Boeing, the world's leading aerospace and defence group, forecast a strong recovery in its commercial aircraft operations with deliveries expected to rise in each of the next three years.

The group on Wednesday reported an 84 per cent drop in net profit from $1.1bn to $186m in its fourth quarter, which was hit by heavy one-off charges in its commercial aircraft operations.

Harry Stonecipher, chief executive, said his confidence was based on the rebound in traffic, which in 2004 overtook the previous peak of 2000 levels. "A big segment of the whole market is growing very rapidly in the Middle East, and even though it is slowing in China, it is still huge growth. That is what gives us confidence," he said.

Boeing forecast a rise in its commercial aircraft deliveries from 285 in 2004 to 320 this year and to between 375 and 385 in 2006. It said there would be a further increase in 2007.

The improvement in civil aviation should help offset a reduction in growth in US defence budgets, which has led Boeing to scale back forecasts for revenue growth in its defence division from 10 per cent to about 7 per cent in 2006. "When peace breaks out all over, defence budgets go out flat to down and there is also budget pressure," Mr Stonecipher said.

During 2004, defence revenues rose 11 per cent, with adjusted operating margins, which nearly doubled from 4.9 per cent to of 9.6 per cent, helping to drive up full year net profits from $718m to $1.87bn. Revenues for the year rose from $50.3bn to $52.5bn.

The forecast recovery in Boeing's commercial aircraft operations - which remains lower than forecasts from rival Airbus - should underpin strong growth in the next two years with group turnover forecast to rise to $58bn this year and between $62bn and $63bn in 2006. Earnings per share are forecast to rise from $2.30 last year to $2.40-$2.60 this year and to $3.00-$3.20 in 2006.

Boeing has closed some of its older aircraft ranges, amid dwindling orders. In the fourth quarter it took charges of $280m to shut down the 717 line in 2006 and a charge of $275m for its failure to win US air force orders for 767 refuelling tankers.

The charges led to an operating loss of $149m in the division in the quarter, against profits of $471m a year ago.

Mr Stonecipher expected a decision in the next 10 to 20 days concerning the sale of its manufacturing plant in Wichita. He said he expected the air force to lift its suspension on Boeing's satellite division from competing for orders "a short period after the Sears sentencing", referring to the decision expected this month on Mike Sears, the former finance director of Boeing.