A boy plays with a model Boeing 747 plane flown by Oasis Hong Kong Airlines, at Hong Kong International Airport Wednesday. The maiden voyage of Hong Kong's first budget air carrier hit turbulence even before it left for London yesterday, because Russia refused to let it fly over its territory. - Reuters

CHICAGO, United States (AP):

Boeing Company, the number two commercial airplane maker behind Airbus SAS, said yesterday its third-quarter earnings fell 31 per cent and raised concerns on Wall Street by predicting higher costs than expected for its 787 jet programme.

Quarterly profits were hurt by a hefty charge for discontinuing in-flight Internet service Connexion. That offset higher jet sales and a 19 per cent increase in total revenue, reflecting a thriving commercial plane business that prompted Boeing to raise its guidance for 2007 earnings and revenue.

But investors focused on the company's comment that its 787 jet programme is coming under increasing pressure concerning weight and supplier-related issues and it will have to spend hundreds of millions of dollars more than anticipated this year and next on research and development for the plane, which is due out in 2008.

Wall Street's concerns about the possibility of 787-related cost overruns sent shares in the company down US$2.45, or 2.9 per cent, to US$81.14 in late morning trading on the New York Stock Exchange.

Weight a dogged issue

"We are at that point in the programme where weight remains a dogged issue," Chairman and CEO Jim McNerney said on a conference call.

The company's Seattle-based Boeing Commercial Airplanes unit more than doubled its operating earnings for the quarter, to US$646 million (euro513.51 million), and its operating margin climbed to 9.7 per cent from 5.1 per cent. Its revenues rose to US$6.7 billion (euro5.33 billion) from US$4.6 billion as the company delivered 100 airplanes in the quarter, its highest total since 2002 and up from 62 a year ago.

The company reiterated its expectation to deliver 395 commercial planes in 2006, up 36 per cent from last year, and 440 to 445 in 2007.

Boeing said its backlog grew to a record US$229 billion (euro182.03 billion), up 4 per cent from the end of the second quarter, amid strong momentum for its commercial jets. It said the 787 has won 432 firm orders from 34 customers.

The defence business registered operating earnings of US$879 million (euro698.73 million), down 33 per cent from a year ago when it had a US$569 million gain from the sale of the Rocketdyne business.

The operating margin for the St. Louis-based business increased to 11.3 per cent from 9.9 per cent excluding the Rocketdyne gain, and its revenue increased 4 per cent to $7.8 billion (euro6.2 billion).

For the first nine months of 2006, Boeing's net income was US$1.2 billion (euro950 million), or US$1.57 per share, down 42 per cent from US$2.1 billion, or US$2.62 per share, a year earlier.

Revenues were US$44 billion (euro34.98 billion), an 11 per cent increase from $39.7 billion.