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Boeing Earmarks $1B For Client Finance Next Yr-Exec
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U.S. planemaker Boeing Co. (BA) has set aside $1 billion dollars to help customers finance orders next year, a senior executive said.
"Because of the credit crunch, we see the need to provide financing. We have earmarked more than $1 billion next year for financing," Randy Tinseth, vice president for marketing for the company´s commercial aircraft division, told Dow Jones Newswires in an interview on the sidelines of an international air freight conference in Kuala Lumpur.
"Leasing companies, regional banks, import-export banks,...will provide the bulk of the financing. But if our customers don´t find financing, we have to make a decision internally to finance those planes," he added.
He said that Boeing Capital, the company´s finance arm, had "worked hard" over the past few years to clean up its balance sheet so as to be in a position to offer finance to customers.
Amid further delays to its Dreamliner model, Tinseth said that Boeing expects more orders for the long-awaited plane that is tipped to be 20% cheaper to operate than previous aircraft of its size.
"American Airlines say they could order 100 787s," he said.
Boeing is also hoping for orders for other models from Turkish Airline as well as airlines in China, Indonesia and the Middle East.
Boeing Tuesday admitted that a 57-day strike by machinists, which only ended Monday, will cause further delays to the 787 program - already two years behind schedule.
Wednesday, Tinseth said: "For every day of strike, there will be at least an equal delay plus a bit more. The 787 will fly next year. We don´t know the exact date. We are in touch with our 56 787 customers. They are anxiously awaiting the new delivery schedule. We can´t speculate on any cancellations for that plane."
"Deliveries for all models will be pushed back - the 737, 777, 767 as well as the Dreamliner," he added.
"We are sitting down and discussing the production cycle and delays from the strike with customers."
The machinist strike is estimated to have cost Boeing $100 million per day in deferred revenue.
Boeing customers have been quick to seek compensation for tardy deliveries of the new plane in the past. All Nippon Airways Co. (9202.TO), the first Dreamliner customer, had expected to begin receiving planes early next year.
Tinseth noted though that, unlike previous schedule slippages, delays arising from the strike would probably not result in Boeing having to pay compensation to customers.
"There is a provision in most of our contracts that makes a delay due to a strike an excusable delay so we won´t have to pay compensation for that particular delay," he said.
However, he didn´t say whether a further delay announced Tuesday - arising from improperly installed fasteners on the first Dreamliners - would result in compensation calls.
Boeing said Tuesday that it didn´t yet know what the impact of the latest fastener problem would be but that a small percentage of fasteners were affected.
On orders, Boeing last week said China would need 3,710 new airplanes worth about $390 billion over the next 20 years.
However, Tinseth was cautious on predictions for the rest of Asia.
"They´re (orders) difficult to estimate in the short term. We will clearly see a slowdown in economic growth this year and a further slowdown next year. This will push down aviation traffic. It is going to be a very challenging time. Many airlines are using new planes to replace old ones, not to grow capacity and we´ll see this in 2009/2010."
"So far this year, we´ve had two cancellations and 80 deferrals to a later time," he added, without elaborating.
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