SEATTLE -- Boeing Co., the world's biggest aircraft builder, plans to expand its jetliner-modification business in an effort that could generate billions of dollars in revenue and help offset a decline in new-plane sales.

Boeing said yesterday that it established a new division called Boeing Airplane Services, which will add about 600 workers by year's end to the 1,600 currently in aircraft overhaul. It will seek more business from airlines for work such as converting passenger jets into freighters and upgrading cockpit electronics.

The effort will be led by Joe Gullion, a former AlliedSignal Inc. executive who joined Seattle-based Boeing in October. It renews a plan Boeing shelved in the past two years as it struggled with unprecedented bottlenecks in its commercial airplane factories. Now that those problems are easing, Boeing is devoting more attention to expanding its services business.

"As they untangle their production lines, that allows management to return to the strategic issues," said Peter Jacobs, an analyst with Ragen MacKenzie Group.

Jacobs predicted that the division could generate an extra $1 billion to $2 billion in sales within three to five years. He estimated revenue from jetliner-modification work currently at less than $1 billion.

Boeing's shares rose $1.5625, to $36.25, on the New York Stock Exchange.

The company has long sought services work to balance periodic contractions in the commercial-airplane industry, one of which is approaching next year; Boeing expects to deliver 480 commercial jets after shipping a record 620 in 1999.

The decline is forcing Boeing to dismiss thousands of workers in its commercial-airplane unit. Some of them could be transferred instead to the jetliner-modification division, which is likely to get most of its new workers from Boeing plants where work is declining, said Boeing spokesman Sean O'Donnell.

The division's facilities are in Long Beach, Calif.; Wichita, Kan.; and the Puget Sound region of Washington state.

Pub Date: 3/17/99