Continuing financial problems experienced by some airlines may force further production cuts of Boeing jetliners, The Boeing Co. said Wednesday.
Boeing made the admission as it reported profits fell 48 percent in the last quarter of 1994, due mainly to fewer jet deliveries. The company also cited a higher level of research-and-development expenditures, increased debt expense and lower investment income for the earnings drop.
“Planned production rates will continue to be adjusted as necessary to match customer requirements,” Boeing said in a news release. “Unfavorable operating results being experienced by certain U.S. airlines may result in further selective production rate reductions, primarily impacting deliveries in 1996.”
Boeing’s release came on the same day Air France announced it was canceling orders and options for 17 new aircraft - seven Airbus A-340s and 10 Boeing aircraft.
Boeing profits for the fourth quarter totaled $157 million, or 46 cents per share, on revenue of $5.1 billion. That compared with earnings of $304 million, or 89 cents a share, on revenue of $5.7 billion in the same 1993 period.
Profits for all of 1994 fell 31 percent to $856 million, or $2.51 a share, from $2.54 billion, or $3.66 a share, last year.
Boeing delivered 270 commercial jets in 1994, compared with 330 in 1993. It has projected it will deliver about 230 aircraft this year.
The annual earnings decrease in commercial aircraft was partially offset by an 8 percent increase in defense and space sales, most of that attributed to the Space Station program, and by a lower federal income-tax rate, Boeing said.
Chairman Frank Shrontz said Boeing doesn’t expect substantial new orders until airlines can sustain their generally improving performance after several years of an economic slump.
In the meantime, he said, earnings will continue to be squeezed as the company makes “strategic investments in both new products and business and manufacturing processes.”
The fourth-quarter results were higher than the 35 cents per share analysts were predicting, said Bill Whitlow of Pacific Crest Securities in Seattle. Both prices and profit margins on jetliners delivered to airlines apparently were higher than predicted, demonstrating that the company has made “a lot of progress in efficiency,” he said.
Boeing’s commercial aircraft production has declined from 32 per month at the beginning of 1993, to 23 per month at the beginning of 1994 and 19 at the end of the year.
Boeing’s comment that it would adjust production schedules “to match customer requirements” was one variable that might make analysts nervous, Whitlow said.