliers: engine maker CFM International and fuselage producer Spirit AeroSystems.

Boeing has dispatched staff to CFM facilities to help the engine maker address issues that have held up engine deliveries, he adds.

"That’s one area that will have additional focus for us in the first quarter," Muilenburg says of CFM, adding that Boeing is also working to make its own facilities more efficient.

Boeing hopes to further increase 737 production to 57 aircraft monthly this year, helping clear a backlog that stands at some 4,700 aircraft – seven years-worth of production.

"We still have some work to do before we move the line to 57 a month," Muilenburg says.

Also in 2018 Boeing continued assembling its first flight-test 777X, joining the aircraft's fuselage, turning on power and installing engines. The company expects that aircraft will first fly this year, followed by the first delivery in 2020.

While the commercial airplane unit brought in most of Boeing's profits, newly-established services division Boeing Global Services posted a 2018 operating profit of $2.5 billion, up 12% in one year.

Global Services generated $17 billion in revenue last year, up 17% from 2017.

Boeing merged formerly disparate services units into the single Global Services entity in 2017 as part of an effort to capitalise on what executives described as a massive sales opportunity.

At the time, Muilenburg said Boeing was on a path to generate $50 billion in annual services revenue.

Boeing has a ways to go, but in 2018 it expanded its services reach. It acquired aircraft parts provider KLX Inc. and began operating an auxiliary power unit joint venture with Safran and an aircraft seating joint business with Adient Aerospace.

Global Services business landed $18 billion worth of new orders in 2018.

AIMING HIGHER IN 2019

Boeing predicts it will generate $110-$112 billion of revenue in 2019, about 10% more than in 2018.

The commercial airplane unit's share of that pie will be $64.5-65.5 billion, about 6-8% more than in 2018, Boeing estimates.

It notes that in 2019 it will shift costs and revenues related to military derivatives of commercial aircraft from the commercial airplane to the defence, space and security business.

Boeing pegs Global Services' 2019 revenue at $18.5-$19 billion, up 9-12% in one year.

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