BOEING is riding a wave of demand for new fuel-efficient planes from airlines worldwide. Now the trick is to build them fast enough.
With a backlog of orders worth US$344 billion ($408 billion), Boeing has been speeding up production of its big commercial planes, saying it will boost output of the new 787 by 40 per cent by the end of the decade.
Yesterday, Boeing reported a better than expected third-quarter profit and raised its full-year outlook, its shares hitting an all-time high.
Along with automakers, aerospace companies like Boeing have been a source of manufacturing strength, offsetting the recent struggles of other big US manufacturers like Caterpillar.
Boeing and European rival Airbus are benefiting from a big expansion of low-cost airlines in Asia and Latin America, and faster replacements of current planes because new planes are fuel-efficient enough to justify their cost. Also, buying a plane almost always involves a loan so, like carmakers, aerospace companies have also benefited from lower interest rates.
Boeing is now making its long-haul 777 at a rate of more than eight per month, up from five in 2010. Airbus has boosted output of its competing A330 to 10 per month.
Boeing said it would boost production of the 787 Dreamliner from 10 per month by the end of this year to 12 per month in 2016, and it's aiming to get to 14 per month by the end of this decade.
The long-range, fuel-efficient 787 is very popular with airlines and is benefiting from today's economics.
Jet fuel prices now are six times higher than in 1995, the last time Boeing delivered an all-new model.
The speeding up of 787 production is especially noteworthy because at one point it wasn't clear Boeing would meet its goal of delivering 60 this year. The company had to cease deliveries for a while when the planes were grounded for battery problems. Deliveries resumed in May and Boeing expects to meet its goal.
Overall, Boeing expects to deliver 635 to 645 passenger planes this year.
Boeing sold 131 of its 787s this year, and has a backlog of 890 orders, though the company is still working to fix its reliability. Chief executive Jim McNerney said its "dispatch reliability", meaning the plane's readiness for a flight, was at 97 per cent, but needed to be better. Software problems including "false messaging" were a big issue. This month a 787 bound for Tokyo returned to San Diego because the pilot got a false error message about its de-icing system.
As for financial results, faster production is going straight to Boeing's bottom line. Third-quarter net income rose 12 per cent to US$1.16 billion, or US$1.51 per share, from about US$1 billion, or US$1.35 per share, a year earlier.
Revenue rose 11 per cent to US$22.13 billion, also topping analyst expectations.
Boeing raised its profit guidance for the full year to US$6.50 to US$6.65 per share. Analysts had been expecting US$6.52.
Profits from commercial planes rose 40 per cent, offsetting a 19 per cent profit drop in Boeing's defence division, where deliveries of military planes declined because of a drop-off in military spending in Europe and the US.
Shares rose US$6.54, or 5.3 per cent, to US$129.02, after setting a new high of US$129.99.