Biting Boeing

Boeing Co. saw its first-quarter profits nearly cut in half, the Chicago-based company reported today. The declining fortunes were attributed to many of the same problems afflicting the companies flying Boeing's planes--a downturn in the number of passengers flying and a drop in the amount of cargo being carried by air.

For the quarter, net income was $610 million, or 86 cents a share, down from $1.21 billion a year ago. Revenues, meanwhile, rose 3.2 percent to hit $16.5 billion.

The company, the nation's largest manufacturer of aircraft, had braced investors earlier this year when it announced a cutback in production of its popular 777 wide-body aircraft. Plus, Boeing said final prices on airlines in production would be less than expected, which would affect earnings.

Then there's the 787, the next-generation plane dubbed the Dreamliner that's already two years late in its development process. Boeing officials vow it will take its first test flight in the next few months. "It's going to fly this quarter," Boeing vice president for marketing Randy Tinseth said at a conference in New York on Tuesday. He also promised that the first deliveries of the plane would take place next year.

The problems related to the 787 are chronicled in a new story in the May issue of Condé Nast Portfolio. The piece, by Jeffrey Rothfeder, details how Boeing subcontracted out construction of various parts of the plane to outside vendors, but didn't adequately ensure everyone was talking to everyone else.

The Dreamliner's delays are expected to cost Boeing as much as $10 billion in canceled orders and compensation to airlines. The fiasco has become an object lesson for manufacturers in how not to do global outsourcing and has eroded Boeing's reputation for efficiency and innovation.

Now, on the eve of its big launch, the Dreamliner carries the company's hopes of recapturing lost revenue and repairing the damage to its image. If the plane passes the rigorous yearlong series of flight tests that begin this spring, it could lead Boeing out of the financial crisis. But if the Dreamliner fails, Boeing could become the General Motors of the skies, with enormous repercussions for the U.S. economy and the U.S. manufacturing base.

For more on the story, click here, and check out this slideshow of images on how the plane is being constructed.