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Monday, February 15, 2010

Boeing Sees Orders for 747-8 Jumbo Jet in Late 2010

Business Week

Boeing Co. expects additional orders for the 747-8 jumbo jet in the second half and will decide this year whether to develop new engines for the 737 airliner, Chief Executive Officer Jim McNerney said.

Production rates, including for the best-selling 737 single-aisle plane, will remain stable for the foreseeable future and the company won’t be forced to enter “bad business deals” to keep them steady, McNerney said in remarks broadcast online from a Cowen & Co. conference today in New York.

“We feel very good about the current production rate,” he said. “We’re oversold in 2011. The numbers are coming together for 2012, and it looks like it will be oversold too.”

Analysts including Cowen’s Cai Von Rumohr have been watching Boeing’s 737 output plans for changes to the 31-a-month rate as airlines cancel and defer orders amid the global recession. The company’s smallest commercial plane provides the revenue needed to fund development programs like the 747-8 and a possible new engine for the 737.

A decision on the engine will be made based on customer feedback this year, McNerney said in an interview at the conference. The determination will “not necessarily” be made before the Farnborough Air Show in July, he said. Rival Airbus SAS has said it may decide on a new power plant for its A320 by then.

New 737 Engine

A new 737 engine may be introduced in the middle of the decade and would be 12 percent to 15 percent more fuel- efficient, McNerney said. Greg Hayes, the chief financial officer of United Technologies Corp., said at the same conference that executives at the company’s engine-making Pratt & Whitney unit expect Airbus will make a decision and hope it will be by midyear.

“What our competitor does will bear on the decision,” McNerney said. Toulouse, France-based Airbus is the Chicago company’s only larger commercial rival.

Pratt & Whitney and other engine makers have been in discussions with both Boeing and Airbus on a new 737 engine. Pratt & Whitney currently supplies Airbus’s A320 model through a partnership co-led with Rolls-Royce Group Plc called International Aero Engines. IAE competes with CFM International, a joint venture of General Electric Co. and Safran SA of France. CFM is the only supplier on current 737 models.

‘Go to Market’

“We’d like to go to market at Airbus through IAE,” Hayes said. “I think Airbus will do something, hopefully by the middle of this year, we’ll see some kind of decision from them. And Boeing’s probably a little bit behind that in terms of schedule.”

Boeing climbed $1.05, or 1.8 percent, to $60.59 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have risen 50 percent in the past 12 months.

The 747-8, the largest jumbo jet Boeing has built, made its maiden flight this week and is now “progressing to plan” after a year’s delay, McNerney said. Interest in the freighter version has picked up, and discussions under way for the passenger variant should “thaw” in the second half, he said.

Flight testing for the 787 Dreamliner composite-plastic plane, which began in December, is going “very well,” McNerney said.

“We’ve found nothing up to this point that is considered significant,” he said.

Delays to the program, which have stretched more than two years, provided engineers with extra time to improve the software systems, which are now looking “surprisingly good,” McNerney said. The company is still working on making the overweight plane lighter, he said.

“We think we’re within the mission envelope with all our customers,” McNerney said.