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Boeing profits plunge
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April 22, 1998: 12:49 p.m. ET
Aircraft maker earnings weaker than expected due to 737 retrofitting charge
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NEW YORK (CNNfn) - Boeing Co., the world's largest commercial aircraft maker, Wednesday reported sharply lower first-quarter profits as a result of a charge to retrofit its 737 models.
The Seattle-based company reported net income of $50 million, or 5 cents a share, compared with $540 million, or 55 cents, in the year-ago period. Analysts had a consensus estimate of 7 cents a share, according to First Call.
Boeing shares barely moved, however, slipping 1/16 to 53 in midday trading.
The latest quarter was dampened by $219 million in losses related to the company's next-generation 737 program. In recent months, Boeing has been plagued by slower 737 production due to increased regulatory scrutiny as well as a shortage of components.
"Changes to the aircraft resulting from flight test and certification requirements in the first quarter caused the retrofit activity to be more extensive than originally anticipated," said Phil Condit, chairman and chief executive.
Earlier this month, the company announced it has taken steps to return to full production. But Condit said recently the problems "cannot be reversed quickly."
Compared with operating profits of $309 million a year earlier, the commercial aircraft operations ended the latest quarter with losses totaling $251 million.
Boeing reiterated that the 737 program will remain in the red for the inital quantity of 400 aircraft. On April 9, the company announced charges of $700 million to cover the loss.
That may not be the end to 737's problems. Just last week, the Federal Aviation Administration proposed measures to prevent possible ignition of fuel vapors in the plane's fuel tanks. The proposed rule would affect 1,140 U.S.-registered versions of the narrow-bodied twin-engine jet.
The FAA set a 45-day comment period on its proposal, saying it would give airlines one year to carry out the work once its airworthiness directive became final.
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