Boeing production maimed in ’02

Airline industry woes make year difficult for aerospace manufacturer

? The year 2002 couldn’t end soon enough for Boeing.

The aerospace manufacturer limped through the year as it dealt with a series of setbacks, particularly in its core commercial jet business. Boeing cut 30,000 jobs, announced more reductions for 2003, slashed production in half, lost the year’s biggest plane order and was forced to watch as the airline industry underwent a massive shakeout.

Industry analysts saw a bigger problem — Boeing’s failure to champion a vision for the future. The company’s decision to shelve ambitious plans to build a Sonic Cruiser jet, which would travel near the speed of sound, made them question whether Boeing has lost its nerve.

“You could either regard 2002 as (Boeing’s) taking a break or as a pattern for the future,” said Richard Aboulafia, aviation director with Teal Group of Fairfax, Va. “It’s the latter that is a bit disturbing.”

Boeing is important to Kansas’ economic future because the company’s production facility in Wichita makes it the largest private employer in the state. The state already has felt the pain of Boeing’s downturn. The company’s woes have been a major contributor to the 14,200 aviation jobs that have been lost in the Wichita area since July 2001.

To be sure, it was a difficult year for everyone in the commercial aviation sector.

The airlines that are Boeing’s customers were hurt by the sluggish economy, a drop in business travel and the aftereffects of the Sept. 11 attacks. The biggest names in U.S. aviation — including United Airlines, which filed for bankruptcy — laid off tens of thousands of workers and cut routes as they reported billions of dollars of losses.

Boeing was forced to reschedule deliveries of more than 500 jets — easily a year’s work — since the attacks and halved its production rates, laying off thousands. The cuts will continue in 2003, the company said, with about 5,000 achieved through attrition and layoffs.

Boeing also lost a huge order to its chief competitor, Airbus of Toulouse, France. British low-fare carrier easyJet announced in October it would order 120 jets from Airbus — despite an existing fleet of Boeing 737s — and take options on another 120.

Instead of building the Sonic Cruiser, Boeing said it planned to launch in 2004 a traditional, middle-of-the-market, super-efficient jet the size of a 767.

Boeing Commercial airplanes chief executive Alan Mulally pauses during a news conference in Seattle. Mulally announced Dec. 20 that Boeing Co. had decided to shelve its proposed high-speed Sonic Cruiser passenger jet in favor of developing a more traditional but highly fuel-efficient airliner. While airlines had shown interest in the high-tech cruiser, they felt the fuel-efficient plane was more important. It has been a difficult year for Boeing as it has cut 30,000 jobs, slashed production and tackled other obstacles.

Including all its businesses, the company earned a profit of $1.73 billion, or $2.14 a share, for the first nine months of the year, on revenue of $40.4 billion, with the majority coming from commercial airplanes.

Boeing chairman Phil Condit defended his company’s moves, saying it “won’t run away from a development opportunity that we think’s got a good market.” He added that Boeing continues to develop new defense aircraft and high-speed Internet connections for air travelers.

“There’s so much exciting going on,” he said.

For the year ahead, the company will have to cope with the airline industry’s continuing problems. It has projected delivering only 275 to 285 jets in 2003, which would be one of its lowest production years in a decade.

The company also will face shrinking backlogs in orders for its 747, 767 and 757 lines, with the 757 outlook looking particularly grim. The 757 had no new orders in 2002, leaving only 29 of the planes to be built as of the end of November.