BA Boeing Co

Boeing says it will focus on landing new sales; Airbus targets delivering more planes

By Doug Cameron and Robert Wall 

The world's two largest aircraft makers laid out divergent year-end goals Wednesday as Boeing Co. said it needs to land new sales, while Airbus Group SE indicated that it would deliver more jets.

Both companies are under pressure from investors to deliver on their orders of 10,000 jets valued at more than $1.5 trillion and maintain the momentum of fresh deals.

Boeing Chief Executive Dennis Muilenburg said the company, which reported forecast-beating third-quarter profit, remains committed to its goal of boosting margins to about 15% by the end of the decade from around 10% now.

The plane maker needs, however, to find more buyers for its widebody jets, especially the 777.

Sales of twin-aisle planes that typically have higher profit margins have been sluggish this year as airlines in Asia and the Middle East dialed back on expansion plans.

Boeing has won new orders for just 17 of its existing 777 jets this year, pushing the backlog to around 150.

Mr. Muilenburg said 777 output could be cut to 42 a year in 2018 after already announcing a reduction to 66, unless it closes some key sales campaigns in the next two months. It currently turns out 100 a year.

A decision to increase production of the smaller 787 jet hinges on making additional deals in the next six months, Mr. Muilenburg said.

The profitability of both jets is crucial to Boeing's long-term plan. The company still expects to generate about $10 billion in cash in 2016 and increase that amount in subsequent years, he said.

Boeing shares reversed an early loss Wednesday and closed up 4.7% at $145.54, after hitting their highest level this year.

Deals for single-aisle jets have been far more robust. Boeing still plans to boost output of the 737, and demand outstrips even the peak of the 57 planes a month it expects to build in 2019, Mr. Muilenburg said.

Meanwhile, production at Toulouse, France-based Airbus has been hobbled by delays in securing seats and engines for some jets. The company must overcome these obstacles to deliver on pledges to investors.

Airbus on Wednesday said it would push more than 208 planes out the door in the fourth quarter, an unusually large number, including almost doubling delivery of its new A350 long-range jet.

To meet its profit goals, Airbus plans to ship more than 670 jetliners this year, at least 20 more than initially promised. Boeing aims to deliver as many as 750 planes in total this year.

Airbus must get those planes into customer hands to generate more than EUR5 billion, or nearly $5.5 billion, in cash in the last three months of the year. It has committed to generate about EUR1.2 billion in cash this year, and ended the third quarter with about EUR4.7 billion in cash out the door.

"For the remaining months of the year we remain totally focused on deliveries to achieve our earnings and cash guidance," said Airbus Chief Executive Tom Enders.

Airbus investors had been anxious that delays on the A350 and an updated version of the company's popular single-aisle plane, called the A320neo, would cause earnings to fall short.

The company reported a 21% drop in its closely watched adjusted-earnings measure to EUR731 million. Net income in the period plummeted 87%, to EUR50 million from EUR736 million, which Airbus attributed to a higher effective tax rate.

Airbus shares closed up 3.8% at EUR55.40 on Wednesday.

Boeing's third-quarter profit rose to $2.28 billion from $1.7 billion, with per-share earnings climbing to $3.60 from $2.47. A tax gain outweighed a charge on a space taxi being developed for the National Aeronautics and Space Administration.

Revenue slipped 7.5% to $23.9 billion, and though Boeing boosted its full-year guidance slightly, sales are expected to be flat or slightly down in 2017.

Write to Doug Cameron at doug.cameron@wsj.com and Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

October 27, 2016 02:48 ET (06:48 GMT)

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