Issues Early Caution On Q1 Earnings

Ahead of the release of its first-quarter results on April 22, Boeing announced Thursday it will scale back its twin-aisle airplane production plans for 2010 due to "significant deterioration in the business environment for airlines and cargo operators driven by unprecedented global economic conditions."

Monthly production of the 777 will decline from seven to five airplanes per month beginning in June 2010. Boeing will also delay previous plans to modestly increase 747-8 and 767 production. No changes are being made at this time to production rates for its 737 narrowbody, Boeing's most popular aircraft model.

In a carefully-worded release, Boeing stressed the cutbacks "solely reflect delivery deferrals requested by customers in response to unprecedented declines in global passenger and air-cargo volumes," and are not due to any cancellations recorded so far this year.

Boeing also admitted its first-quarter net earnings will take a hit due to "production decisions and unfavorable price escalation," to the tune of 38 cents per share. So far, the bulk of the losses come from the 747 program.

"Because the 747 program is currently in a loss position, the reduced earnings associated with the factors above will be recorded for most units in the 747 backlog," the planemaker stated. "That impact, somewhat offset by a refinement in cost estimates, accounts for approximately $0.31 per share of the first-quarter charge. For the other commercial programs, the impact will be reflected in lower margins on deliveries as they occur, including an estimated $0.07 per share net earnings reduction in the quarter."

"These are extremely difficult economic times for our customers," said Boeing Commercial Airplanes President and CEO Scott Carson. "It's necessary to adjust our production plans to align supply with these tough market conditions. We are in close contact with our customers as we continue to monitor this dynamic business environment."

Boeing's states its commercial backlog of more than 3,500 airplanes "remains strong and well-diversified in terms of airplane models, geography and customer business models."

FMI: www.boeing.com