Boeing says efficiency supports strong outlook, despite hurdles

Tue May 12, 2015 3:55pm EDT
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By Alwyn Scott

NEW YORK (Reuters) - Citing steady demand from airlines, Boeing Co (BA.N: Quote) said on Tuesday it is capable of raising 737 jetliner output by 43 percent to 60 a month, as it gave a rosy outlook despite concerns about orders, overall production and defense spending.

Boeing Chief Executive Jim McNerney said market fundamentals that support higher jetliner production are unchanged, despite recent deferrals of aircraft deliveries by American Airlines (AAL.O: Quote) and United Continental Holdings (UAL.N: Quote), which he termed normal fleet optimization decisions.

Aircraft prices have "not deteriorated," even for 737 and 777 models that are being replaced by new versions, he told Boeing's annual investor conference in Chicago. Plane makers, including rival Airbus Group NV (AIR.PA: Quote), typically offer heavy discounts to sell end-of-production models to avoid cutting output.

Boeing faces curbs on defense spending, slowing commercial aircraft orders after record years, and a possible loss of export financing if Congress fails to reauthorize the U.S. Export-Import Bank.

But McNerney and other top executives of the world's largest plane maker said they would be able to keep profits rising because of the work they are doing to lift productivity, lower costs and make smaller, less expensive innovations in products.

McNerney reaffirmed Boeing's goal of generating more than $9 billion in operating cash flow this year, and said that figure will increase in 2016 and beyond.

He also said Boeing's defense business would be at the right scale even if it did not win ongoing competitions for major new programs such as the Long Range Strike Bomber.

"It's hard to believe we wouldn't get one of them," he said. But "we would still be an at scale" as a defense business, and would have the commercial airplane business. "We don't have to panic," he said.   Continued...

An aerial view shows the final assembly area at the Boeing plant in North Charleston, South Carolina, March 26, 2015.  REUTERS/Randall Hill