SEATTLE United woes' impact on Boeing

United will likely order fewer planes if it files for bankruptcy protection, and that's bad news for Boeing.
SEATTLE (AP) -- A possible bankruptcy filing by United Airlines poses the latest industry trouble hitting Boeing Co., whose financing arm counts United as its biggest customer.
United, whose request for federal loan guarantees was denied Wednesday, owes Boeing Capital Corp. $1.3 billion in financing for the purchase of about a dozen Boeing jets. The planes are mostly late-model 777s.
United is current on its payments to Boeing, said Russ Young, a spokesman for Boeing Capital Corp. Boeing declined to comment on when its next payment from United is due.
The airline is expected to file for bankruptcy protection Sunday, sources told the Associated Press on Thursday. That would give the airline 60 days to meet the terms of its current financing agreement, negotiate a new one, or surrender the jets to Boeing, Young said.
United -- which was spun off from Boeing in the 1930s -- has been talking with Boeing about negotiating new financing terms and other alternatives, although no decisions have been made, Young said.
Making cuts
Since the Sept. 11 terrorist attacks, Boeing has slashed production rates, cut nearly 30,000 jobs, deferred deliveries of more than 500 jets and announced 5,000 more job reductions for 2003. It also is locked in a battle with rival Airbus, which has been seizing market share steadily and is poised to match Boeing's jet production next year.
"To the extent that United is going to be shrinking its capacity, they will be ordering less planes and using less supplies and that can't be good for their supplier partners," said Jim Corridore, an airline equity analyst with Standard and Poor's.
Even if United defaults on its payments, Boeing is in a relatively good position, analysts said.
The company will likely be able to find other carriers wanting to pick up the popular 777s, said Peter Jacobs, an analyst with Seattle-based Ragen MacKenzie, even in the current economic downturn.
A United bankruptcy petition won't immediately affect Boeing's production of commercial jets, said Cai von Rumohr, analyst with SG Cowen.
But it could cause indirect effects.
Likely actions
United would probably cut flights and park some of its larger 747, 767 and 757 jets, sales of which have been especially hurt by the downturn in the commercial aviation industry. Those aircraft production lines in Renton and Everett have already slowed considerably and Boeing has not been winning many new orders for the jets.
United's $1.3 billion in financing is the largest portion of Boeing Capital's total portfolio of $11.5 billion. In Boeing's third quarter, the company took a $250 million non-cash charge against earnings to, among other things, reflect United's deteriorating credit rating and to shore up its reserves in the event of a default.