Chicago-based aerospace and defense giant Boeing Co., maker of the 787
Dreamliner airplane that is grounded and under investigation in the United
States and Japan for battery issues, on Wednesday announced fourth-quarter
profit that beat Wall Street expectations.
Boeing has halted deliveries of 787s until the Federal Aviation
Administration lifts a ban on flying the jets. However, Dreamliner production
continues.
Boeing CEO Jim McNerney said it was "job one" to support investigations
under way with the Dreamliner, and "we have got every expert in the world
looking at this issue."
"We do believe good progress is being made in narrowing down the
potential cause of the events," he said. "We will get to the bottom of this
and in so doing we will restore confidence in the 787 and Boeing."
Any expense related to the investigations and grounding of the 787s was
not reflected in earnings announced Wednesday. And in giving guidance for
future earnings, Boeing assumed there would be "no significant financial
impact" from the Dreamliner grounding.
Boeing reported fourth-quarter profits of $1.28 per share, handling
beating analyst expectation of $1.19 per share. Revenue was $22.3 billion, up
14 percent over the previous year, but slightly below expectations of $22.36.
For the full year of 2012, revenue rose 18 percent but profits were down
3 percent from 2011.
Last year marked a milestone, as Boeing returned to the No. 1 spot as the
world's largest aviation company. "In a year of considerable achievement,
Boeing was the commercial aviation market leader for both orders and
deliveries, " McNerney said.
However, 2013 has not started well.
The National Transportation Safety Board is investigating a Boeing
Dreamliner battery fire in Boston on Jan. 7. That fire, along with a
subsequent 787 battery problem in Japan, led to groundings of Boeing's
breakthrough plane model in the U.S. and elsewhere.
Investigators have not found a cause for the battery problems, which may
suggest that grounded Dreamliners, including six owned by Chicago-based United
Airlines, won't be airborne anytime soon.
Earlier Wednesday, two Japanese carriers confirmed they had replaced
numerous of the potentially flammable lithium-ion batteries last year, long
before the two incidents in January.
McNerney, during a call with analysts and media, downplayed the
significance of those replacements. "The replacement cycle we've been
experiencing there has been for maintenance reasons," he said. "There's been
no instance we're aware of (when) a battery has been replaced due to any kind
of safety concerns. What we've seen is replacement, which is not uncommon.
It's replaceable unit designed to be replaced."
However, those batteries are being replaced at a "slightly higher" rate
than Boeing expected, he said.
Boeing has no plans to abandon the lithium-ion battery technology,
McNerney said. "Nothing we've learned has told us yet that we have made the
wrong choice on the battery technology," he said. "We feel good about the
battery technology, and it's a fit for the airplane."
Costs due to the grounding of 787s are unknown but mounting daily as
airlines are barred from using the high-tech plane. Boeing is building five
Dreamliners a month but isn't delivering them. With each carrying a list price
of $207 million, they quickly become an expensive pile of jets outside
Boeing's factories in Everett, Wash., and North Charleston, S.C.
Analysts say that most of Boeing's businesses remain unaffected by the
787 problems. It is still producing huge numbers of planes, will enjoy strong
cash flow this year as it delivers those jets, and has orders to last another
seven years at current production rates.
Some analysts say the 787 problems appear to be relatively easy to fix,
perhaps by swapping in a different battery type.
But even so, Boeing faces a longer-term review of its design,
manufacturing and assembly processes by the Federal Aviation Administration.
"As we work through these events, it is important to reiterate that 787
production continues as planned, and we remain confident in the future of the
program and the integrity, safety and performance of the airplane," McNerney
said.
Boeing said Wednesday it will begin reporting "core operating earnings"
numbers along with traditional earnings numbers that comply with generally
accepted accounting practices. That's because Boeing's large pension expense,
subject to market forces, can obscure how the company is actually operating.
By that measure, Boeing's fourth-quarter core operating earnings increased by
9 percent to $1.8 billion.
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Distributed by MCT Information Services
