Boeing Reportedly Working on 70-Plane Deal With GE Unit
Boeing Co. is in talks with General Electric Co.’s airplane-leasing unit for an order of about 70 jetliners valued at more than $5 billion, people familiar with the situation said.
Meanwhile, Boeing posted a better-than-expected 26% increase in second-quarter profit as it cut costs and caught up on jetliner deliveries delayed by a 40-day engineers’ strike.
General Electric Capital Aviation Services, a unit of General Electric’s GE Capital finance business, may buy 10 of Boeing’s long-range 777s, as well as a mix of medium-range 737s and wide-body 767s, the sources said. The orders are likely to be announced next week at the Farnborough air show in Britain, the sources said.
Representatives of Seattle-based Boeing and General Electric Capital Aviation Services declined to comment.
Boeing said its profit from operations grew to $654 million, or 75 cents a share, from $520 million, or 56 cents, a year earlier, beating the 67-cent average estimate of analysts polled by First Call/Thomson Financial.
Sales slipped 1.9% to $14.8 billion, reflecting a decline in deliveries of more expensive wide-body jetliners, Boeing said. The company delivered 39 wide-body planes such as the 747 and 777, down from 50 the year-earlier quarter, when it delivered a total of 165 jetliners.
Jetliner output swelled to 167 from 75 in the first quarter and came at less expense because many were finished during the strike, with inspections completed once the engineers returned in March. A 10% reduction in the work force also helped boost profit at Boeing, which lost ground to rival Airbus Industrie two years ago when it struggled with assembly-line bottlenecks.
Countering expectations for an extended decline, Boeing said it expects steady demand for jetliners. It predicted that deliveries will rise as much as 10% in 2001 from around 490 in 2000, and then stay near that level in 2002. It increased its sales forecast to $51 billion from $50 billion for this year, and to $53 billion from $51 billion for 2001.
The company’s jetliner deliveries peaked at a record 620 last year, with $58 billion in sales.
The GE deal would give Boeing a second major order in less than a month, following Southwest Airlines Co.’s agreement in June to buy at least 94 of the 737s. The latest sale would give Boeing about 400 orders for the year, more than the 391 in all of last year when the company trailed Airbus Industrie in the annual order race for only the second time.
A GE Capital order for 767s, a twin-engine jet smaller than the 777s, would be the first for that jet this year. It competes with Airbus A330s, which have secured 49 orders in 2000.
Boeing Chairman Phil Condit was relaxed about the 767’s prospects on a conference call with analysts Wednesday, saying he expected it would eventually get enough orders to keep production stable.
Boeing shares rose 75 cents to $45.88 on the New York Stock Exchange. General Electric shares rose 50 cents to $52.75. Airbus, a partnership of four European plane makers, isn’t publicly traded.
In its earnings report, Boeing said operating profit in the jetliner group almost doubled to $882 million from $448 million as sales dropped to $9.9 billion from $10.1 billion.
Profit in the military-aircraft division fell 32% as deliveries of the aging F-15 fighter declined and because of “program performance issues” on military helicopter programs. The space unit lost $38 million compared with a $94 million profit because of increased spending on new rocket programs and an airborne Internet venture.
Boeing’s latest earnings exclude a charge of $34 million, or 4 cents a share, to cover the cost of a trial launch of a Delta III rocket next month.
