Boeing Updates Commercial-Airplane Production Progress

Boeing Commercial Airplane Group plans to finish the year with approximately 335 7-series airplanes tendered for delivery.

In November, Boeing tendered for delivery 24 of the 25 7-series airplanes it had projected, tendering the 25 th on Dec. 1.

"Through Dec. 15, we have delivered 17 airplanes, including the airplane delivered on Dec. 1," said Bob Dryden, BCAG executive vice president for Airplane Production. "For the second half of December, we have an aggressive schedule. Boeing plans to tender for delivery an additional 36 commercial airplanes by the end of the month. Seventeen of those airplanes are to be tendered for delivery in the week following Christmas, a time when Boeing is traditionally on vacation. Crews will be working overtime during the holiday to accomplish this. All of these airplanes are factory complete and are in the process of customer acceptance."

As in November, Boeing anticipates that customer-unique circumstances may preclude some customers from immediately taking final delivery of a small number of these tendered airplanes. An airplane is tendered for delivery when we have completed production and the customer has been notified that the airplane is ready for the customer's purchase. Delivery occurs when the customer completes the purchase and flies away with the new airplane.

"Our job with regard to factory recovery is to ensure that the airplanes are ready for delivery to all our customers," Dryden added.

Factory recovery is proceeding satisfactorily, he said, noting that overall part shortages, behind-schedule jobs, and out-of-sequence work are at or better than the recovery plan. The plan, announced this fall, involved stopping the 747 production line for 20 manufacturing days and deferring new Next-Generation 737 final assembly for 25 manufacturing days. Today, factory operations are back in sequence and overtime is down to 17 percent from a high of more than 20 percent.

Boeing expects to deliver the first 737-700 to Southwest Airlines this week. The next three 737-700s, all for Southwest, will be delivered in December. The delivery plan calls for 27 737-700s to be delivered by the end of the first quarter of 1998.

"The challenge now is to continue to keep part shortages and behind-schedule jobs on track with the recovery plan and to keep them under control as we increase the 747 production rate from four per month to five per month; and the Next-Generation 737 from seven per month to 14 per month in the spring of 1998," Dryden said. Total 737 production (all models) will increase from 21 per month to 24 per month at that time.

In addition, Boeing noted that it believes employment in commercial airplane operations should start to decline by approximately 12,000 in the second half of 1998. A significant portion of the decline is expected to be accomplished through attrition. Boeing Commercial Airplane Group employment currently is at approximately 118,000, including Douglas Products Division.

In total, Boeing expects to tender for delivery 375-385 commercial airplanes in 1997, including the MD-series.

FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY

Certain statements in the financial discussion and analysis by management contain "forward-looking" information that involves risk and uncertainty, including projections for deliveries, sales, research and development expense and other trend projections. Actual future results and trends may differ materially depending on a variety of factors, including the Company's successful execution of internal performance plans; future integration of McDonnell Douglas Corporation; product performance risks associated with regulatory certifications of the Company's commercial aircraft by the U.S. Government and foreign governments; other regulatory uncertainties; collective-bargaining labor disputes; performance issues with key suppliers and subcontractors; governmental export and import policies; factors that result in significant and prolonged disruption to air travel worldwide; global trade policies; worldwide political stability and economic growth; changing priorities or reductions in the U.S. Government defense and space budgets; termination of government contracts due to unilateral government action or failure to perform; and legal proceedings.

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