Boeing Suffers In Last Quarter

Boeing following on the footsteps of other defense giants Lockheed Martin and Northrop Grumman reported a bad third quarter yesterday. Due to charges related to delays in the 787 Dreamliner and the 747-800 freighter the company saw a loss off over $1.5 billion.

The company had already warned two weeks ago that it would have to take some charges due to the problems with its new civil aircraft. The bulk of the $3.5 billion in charges is related to the fact that they cannot deliver the existing 787 test aircraft to a customer and thus their value must be carried as a debit. Ultimately some of these will be provided to customer and some of Boeing’s earnings in the future will come from them.

The company’s Integrated Defense Systems did see an increase in revenue to $7.8 billion but because the U.S. Army has canceled the Future Combat Systems (FCS) contract backlog was lower. IDS has seen some hits with the FCS end and some missile defense work canceled as well.

Military aircraft other then the F-22 remains a bright spot as the company continued to sell CH-47 Chinook helicopters to the U.S. Army and foriegn customers. The C-17 transport also has been kept alive by Congress with some ordered in the 2009 Supplemental as well as money for them being kept in the 2010 budget despite Obama Administration’s request for no more funding.

To see how strong in many ways the company is it reported total profit for the year to date as still being $44 million despite the over $3.5 billion in charges taken this quarter. If the fourth quarter comes in as predicted with another $18 billion in revenue there may be a larger profit at the end of the year.

Despite the end of the F-22 program Boeing still has some new contracts it may win. The biggest of course is the new KC-X tanker aircraft which in the first contract of three could be worth $35 billion in just procurement of aircraft. The support contracts that would follow would be worth even more if you assume a forty year life for the aircraft. Boeing is planning on proposing for the new RFP as does the Northrop Grumman-EADS team.

As the defense budget falls out over the next two years and the 787 and 747-8 begin deliveries Boeing will see potential for growth. Like EADS went through with A380 once it began service it quickly made up for the lost revenue and costs over the previous few years related to delays. The two Boeing civil aircraft will accomplish the same thing for the U.S. corporation.