Boeing's 2Q profit climbs; 787 plans still pending

Boeing Co. on Wednesday reported a 17 percent rise in second-quarter profit to beat Wall Street expectations, but the airplane maker said it was still assessing the financial impact of the latest delay of its new 787 jetliner.

The Chicago-based company expects to reevaluate its earnings forecast and announce a revised schedule for the eagerly anticipated 787, which is nearly two years behind schedule, in the third quarter. Boeing's credibility suffered a blow last month when the company postponed the plane's first test flight and deliveries for the fifth time, saying part of the aircraft needed to be reinforced.

"Much to our disappointment, the 787 continues to challenge us," Boeing Chairman, President and CEO Jim McNerney said in a conference call. He defended the company's decision to postpone the test flight and said fixing the problem was "straightforward and involves a relatively small number of parts."

Production of the 787, designed for fuel efficiency with carbon composite parts, has been fraught with problems. Boeing has taken a new approach to building airplanes with the 787, relying on overseas suppliers to build huge sections of the plane that are later assembled at its facilities near Seattle. Ill-fitting parts and other glitches have hampered production.

Those problems have contributed to the delays, expected to cost Boeing billions of dollars in expenses and penalties.

In an apparent attempt to resolve supplier problems, Boeing announced earlier this month it had agreed to pay $580 million and forgive debt for a plant owned by Vought Aircraft Industries that makes large sections of the 787's fuselage.

Boeing, the world's second-largest commercial plane maker after France-based Airbus, said it earned $998 million, or $1.41 per share, for the three months ended June 30. That compares with $852 million, or $1.16 per share, during the same period last year, which included a charge of 22 cents per share for late delivery of military aircraft.

Revenue edged up 1 percent to $17.15 billion from $16.96 billion in the year-earlier period, helped by stronger sales in its defense division. Defense sales rose 9 percent to $8.7 billion. Commercial airplane revenue slid 2 percent, to $8.4 billion.

Analysts surveyed by Thomson Reuters, on average, had expected a profit of $1.21 per share on revenue of $17.15 billion. Analyst estimates typically exclude one-time items.

The company reiterated its 2009 profit forecast of $4.70 to $5 per share. Boeing reduced its forecast in April, citing lower expected profit at its commercial aircraft division. Analysts expect profit of $4.52 per share.

But Peter Arment, an analyst at Broadpoint AmTech, said Boeing's guidance was unreliable because it doesn't reflect the revised 787 schedule. "So I think the air of uncertainty will remain regarding Boeing," he said.

News of the latest 787 delay came June 23, when Boeing said it needed to reinforce the plane near the area where the wings meet the fuselage. On Wednesday, the company said it had identified a technical solution to the problem and was evaluating ways of implementing it. Boeing said it expects to issue a new schedule and reevaluate its earnings guidance this quarter.

The mid-size 787 is designed to carry 210 to 330 passengers. It includes wider seats and aisles, larger windows and a ventilation system that will allow for higher humidity, all of which Boeing says will make the cabin feel more comfortable.

It is Boeing's first all-new aircraft since the 777 and the first commercial jet made mostly of carbon-fiber composites rather than more traditional aluminum. Boeing says it will be about 20 percent more fuel efficient than planes of comparable size.

The plane remains a priority for Boeing as it grapples with dwindling orders amid the global recession, which has undercut demand for air travel and cargo services. Some airlines have been forced to cancel or delay plans to buy new planes.

To cope, Boeing has introduced cost-cutting measures in recent months, including plans to slash 10,000 jobs and scale back production of some planes.

Despite the weaker demand, Boeing's commercial plane deliveries slipped by just one plane in the second quarter, to 125, compared with the same period a year earlier. Boeing receives payments for planes when they are delivered.

The company said it booked 57 new orders during the quarter, down from 187 orders a year earlier. It said 52 other orders were canceled. Boeing built up a hefty backlog during three years of booming demand that ended last year, when orders plunged. It said Wednesday the backlog was valued at $328 billion. That's down from $339 billion at the end of March.

So far, 56 customers have booked 850 orders for the 787 - its best-selling new aircraft to date. But that includes some 73 orders canceled this year through July 14.

Shares of Boeing lost $1.02, or 2.4 percent, to close at $42 Wednesday.