MINNEAPOLIS (AP) – Boeing's second-quarter profit fell 21 percent, and it said layoffs are likely in its defense business because of expected government spending cuts and bargain-hunting.

Profits and revenue fell in both Boeing's airplane and defense businesses. The commercial airplane downturn seems to be ending, with orders up sharply from last year and U.S. airlines reporting profits. But Boeing said the defense business would have lower margins than expected for this year because of pricing pressure in the US.

"There is no question that the overall cost structure of that business has to come down,'' Chairman and CEO James McNerney told analysts on a conference call. He didn't say which programs or plants would see layoffs, when, or how many. He added that regular attrition as workers retire or quit would be part of the reductions as well.

Boeing Co.'s second-quarter profit of $787 million worked out to $1.06 per share, five cents more than expected by analysts surveyed by Thomson Reuters. Revenue fell 9.1 percent to $15.57 billion. That was short of the $16.13 billion expected by analysts. Defense revenue fell 8 percent to $7.98 billion, with profits down 19 percent to $711 million. Most of the revenue decline occurred in Boeing's space unit.

One of Boeing's strategies to boost its defense business is to sell to more international customers, McNerney said. That's beginning to bear fruit, with late-stage talks happening with customers in the Middle East and Asia, he said.

"I think there's as strong a pipeline as I've seen in the international defense business in a long, long time,'' he said.

The Air Force tanker competition is a huge wild card for Boeing's defense prospects. It's competing with European defense contractor EADS, the parent of Airbus, to build 179 planes for the $35-billion program. McNerney said Boeing submitted "an aggressive but responsible bid'' to make the tanker, and it expects the Pentagon to pick a winner in November.

Defense Secretary Robert Gates is looking for savings in Pentagon weapons spending. The government is pressing Boeing for better prices on two military aircraft, the C-17 cargo plane and the F-15E fighter, said Citi analyst Jason Gursky.

"The customer, i.e. the government, is negotiating,'' he said.

Still, Gursky believes that worries of a rapdid downturn in defense spending are overblown; such wind-downs typically take years, he said.