Boeing CEO sees upturn, eventually

Meanwhile, Condit looks to sales of military planes

Air travel yet to recover

May 27, 2002|By BLOOMBERG NEWS

ST. LOUIS - Boeing Co. Chief Executive Officer Phil Condit said it will take "awhile" for commercial air traffic to return to the levels seen before the U.S. economic decline.

Condit said the collapse of numerous companies in the Internet industry, coupled with the terrorist attacks Sept. 11, led to a 13 percent decrease in commercial air travel over 12 months, compared with a 2 percent decline during the gulf war.

"The drop-off was happening well before. Nine-eleven just dropped the bottom out, and it will take awhile for the airline traffic to come back," Condit told analysts last week at the biggest aircraft maker's annual meeting in St. Louis.

Condit is counting on sales of the company's military aircraft, which includes the C-17 transport, F-18 fighter and Apache helicopter, to help keep profit chugging along during the commercial slump. Military sales will rise at an 8 percent compounded rate through 2007, the company said.

Boeing also expects to close a contract to lease 100 converted 767s as refueling tankers to the Air Force by this summer, said Gerald Daniels, who heads Boeing's defense unit.

Commercial-aircraft deliveries will fall to 275 to 300 next year from an estimated 380 this year and 527 in 2001, said Alan Mulally, head of the commercial-aircraft business. Boeing is also near completing the 30,000 job cuts announced after Sept. 11.

The company is optimistic that "our low point in production will be in 2003, and then we will come back," Mulally said, adding that production will be more efficient after the cuts.

While the company has pulled eight wide-body aircraft from production in 2003, "upward pressure" from 737 model orders because of expansion at lower-cost airlines will keep delivery schedules in the 275 to 300 range, Mulally said.

Condit said he is confident about an economic recovery, partly because productivity continues to improve and has room to improve more in manufacturing.

"I'm more optimistic than I would be just looking at GDP numbers," he said. "Positive productivity in the middle of a downturn is a pretty amazing thing."

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