SEATTLE, June 29 (Reuters) - The latest retrenchment by a major airline hurt Boeing Co. (NYSE:BA - news) shares on Friday and renewed pressure on the
aerospace giant to produce good news after a weak display at the Paris air show last week, analysts said.
o. 3 U.S. carrier Delta Air Lines Inc. (NYSE:DAL - news), a loyal Boeing buyer, said on Friday it would mothball aging 727 trijets faster than planned and cut capacity by 1.4 percent to co costs and slumping ticket sales.
The top two U.S. carriers--AMR Corp. (NYSE:AMR - news) unit American Airlines and UAL Corp.'s (NYSE:UAL - news) United Airlines--made similar announcements this month and a growing list of analysts are warning Boeing jet deliveries and profits could suffer.
``We are in the midst of an airline recession that doesn't lend much support to Boeing stock,'' said Chris Mecray,
analyst at DB Alex. Brown. ``From a demand standpoint we are still in a position of weakness and we have yet to
see any sign of stabilization. We are in something of a free-fall stage.''
Boeing stock was down $1.64, or 2.87 percent, to close at $55.60 in New York Stock Exchange trading on Friday.
By contrast, the Dow Jones industrial average, which includes Boeing, was down about 0.6 percent.
Boeing stock began falling just prior to the Paris air show, which ran from June 15 to June 23. Shares of the
Seattle company fell from $65.50 on June 14 to a two-month low of $57 on June 22, a loss of nearly 13 percent.
Shares of European Aeronautic Defence and Space Co. (EADS) , which owns 80 percent of rival Airbus Industrie [ARBU.UL], rose modestly during the air show, but
by Friday they too were down from their pre-show value.
EADS stock rose 45 cents at $22.20 on Friday, but traded at $23.20 on June 14 and $24.80 on June 7.
Both stocks could see further losses if the U.S. economy fails to pull out of its current tailspin, analysts said. Forecasts call for an economic rebound by early 2002, but
further weakness could cause airlines to delay deliveries of planes on order.
``Things are looking kind of dismal for Boeing right now. The jury is still out on whether there could be any further downside in the stock. There is certainly no urgency
to buy it,'' said Mecray, who said the stock could head as low as the mid-40s before recovering.
NO-SHOW AT AIR SHOW
Analysts knew jetliner demand was weak heading into the show, but Boeing's paltry posting of a single order for three 777 widebodies by Japan Airlines Co. Ltd. at
Paris shook investors' confidence in the brave-faced manufacturer.
A host of Boeing executives played down the lack of orders, while Airbus trotted out 155 unit sales and boasted of plans to boost annual production nearly 50 percent to
450 in 2003.
Boeing called Airbus' news ``fluff'' and disavowed the traditional air show news blitz, though at the Farnborough, England, air show last July Boeing unveiled 132 sales
worth $14.3 billion, versus Airbus' 230 sales worth $17.6 billion.
``That's a hollow explanation from Boeing,'' said Paul Nisbet, analyst at JSA Research. ``They didn't have any orders to save up this year. Why did they save them up
Nisbet was more confident than Mecray that Boeing shares were bottoming out. While conceding his year-end 2001 price target of $81 might be too optimistic, he stood
by his year-end 2002 target of $96.
``So far there is no sign that airlines are resisting taking new airplanes, but orders have slowed. If the economy picks up by early next year this could be a fairly
short-lived phenomenon and Boeing will escape without having to lower production rates,'' Nisbet said.
Boeing plans to deliver 530 jets this year and next, up from 489 in 2000. Airbus has projected 450 deliveries in 2003, up from about 330 this year, and predicts it will soon
wrest market leadership away from long-time front-runner Boeing.
To date Boeing has booked 175 new jet orders in 2001, compared to a bumper crop of 611 in 2000, while Airbus has announced 299 new jet sales, compared with 520
Both manufacturers have projected 400 orders for full-year 2001. Neither looks likely to meet that target, Mecray said.
``I'm reducing my Boeing order target from 400 to 450 down to about 350. Airbus still looks good for about 350,'' Mecray said.