• Aerospace
  • Boeing mulls another cut to Dreamliner output

    Boeing is grappling with slowing sales for wide-body aircraft in a market glutted with used models.

    Bloomberg

    79彩票注册网址A 737 Dreamliner on the production line in Everett, Washington

    79彩票注册网址

    (Bloomberg) — Boeing Co. is considering another cut to production of its marquee 787 Dreamliner as the aerospace giant contends with sluggish demand, people familiar with the matter said.

    79彩票注册网址Executives are studying whether to trim monthly output by two planes to 10 a month from a reduced pace that was announced in October, the people said. While no final decision has been made, a new production schedule for the twin-aisle jet could be announced as early as next week when the company reports earnings.

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    79彩票注册网址Boeing is grappling with slowing sales for wide-body aircraft in a market glutted with used models. The manufacturer has struggled to persuade airlines to accelerate deliveries to fill empty production slots, said one of the people, who asked not to be identified because the discussions are private.

    Slowing output of the carbon-composite Dreamliner, with a list price that starts at about $250 million, would crimp a critical source of cash for Boeing as it attempts to recover from a global grounding of the 737 Max following two fatal crashes. The 787 accounted for about 40% of Boeing’s jetliner deliveries in 2019 as the company was barred most of the year from shipping the best-selling Max.

    “We maintain a disciplined rate-management process, taking into account a host of risks and opportunities,” Boeing spokesman Chaz Bickers said when asked about a possible output cut for the Dreamliner. “We will continue to assess the demand environment and make adjustments as appropriate in the future.”

    79彩票注册网址Boeing rose 1.7% to $323.05 at the close in New York. On a volatile day for the stock, Boeing fell in midday trading on the potential Dreamliner rate cut before reversing losses when Reuters reported that the Federal Aviation Administration was “pleased” with Boeing’s latest work on fixing the Max. The shares have fallen 9.8% over the last 12 months, the second-worst performance in the Dow Jones Industrial Average.

    Cutting Dreamliner output to 10 a month from last year’s levels would clip $324 million from cash flow, said Bloomberg Intelligence analyst George Ferguson. That’s “small vs. the $4 billion-plus the 737 will earn” when the Max grounding ends and production normalizes at a monthly rate of 57 jets, he said in a note to clients.

    79彩票注册网址In addition, the impact on cash flow of any new cut in Dreamliner production could take years to materialize. In October, Boeing executives cited an extended order drought from China when they said the company would  to 12 Dreamliners a month by late this year from its peak rate of 14.

    CHINA FACTOR

    79彩票注册网址Boeing has gotten more bad news into the open under new Chief Executive Officer Dave Calhoun, who took the reins this month. The Chicago-based company has already delayed expectations for the Max’s return to midyear and is expected to report a multibillion-dollar accounting charge for compensating airlines that didn’t receive planes on order.

    79彩票注册网址A nascent thaw in trade tensions between the U.S. and China could weigh against reducing output of the Dreamliner, which can seat as many as 336 passengers. In a  announced last week, China agreed to purchase almost $80 billion in U.S. goods including aircraft through next year.

    79彩票注册网址“I would expect a rate reduction sooner rather than later, with one caveat,” John Plueger, CEO of Air Lease Corp., predicted earlier this month. “If Boeing had any suspended 787 deals which get reactivated quickly, then that might modify their rate decision.”

    He said he had no particular knowledge of Boeing’s plans.

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