Boeing earnings positive, North Charleston work in progress
Boeing's quarterly earnings report was generally positive Wednesday, but the aerospace giant's North Charleston 787 Dreamliner factory got more of a mixed grade.
Boeing executives noted the local plant's recent milestones, including certification by the Federal Aviation Administration and completion of its first 787. And Boeing Chief Financial Officer Greg Smith spoke of “significant improvements” in finishing sub-assembly jobs on time at the relatively young plane-making complex.
But Chief Executive Officer Jim McNerney acknowledged the aft-body factory at Charleston International Airport continues to be “a hotspot for us, and we're addressing it.”
“I don't think it's a showstopper in terms of getting to rate, but it is something we're focused on,” McNerney said.
The executives' comments about the South Carolina plant came as Boeing ramps up production of its popular commercial airplanes and adjusts to the contracting U.S. defense budget. Making the long-troubled 787 profitable like the 737 and 777 programs is a top priority but still years away.
On Wednesday, Boeing reported quarterly net income of $967 million, or $1.27 per share, on more than $20 billion in revenues from April through June.
Boeing Commercial Airplanes brought in most of that sum, more than $11.8 billion, up about a third from the same period in 2011. Boeing's increased quarterly pension expense was a notable drag on the earnings.
All told, the mid-year financial results were good enough for the company to increase its year-end earnings-per-share guidance, to between $4.40 and $4.60.
Rob Spingarn, who covers Boeing for Credit Suisse, called the 25-cent increase a “nice guidance boost,” adding “it's more than we had expected at the second quarter.”
As usual, most of the discussion on the earnings call focused on Boeing's commercial plane business, the 787 and the 737 MAX, in particular.
Although its configuration has not been finalized, the single-aisle MAX won several hundred orders at this month's Farnborough International Airshow and is expected to enter service in 2017.
Meanwhile, Boeing has handed over 15 787s to airline customers since deliveries finally began last September and has more than 800 outstanding orders.
Smith said Wednesday that Boeing hopes to deliver as many as 30 more Dreamliners in the second half of the year.
Between its 787 factories in North Charleston and Everett, Wash., Boeing is now making 3.5 Dreamliners per month but plans to increase that rate to five per month by the end of this year — and up to 10 per month by the end of next year.
The local aft-body operation, which Boeing bought from Vought Aircraft Industries as part of a broader effort to gain control of its global supply chain, is crucial to that ramp-up because it supplies major fuselage pieces for every 787.
But its performance has been uneven. Earlier this year, incorrect shimming traced to building 88-19 required fixes and delayed deliveries. Boeing has been installing new tooling in that factory to improve production.
McNerney also referenced Wednesday the three Dreamliners that were supposed to be delivered to government-owned Air India last month but still sit on the North Charleston flight line; one of them is the first S.C.-built jet.
He said Boeing uncharacteristically produced more planes than it delivered this quarter “as some of the machinations with our Air India customer had to get settled out as they went through a political transition there.”
There was good news on that front Wednesday when, according to published reports, the Indian aviation minister announced that a ministerial panel had approved a compensation package for the years-late deliveries of Air India's 787s. The Indian Cabinet must now approve the compensation and that could happen as early as today.
Responding to questions, McNerney and Smith downplayed the grounding this week of five All Nippon Airways 787s because their Rolls-Royce engines required new gearboxes. McNerney said four of the five planes are back flying and that the repair was “pretty minor.”
The Boeing chief was also asked about when he would take plans for a stretch Dreamliner, the 787-10X, to the company's board.
“We are getting greater fidelity on the evaluation now. It's hard for me to predict exactly when we would move forward, but end of this year, beginning of next year could be timing,” McNerney said.
As Boeing has not yet committed to building that variant, the company has not said whether it would be built in South Carolina alongside its shorter siblings, the 787-8 and 787-9.
“It looks like a pretty good airplane that will have a lot of market demand,” he said. “And will be the absolute perfect next step on 87. That's the way it looks today.”
Reach Brendan Kearney at 937-5906 and follow him on Twitter at @kearney_ brendan.
Editor's note: Earlier versions of this story incorrectly stated how many Dreamliners Boeing hopes to deliver this year. The Post and Courier regrets the error.