July 23 (Bloomberg) -- Boeing Co. posted second-quarter earnings that trailed analysts' estimates after rising fuel costs spurred airlines to buy smaller, more-efficient jets that bring less profit to the No. 2 commercial planemaker.

Net income declined 19 percent to $852 million, or $1.16 a share, from $1.05 billion, or $1.35 a share, a year earlier, the Chicago-based company said in a statement today. Revenue was little changed at $17 billion, missing estimates. Delays on a military surveillance plane cut profit by 22 cents a share.

Boeing fell in New York trading and has dropped 36 percent in a year on the loss of an aerial-tanker contract and delays on the 787 Dreamliner. Chief Executive Officer James McNerney, 58, shipped carriers including Continental Airlines Co. more 737s, listed at $67.5 million, and fewer 777s, which cost more than three times as much. The 787 delay robbed Boeing of the chance to start delivering the $173 million model in May as first planned.

The results were ``the worst quarter we have seen from Boeing in some time,'' JPMorgan Securities Inc. analyst Joseph Nadol of New York wrote in a note today.

The company was predicted to earn $1.22 a share on sales of $17.3 billion, the average estimates of 12 analysts surveyed by Bloomberg. Boeing fell $2.54, or 3.7 percent, to $66.72 at 4:02 p.m. in New York Stock Exchange composite trading.

Boeing and larger rival Airbus SAS have been selling more short-haul planes, such as the 737 and the A320, while building sales of their new 787 and A380 programs. They took divergent strategies with the new models, both of which are delayed. The 787 focuses on light materials to aid fuel efficiency, while the A380 superjumbo carries more than twice as many passengers.

Full-Year Forecast

Boeing reiterated its forecast for profit of $5.70 to $5.85 a share this year and $6.80 to $7 in 2009. The forecast, in light of today's earnings decline, ``means the back half of the year is going to have a bulge in it,'' said Howard Rubel, a New York- based analyst with Jefferies & Co.

Today's earnings were reduced by 22 cents a share because of a four-month delay of the Wedgetail surveillance plane destined for the Australian military. The charge was disclosed July 10.

Boeing's commercial backlog rose 8 percent year-to-date to a record $275 billion, which will keep it busy building planes for about eight years. Short-haul 737s, the most widely flown commercial jetliner, make up about 61 percent of the backlog.

Fuel Efficiency

Carriers are replacing some older 737s with newer versions that Boeing says use 8 percent to 12 percent less fuel. The price of jet fuel in New York has surged 77 percent in the past year.

Southwest Airlines Co. took delivery of nine 737s in the quarter and Continental took 10. Boeing delivered 14 more 737s last quarter than a year earlier and three fewer 777s, which are used for different types of routes.

Boeing repeated today that it expects the first 787 to fly by year-end and be delivered in next year's third quarter.

This year's 21 percent slump in the dollar is helping Boeing compete with Toulouse, France-based Airbus, whose costs are mostly in euros while sales are in the U.S. currency. Almost 90 percent of Boeing's commercial sales are overseas.

Airbus surpassed Boeing as the largest planemaker in 2003, two years before McNerney joined the company. Boeing shares have risen less than 3 percent since he took the helm.

2nd-Half Deliveries

``While we faced some challenges this quarter that affected our results, we remain confident in our outlook,'' McNerney said in today's statement. The mix of customers and type of aircraft delivered will be ``more favorable'' in the second half, with higher pricing lifting results, he said on a conference call.

Boeing still expects to deliver between 475 and 480 planes this year, after shipping 241 in the first six months. Deliveries, which are important because that's when a planemaker gets paid, will rise to between 500 and 505 next year and increase further in 2010, the company said.

Airbus this month said as much as 27 percent of its backlog could be at risk as fuel prices erode airlines' earnings. Boeing, in contrast, said its orders are secure, especially since airlines need more fuel-efficient replacement aircraft. Airbus won about 62 percent of the orders announced at last week's Farnborough International Air Show.

Orders were down from business announced at shows in Paris and Dubai last year, and most came from Middle East airlines such as Etihad Airways, the Abu Dhabi-based national carrier of the United Arab Emirates. Mideast governments are investing revenue from the sale of oil.

Unit Performance

The commercial unit's sales sales fell 2 percent while shipments rose 11 percent. Boeing delivered 126 planes, the most since the end of 2001. The unit's operating profit was 9.1 percent of sales, down from 11 percent a year ago, and the defense unit's margin fell to 8 percent from 10.7 percent.

Analyst Paul Nisbet of JSA Research Inc. in Newport, Rhode Island, blamed part of the drop on higher costs for the 787, which has been delayed by a redesigned wing box and incomplete work by vendors.

Boeing gets about half its revenue from military contracts, and about 59 percent of total sales last year were from the U.S.

The U.S. Air Force this month agreed to reopen parts of the $35 billion aerial-tanker contest that Boeing lost to Northrop Grumman Corp. and Airbus parent European Aeronautic, Defence & Space Co., after Boeing protested the decision. Boeing had been the sole producer of Air Force tankers for more than 50 years.

To contact the reporter on this story: Susanna Ray in London via sray7@bloomberg.net

Last Updated: July 23, 2008 16:07 EDT