Boeing Co. posted stronger-than-expected profit on Wednesday as its backlog of orders rose, and said its 2013 forecast assumed no significant financial impact from the grounding of its 787 Dreamliner jet by regulators.
Aviation safety agencies in the United States and Japan are investigating what caused lithium-ion batteries to burn on two 787 passenger jets this month, prompting regulators to ground the planes worldwide.
Boeing said it is continuing to build the Dreamliner but has halted deliveries, and analysts have raised concerns about the cost of the grounding and fixing the battery problem on about 125 jets that Boeing has built so far.
“Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers,” said Boeing chief executive Jim McNerney.
Boeing said it expects to deliver at least 60 Dreamliners in 2013, compared with 80 or more that analysts expected. That gap of 20 jets implies a four-month delay in delivery, since Boeing is making five 787s a month. The company intends to increase production to 10 Dreamliners a month by the end of the year.
Boeing’s quarterly report came as its Dreamliner woes appeared to deepen. Earlier Wednesday, Japan’s two biggest airlines said they had repeatedly replaced sub-par lithium-ion batteries on their Dreamliners in the months before the two incidents that led to the 787 groundings.
The comments from All Nippon Airways Co. Ltd., the biggest 787 customer to date, and Japan Airlines Co. Ltd. indicated there appeared to be problems with the battery’s reliability long before one caught fire on a JAL 787 at Boston’s Logan Airport on Jan. 7, and a second was badly charred and melted on an ANA domestic flight a few days later. The flight was forced to make an emergency landing.
On Jan. 16, the U.S. Federal Aviation Administration ordered U.S. airlines to stop flying 787s, and other regulators around the world quickly followed suit.
The two airlines operate 24 of the 50 787s in service. United Airlines is the only U.S. carrier currently flying the 787.
Boeing later said the replacements of potentially flammable lithium-ion batteries were not made because of safety concerns. “Batteries are a replaceable unit on airplanes, regardless of the technology used,” the company said in a statement.
But in giving its outlook for 2013, the company said its numbers assume “no significant financial impact from the FAA directive.”
Ken Herbert, an analyst at Imperial Capital, said it was difficult to estimate the impact from the grounding. “It’s too early, and too risky, to say,” he said, noting there were numerous grounding-related issues for Boeing and for airlines, and many unknowns.
The NTSB has not yet established a cause for either of the two battery incidents.
Meanwhile, Boeing said net income fell to $978-million (U.S.), or $1.28 per share, in the fourth quarter, from $1.39-billion, or $1.84, in the year-ago period, when it posted a special tax gain.
Analysts expected earnings of $1.19 a share.
Mr. Herbert said wider profit margins from its commercial airplanes helped the company to beat estimates.
But he was disappointed by its 2013 profit outlook of $5 to $5.20 a share, compared with his target of $5.60. The figures include pension charges.
The consensus Wall Street estimate was $5.13 a share for 2013, according to Thomson Reuters I/B/E/S.
Revenue for the quarter rose 14 per cent to $22.3-billion.
The company said it booked 394 net aircraft orders in the quarter, adding that its total order backlog was nearly 4,400 planes valued at $319-billion, a record tally. In the third quarter, it recorded 369 net orders and had a backlog of about 4,100 airplanes valued at $307-billion.
For the first time, Boeing released so-called core results, which exclude most pension expenses that are part of standard accounting measures. Boeing said core earnings rose 9 per cent to $1.84-billion in the quarter from $1.69-billion a year ago.
Core earnings per share fell 24 per cent to $1.46 from $1.92, but the year-earlier figure included a one-time tax benefit of about 52 cents a share.
Boeing said the new measures better reflected its operating performance by factoring out market fluctuations and interest rate assumptions that can make pension expenses change significantly from quarter to quarter.
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