From Dreamliner to lost military deals, problems nag Boeing

This was to be Boeing's summer of triumph. Dozens of its groundbreaking 787 Dreamliners were supposed to be in commercial airline service around the world by now, changing the nature of global air travel.

A family of ultra-high-tech spy satellites made by Boeing BA was to be in the heavens, reading the license plate numbers of the USA's vilest enemies from 150 miles up.

Profits from regular launches of commercial satellites from a floating launch pad on the equator were supposed to be rolling in.

The Air Force was to take delivery of a fleet of new air-to-air refueling tankers based on the Boeing 767.

But none of that is happening this summer. And some likely never will.

"Every aircraft, and every defense program Boeing is involved in is having problems," says Scott Hamilton, an independent aircraft manufacturing and sales analyst and consultant. "Boeing is, quite simply, a mess right now. And I say that as an unhappy shareholder."

This is quite a turnaround for Boeing, which is America's largest exporter. Barely a year ago, the company was doing well. Or so it seemed.

Its stock traded at a 52-week high of $68.75. It boasted an unprecedented backlog of firm orders for jetliners worth well over $350 billion, including more than 900 for Dreamliners, the fastest-selling plane in history. It was coming off two straight years of sales victories over Europe's Airbus. Both the revolutionary 787 and the 747-8 extension of the venerable Boeing 747 jumbo jet were moving toward their first flights. Its defense and space business seemed to be booming.

Then came last fall's costly 58-day strike by production workers at Boeing's Commercial Airplane division that delayed delivery of dozens of planes. That was followed by a fourth major setback for the 787 and rapid deterioration of the economy that destabilized Boeing's airline customers worldwide.

A growing number of less-publicized setbacks took place in the company's defense and space business. Some were related to changing program priorities and shrinking budgets under a new president and Congress. Others resulted from Boeing's failure to perform to expectations.

787 becomes 'Nightmareliner'

The Chicago-based company still managed to report a modest first-quarter profit this year, then a large $998 million second-quarter profit, up 17% from the second quarter of 2008. But industry analysts are fretting about bloated inventory costs, sagging cash flow, increased borrowing and mounting cancellations of orders. They also worry about defense contracts that have been scaled down, lost or threatened because of Boeing's inability to deliver on its promises.

Take, for instance, Boeing's role as systems integrator of the Army's ambitious Future Combat Systems program, the Pentagon's second-biggest weapons development program. It has been scaled back partly because of poor performance.

Analysts also are expecting Boeing to swallow a charge against earnings of up to $500 million related to the June 22 Chapter 11 bankruptcy filing of the Sea Launch commercial satellite launch joint venture. Boeing owns 40% of heavily indebted Sea Launch. Companies in Norway, Russia and Ukraine own the rest.

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