Bombed-out Boeing sees little but grief ahead

Boeing, the US aerospace and defence corporation, yesterday warned profits this year and next would be severely depressed by the continuing savage downturn in the world aviation market.

The ailing group, which posted an operating loss of $293m in the second quarter after taking a $1.1bn hit on its satellite business, said the market would recover in 2005 at the very earliest.

Boeing, which is in danger of ceding first place in aircraft deliveries this year to its European rival, Airbus, said it now expected to deliver a maximum 290 aircraft next year compared with an earlier forecast of 275-300.

The company, which is shedding a further 5,000 commercial aviation jobs on top of 35,000 already cut in the last two years, said it could scrap its 757 plane next year because of a lack of orders.

The commercial aviation downturn, which could last well into 2006, is the main reason Boeing has shaved at least $2bn off next year's forecast sales of $54bn. Phil Condit, chairman and chief executive, said the impact would be to depress forecast 2004 earnings per share by an expected 35 cents or $400m.

This year, badly hurt by the lack of business at its satellite and rocket business, Boeing said it could lose as much as 7¢ a share and make at most 3¢ compared with earlier forecasts of earnings of 68¢ to 88¢.

Mr Condit made plain he was not counting on US airlines - still declaring huge losses despite federal subsidies - for any upturn in the market in 2005, with 75% of expected deliveries next year coming from non-American carriers.

"It depends how fast Asian airlines recover from Sars," he said cautiously. "European airlines appear to be coming back out of the impact of Iraq...We will be up slightly in 2005 deliveries from what we can see."

Mr Condit, who said the market for spares and maintenance was also affected by lack of demand, said there was a backlog of 18 orders for the 757 and Boeing had started a new marketing campaign to win orders. "If we are successful in those campaigns the [757] programme can keep going," he said. But he made plain there was no point in continuing production after mid-2004 if no orders existed.

Boeing, which is fighting off a serious Airbus challenge in the low-cost airline market, is counting on the new 250-seater 7E7 to restore its long-term fortunes in commercial aerospace where Airbus is introducing the much bigger A380 superjumbo.

Mr Condit conceded that the new plane was unlikely to be launched with an American carrier and cast considerable doubt over the participation of a Japanese airline - a first in aviation history. He insisted that interest in the plane elsewhere was acute.