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Boeing To Take $1B Charge, delays 747-8 freighter, increases quarterly jet deliveries

By Elizabeth Haggar for CEOWORLD Magazine Updated:October 6, 2009

Boeing Co. (NYSE:BA) said Tuesday it will take a $1 billion pre-tax charge in the third quarter due to increased production costs and difficult market conditions affecting its 747-8 program.

The company now expects the first flight of the 747-8 Freighter to take place early next year. Shares of Boeing fell 1.5% in Tuesday premarket trading.

Last year, the company said it was delaying deliveries of the 747-8 freighter and passenger jets due to design changes, limited engineering resources and a strike that shut down the company’s commercial jet factories for eight weeks.

About $640 million of the charge reflects higher estimated costs to produce 747-8 airplanes at Boeing and its suppliers, Boeing said. Higher fixed expenses and volume-based penalties to suppliers are the main drivers of the additional costs, Boeing said.

The company said the remaining $360 million of the charge relates to “challenging market conditions” and its decision to maintain the 747-8 production rate at 1.5 airplanes per month nearly two years longer than previously planned. The company is delaying an increase in 747-8 production to two per month.

Boeing Co. said Tuesday it delivered 113 commercial jets in the third quarter, up from 84 in the same period last year.

The Chicago aerospace giant said 737 deliveries rose to 90 from 67 last year, 767 deliveries rose to four from two and 777 deliveries rose to 19 from 11. However, 747 deliveries fell to zero from four last year.

The decline in air traffic has pressured some customers taking new aircraft this year to defer deliveries, but so far other customers have stepped up to purchase the planes. But it’s expected to get tighter next year: Boeing has announced cuts to its 777 program in 2010 and ramp-up delays for its 767 and 747-8 jets. Shares of Boeing rose less than 1% in premarket trading on Tuesday to $52.66.

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