NEW YORK (Reuters) - Boeing Co’s (BA.N) chief executive said the company can increase so-called “aftermarket” sales of parts and service of its planes, bringing that area in line with overall aircraft sales growth, which would help increase revenue.
Speaking on a conference call with analysts and reporters, CEO Jim McNerney said Boeing is trying to add aftermarket “hooks and handles” to forthcoming 737 MAX and 777X models to help improve aftermarket sales.
Separately, Chief Financial Officer Greg Smith said the profit margin on the 787 improved in the third quarter and is now in the “very low single digits,” in part because of the company’s expansion of the number of planes used for calculating the cost of the 787 development by 200 airplanes. The accounting also includes investments for the 787-10, Smith said.
But commercial aircraft margins will come under pressure in the fourth quarter, due to rising research and development costs, more deliveries of lower-margin 787s and the cost of supporting a larger fleet of planes in service, he said.
Smith noted that efforts to push cost-cutting into the supplier base through Boeing’s “partnering for success initiative” were still just getting started, and there was more to go. Using a U.S. baseball analogy, Smith said the efforts were in “early innings” and the company would go into extra innings if needed.
Reporting by Alwyn Scott; Editing by Gerald E. McCormick