February 18, 2015 / 3:00 PM / 5 years ago

Boeing CEO vows to maintain cash to shareholders, 777 production rate

(Reuters) - Boeing Co (BA.N) will keep returning significant cash to shareholders and will not cut production of wide-body 777 jetliners as it shifts to a new version later this decade, Chief Executive Officer Jim McNerney said on Wednesday.

Boeing Chief Executive Officer Jim McNerney gestures to the media at Farnborough airport in Farnborough, southern England July 18, 2010. REUTERS/Kieran Doherty

The transition from the 777 to the new 777X will happen “without a hit to production rates,” McNerney told an investor conference hosted by Barclays Plc in Miami, addressing a key concern about the company’s future performance.

His remarks suggested that Boeing believes it can generate cash by delivering already-sold aircraft while winning new sales.

McNerney said Boeing can keep returning about 80 percent of free cash flow to investors while maintaining competitive research and development spending relative to rival Airbus (AIR.PA).

Boeing has long insisted it can sell the remaining 777-300ER planes it plans to produce at the current output of 100 a year.

But analysts worry that Boeing may be forced to cut prices or production as it makes the switch to the new plane. Airbus has said it will cut A330 jet output to nine a month from 10, as it introduces the revamped A330neo. Analysts believe Airbus could have to cut A330 production to six a month.

McNerney said Boeing has a strategy to maintain pricing of the 777 while still selling out the remaining planned production slots.

He brushed aside fears that low oil prices and the strong dollar will dent aircraft orders or profits, noting that most airlines do not want to delay getting new aircraft and they see the enduring value of the planes over their long life spans.

He predicted slow to moderate growth in the defense and space businesses, with profit margins in the low double digits.

The company remains focused on cutting costs with its suppliers and increasing organic growth and productivity rather than making major acquisitions.

Boeing is about 40 percent through cost-cutting discussions with suppliers dubbed “Partnering for Success,” McNerney said, but once those are finished, “we’ll do it again.”

Addressing concerns about rising deferred production costs for the 787, McNerney said it reflects investments to improve long-term productivity and that labor costs are “coming down more slowly than we anticipated.”

He said a replacement for the 757 is not needed in the short or medium term since Boeing’s other aircraft cover most 757 flight routes. He said it is not clear what customers want to replace the jet, discontinued in 2005, other than a slightly larger version.

Reporting by Alwyn Scott; Editing by Chizu Nomiyama and Jonathan Oatis

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