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Boeing Scrambles To Evaluate Impact Of Asian Financial Crisis Big Share Of Company’s Backlog Is Orders From Asian Airlines

Sun., Dec. 28, 1997, midnight

At Boeing Co.’s gargantuan factory north of town here, workers are putting the finishing touches on a $150 million 747 jumbo jet for Korean Air. South of town, other Boeing workers are busy delivering a 737 to Thai International Airways, one of five the Asian flag carrier will take delivery of this month.

But on another Boeing tarmac, another 737 sits idle while Indonesia’s Garuda airline tries to line up financing for the $30 million plane.

Such are the confusing crosscurrents facing Boeing as its executives try to get their hands around the Asian currency and economic crisis. Like many American multinational corporations, Boeing is betting heavily on Asia for its future growth. But few other U.S. companies already receive such a huge chunk of their current income from Asia.

The leading U.S. exporter, Boeing counted on Asia for 72 percent of the $10 billion in foreign sales it posted last year. Boeing predicts that the region’s airlines will buy $300 billion of the more than $1 trillion in new airliners that it expects to be sold in the next 20 years.

“We keep waiting for somebody to throw a rock in our face,” said Boeing President Harry Stonecipher. “But realistically things seem to be holding in place.”

Yet to date, six months after the first signs of Asia’s currency crisis began surfacing, Boeing still doesn’t have a clear picture of how the devaluations of currencies and resulting economic slowdown will affect the company.

Boeing did say last month said it expected airlines in Asia to order 20 fewer planes a year over the next three years. That’s a cut of about a third from the projected rate of delivery.

But that analysis resulted less from hard market information than from simple economic forecasts. Company planners assume a 40 percent dropoff in economic activity in the four most affected countries - Thailand, Malaysia, Indonesia and Korea. Boeing analysts then calculated that there would be about a 33 percent falloff in orders.

So far, though, only Hong Kong-based Cathay Pacific has said publicly it wants to delay - but not cancel - options on future orders, although the carrier still plans to take delivery of seven new Boeings over the next two years. And Cathay’s moves are related not to the current crisis in Asia, but to slumping traffic into Hong Kong since the colony’s turnover of power from Britain to China this summer.

Indeed, says Larry Dickenson, vice president for Asia-Pacific in Boeing’s commercial group, “we are talking currently with several Asian airlines about ordering new airplanes.”

Still, Wall Street remains unnerved about the threat of an Asian meltdown and the resulting effect at Boeing. They well recall that an unanticipated event - the start-up of the Gulf War in 1991 - touched off an industrywide recession.

But some industry observers believe Boeing won’t be hurt badly by the problems in Asia.

“We’ve got 3,000 airplanes in the (order) backlog between Boeing and Airbus,” said Bankers Trust analyst Wolfgang Demisch. “To some extent the market could digest a slowdown in Asia.”

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