Guy Norris/LOS ANGELES
Boeing has doubled the projected number of Next Generation 737s it will have to build to reach break even on the programme as the legacy of production problems continues to dog its financial performance.
The USgiant admits that it is now likely to have to deliver 800 NG737s before it achieves profits on the programme, which chairman Phil Condit says is still about a month behind delivery targets.
The next hurdle comes late this year as production rates are raised from 14 to 21 aircraft a month. This is expected to be completed around October, says Condit, but he cautions that "-significant performance risks remain". No profits will be posted for the line until the new rate is achieved, although Boeing adds that, with the target of delivering 164 NG737s this year and a further 270 next year, the original 400 break-even figure will be reached "fairly quickly".
Late NG737 delivery costs were also partially blamed for another set of poor profit figures for the first half of 1998. Boeing's net profits were down to $308 million for the first six months, less than one-third of the level of a year ago.
Other causes of the reduced earnings included charges of $78 million relating to the termination of the MD-11 and reduced profit margins across the commercial aircraft product line. Condit blames continuing pricing pressures as well as production inefficencies for the weak profit margins, which have been at little above 1% for the commercial business this year.
Output is due to continue to rise, with 620 airliner deliveries scheduled for 1999 against 550 this year, although sales revenues will edge up by only 8% to $39 billion next year. Doubts over the Asian economies also continues to trouble Boeing as the number of new aircraft in storage grows to 20 from eight in the fourth quarter of 1997.
The company's expanded Information, Space and Defense Systems segment is expected to add sales of up to $20 billion this year and next with a "solid performance" recorded for the year so far.
This will contribute significantly to improved net earnings, which are predicted to be around $1 billion for the entire Boeing group in 1998, with double that anticipated in 1999, says Condit.
Source: Flight International
