Boeing: 2009 Soft But Stable

The two months that Boeing machinists spent on the picket lines late last year helped push 2008 revenues and earnings well below those of the previous year and exacerbated the company's struggles with organizational sluggishness and a critical shortage of engineers.

The full-year cost of the strike on earnings was $1.8 billion, including a 15% reduction in revenues at Boeing Commercial Airplanes (BCA). The strike knocked 105 deliveries off Boeing's target for 2008, forcing it to settle for 375. If this year's production goes smoothly, BCA will deliver 480-485 airplanes, about what it aimed for last year.

Boeing anticipates a jump in deliveries in 2010 as the long-delayed 787 and 747-8s finally enter service. How much deliveries will increase, however, is not clear.

Coming off three record years and heading into a worldwide economic crisis, Boeing booked 662 orders last year, or nearly twice as many as it delivered. While that rate "is holding," Boeing Chairman/CEO James McNerney said in an earnings report last week, "we do expect to see an increase in the number of deferrals and cancellation levels in 2009."

Since Boeing typically overbooks production slots to cover cancellations, production lines should remain busy this year, says McNerney. It will not be until 2010 that Boeing might feel the effects of the weakening airline market. This year's airplanes are already financed, but the cycle for next year's is not complete.