Boeing May Find It Tough to Deliver

Boeing CEO Jim McNerney believes "airline traffic is the key factor to watch" in assessing future orders, wrote Macquarie Research analyst Rob Stallard, who met with Boeing management last week. "Boeing has yet to see a slew of deferrals, but airlines have until spring of next year to defer 2010 deliveries," he said in a report, noting that Boeing may delay its 2010 guidance until April.

Clearly, the worldwide economic pullback raises questions about Boeing's frequent assertions that broad geographic distribution protects its orders. Aviation analyst Scott Hamilton sees "a good likelihood of a drop-off in orders" and notes that among China's big three airlines, two are grounding aircraft while the third lost money in the third quarter. "China historically has been relied upon by Airbus and Boeing as a rock solid customer," Hamilton says.

In India, another favorite of the aircraft manufacturers, airlines are expected to lose about $2 billion this year. The second-largest carrier, Kingfisher, is returning A320 jets.

Additionally, International Lease Finance Corp., the major leasing company, is owned by troubled insurance giant AIG(AIG Quote). "The impact of the credit crisis is inescapable," wrote Gimme Credit analyst Carol Levenson, in a recent report on Boeing. Boeing's financing unit, Boeing Capital, "will have to step up to the plate," she said.

Despite its current problems, Boeing was worse off 11 years ago, Hamilton notes. In 1997, the company sought to speed up production more quickly than suppliers could make parts. The result was a month-long shutdown, a rare annual loss and $2.6 billion in charges over two years.