Facetime with Boeing's Jim McNerney

In a conversation with Maria Bartiromo, McNerney discusses the "double-edged impact" of high oil prices and his expectations for the 787

by Maria Bartiromo

Laban-Mate/AFP/Getty

Boeing (BA) Chairman and CEO Jim McNerney has taken his share of hits lately. The ambitious 787 Dreamliner is about 15 months behind schedule, and in late March, Boeing lost out on a multibillion-dollar contract to build a fleet of refueling tankers for the U.S. Air Force. That deal, which is being protested, went to Northrop Grumman (NOC) and partner EADS (EADS), the European consortium that builds the Airbus and is Boeing's archrival.

Boeing's stumbles have caught many by surprise, primarily because McNerney, a disciple of former GE CEO Jack Welch, is held in such high regard. After a stellar 19-year career at GE, McNerney became chairman and CEO of 3M, moving to Boeing as chairman and CEO in 2005. I talked with McNerney on May 22 in Chicago at a conference on competitiveness sponsored by the Commerce Dept.

MARIA BARTIROMO

Oil has climbed as high as $135 a barrel. What are the implications for the aerospace business and Boeing?

W. JAMES McNERNEY JR.

I don't see any business plans that any companies in our industry have that don't assume a very high price of oil, because it is having a big impact. You can see the impact on our airline customers with American Airlines' (AMR) announcement about curtailing capacity. [On May 21, AMR, American's parent, said it would cut back on flights.] They've got to deal with it. And it has sort of a double-edged impact on Boeing: On the one hand, our customers are taking out inefficient capacity because at the current price of oil, they're not making money on certain routes. On the other, the replacement technology they need are the planes we're building now that are 20%, 30% more efficient.

A lot of people are talking about the 787 promising 20% fuel savings. How significant will they be?

Well, 30% overall operating savings, with 20% to 22% fuel savings driven by engine technology. Also, this is the first carbon-fiber titanium airplane ever built, and it's 20% lighter. And so the combination of engine technology and lighter materials produces those savings and lessens the environmental footprint. Two big deals in today's economy.