Boeing profits rise but layoffs loom

Boeing faces a tough time for commercial airlines sales

Boeing, the world's biggest aviation firm, has posted improved profits but forecasted lower deliveries and sales for next year.

Airlines worldwide have cut routes and mothballed planes amid a downturn in passenger numbers following the suicide hijackings in the US last month.

Five years ago, we set out to get a much more balanced portfolio [of businesses]

Phil Condit, CEO, Boeing Co

One of the starkest portraits of the problems facing the industry came from US carrier United Airways, which told staff that it is "literally haemorrhaging money" and risks bankruptcy.

Despite the gloom, Boeing chief executive Phil Condit said the company was well positioned for the future.

Positioned for future growth

"Five years ago, we set out to get a much more balanced portfolio [of businesses]," Mr Condit told BBC News Online.

During that time, the airline moved from being mainly a builder of commercial aeroplanes to one that also dabbles in military aircraft, and space and communications technologies.

"That has stood us in very good stead, because we are going to see a downturn in the commercial side."

The Boeing chief said that his company could expect to see "very positive growth" in the space industry - communications in particular - and in military aircraft.

"That is the Boeing story," Mr Condit added.

Massive job cuts

Lay-offs have also become a part of Boeing's story, with 30,000 employees cut at the now Chicago-based aerospace giant.

Boeing has taken a $100m charge against profits this year to pay for the first 12,000 employees to be cut from the rolls. Those pink slips went out on Friday.

"Given the opportunity, we would not like to go here at all," Mr Condit said.

Hit hard

But with its commercial aircraft business hit hard by a reduced number of Americans taking to the skies, Mr Condit said Boeing could little afford any other course of action.

The attacks on New York and Washington, which left nearly 5,400 people dead or missing, have resulted in a 10-20% reduction in the number of passengers flying.

By contrast, the Gulf War led to a reduction of at most 2% in passenger numbers, Mr Condit said.

"The job cuts go right hand in hand with that decrease," Mr Condit told BBC News Online.

As a result, Boeing plans a "rapid and orderly ramp down" of plane production over the next six to nine months.

"The commercial airplane market is in a period of unusual uncertainty," the company said in a written statement.

Meanwhile, rival Airbus has scaled down its delivery forecast for 2002 by almost a quarter, to 315 planes, according to chief commercial officer Joe Leahy.

Tough times for Boeing?

How future airline failures may affect Boeing's bottom line, and assembly lines, is of grave concern, especially following United Airline's dismal announcement on Wednesday.

Mr Condit explained that every plane order gets advanced payments before it is produced and during assembly.

"Those payments get higher the near to completion the plane gets," he said.

And in the end, the plane becomes Boeing's if an airline fails.

But he also said the nature of the bankruptcy also affects airplane orders and the inventory of existing aircraft.

If, for example, an airline remains in business as it works through reorganisation, it would have less of an impact than if one goes into instant liquidation.

How likely are more failures?

Mr Condit said, "I think there will be further failures," adding that the situation is dire enough that he expects that to happen. "And that is in our planning".

Profits for the year

In speaking to BBC News Online, Mr Condit said that, given the current crisis, Boeing has revised downward "slightly" its profits picture for 2001.

For the year, the Boeing chief said he expected his company to bring in $58bn.

In the quarter which ended on 30 September, Boeing reported profits up 7% to $650m, after a $100m charge to cover the cost of the first 12,000 of the 30,000 planned job cuts.

In the same period last year, Boeing recorded profits of $609m.

Sales were worth $13.7bn, a 15% increase from the same period last year.