Boeing chief shares outlook and specific issues at earnings press conference

Boeing CEO Jim McNerney was bullish about the next 12 months and beyond at the half-year reporting point; and he was also positive when challenged about some specific issues.

In general terms, McNerney spoke confidently about the business climate: "the global economy continues to transition to a sustained recovery, although uncertainties remain as air transportation has been adjusting to the economic impacts of the unrest in the Middle East, rising oil prices, sovereign debt issues in Europe, and the US debt ceiling discussion and its related impacts. Notwithstanding these uncertainties, airline industry fundamentals remain sound. The continued strength and resiliency of the global economy is supporting growth for both passenger and freight traffic, which we expect to increase at or above long-term historical trends during 2011." 

And, confirming that Boeing had made the decision to proceed with a re-engined 737, the CEO explained that "a broader customer view has emerged in support of the greater certainty of gaining significant incremental improvement in a re-engined 737 in the near to mid term over the more perfect solution, which may be available further down the road. It has always been our view that if it looked like we were putting meaningful market share at risk by waiting to do a new airplane, we would re-engine instead. That, combined with our new engine technical production assessment against leadtime for a new engine decision, led us to the judgment that we have made. We are confident that our re-engined 737 will maintain the value proposition we have in the marketplace today, and we expect to see strong demand for this product."

Painting the broader picture for the company's Commercial Airplanes division, McNarney said, "We now expect Commercial Airplanes to deliver between 485 and 495 airplanes during the year with a combined 20 to 30 787 and 747-8 deliveries weighted more towards 747-8. Commercial Airplane revenues remains at between $36 billion and $38 billion for the year as improved service revenues is offsetting the lower forecasted deliveries. Commercial operating margin guidance has been increased and is now expected to be between 8% and 8.5%, reflecting the strong performance on production and service programs and the lower planned development program deliveries. We expect Commercial operating margins during the second half to be lower than the first half, driven by dilution from the 787 and 747-8 deliveries and higher fleet-to-port costs, somewhat offset by lower research and development expense and higher volume on production programs."

And after the 737 re-engine project? "I would say the two projects after the re-engine that we have to sort out would be the -10 on the 787, which is a further stretch of that airplane, and then some degree of refurbishment, as I just said, on the 777, which could range from a small to large if -- and we're sort of waiting to see what the A350-1000 is or isn't to make that judgment. I think you always want to plan conservatively, so we're planning on the modification being somewhat significant. Those kinds of modifications are almost the same as new airplanes in terms of the kind of people you need to employ and the scope of the work. Then there will be, obviously as we get into the next decade, the choice on the all-new narrow-body versus an all-new wide-body and -- but there'll be a lot of work in the meantime to keep our folks busy."