MOSCOW - U.S. plane maker Boeing Co is still profitable despite slumping airliner sales and is set to benefit from sharp cost-cutting when demand picks up, its chief financial officer said.

"We have a pretty darned good picture in front of us, and the challenge in the down years is to be lean and mean and do the best you can within the markets that are given to you," CFO Michael Sears told Reuters in an interview.

Boeing expects its sales of airliners next year to amount to less than half the number it racked up in 1999.

Sears, on a visit to Moscow where the company has a research and development facility employing 350 engineers, said Boeing has never before managed to weather such a dramatic fall in sales and stay in the black.

"When the commercial market comes back, the profitability - because we are profitable at low rates - the profitability at higher rates will be excellent," he said.

"Here's the pudding: lousy market, significantly lower revenues and profits. That says that the focus we have in the last four to five years to create a business-oriented culture inside the Boeing company is working," he said.

Boeing has slashed its payroll over the past year. Only days after the September 11 attacks on landmarks in New York and Washington signalled a dramatic fall in air travel, the company said it would lay off up to 30,000 employees.

Sears said he believed Boeing was well placed to prosper as budget airlines in the United States and Europe squeeze traditional high-cost carriers by flying cheaply to an increasing number of destinations.

THE WRONG GAME

European plane consortium Airbus, which is building a three-deck A380 Superjumbo airliner, is chasing the wrong end of the market as air travel gradually moves away from the "hub and spoke" model traditionally served by the giant Boeing 747, he said.

"It's the wrong game," said Sears, referring to Airbus's Superjumbo project. "We believe the world wants to go where the world wants to go as opposed to where hub-and-spoke business models and big aeroplanes want to take you," he added.

The hub-and-spoke system forced passengers to change planes in major centres if they wanted to travel to a provincial destination.

Low-cost carriers are now flying an increasing number of direct routes between provincial cities using smaller airliners.

The fact that the mid-sized Boeing 767 is making far more transatlantic trips than the 747 attests to this, he said.

"When it (transatlantic travel) started it was New York and London ... and now there is a tremendous number of city pairs that are connected with 767s," he added.

Sears said more traditional airlines, which flourished in a high-cost regulated environment, could be driven out of business by upstart carriers such as Easyjet and Southwest Airlines Inc.

"We are in a free enterprise world with commercial airlines and those airlines who grew up in this (regulated) environment have got a cost structure that does not work in this free enterprise world," he added.

"They (budget airlines) are just knocking the socks off the majors and people want to say well United (Airlines) can't go out of business.

"And all I say is: you remember Eastern Airlines, TWA, you remember Braniff, PanAm. Those are some names that once upon a time all of us said they can't go out of business, but they did. It's happened before," he added.

SONIC CRUISER DECISION

Sears said Boeing was still some months away from making a decision on whether to produce a "Sonic cruiser" airliner, which would fly some 20 percent faster at the same cost as today's airliners, or to focus on a conventional airliner that would fly passengers at lower cost.

"We're looking at both, and I suspect we're six to 12 months from a decision," he said adding: "In the middle of next year we ought to have some pretty good insights into that."