Boeing cuts production rate on 747-8 jumbos

Boeing cited lower demand for large passenger and cargo planes
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First Published: Fri, Apr 19 2013. 09 05 PM IST
A file photo of Boeing 747-8 aircraft.
A file photo of Boeing 747-8 aircraft.
Boeing Co said it would cut the production rate for the latest version of the 747 jumbo jet from 2 aircraft per month to 1.75 aircraft citing lower demand for large passenger and cargo planes.
The first delivery of the 747-8 aircraft at the new production rate is expected in early 2014, the company said, adding that the change was not expected to have a significant financial impact.
“Boeing has noted soft demand in the freighter market for some time, and if there is no pick up in orders we could see further cuts to the 747-8 production rate,” RBC Capital Markets analyst Robert Stallard said in a flash note to clients.
Boeing has a backlog of 64 747-8s, with just 7 orders in 2012 and 3 orders year-to-date in 2013, he said.
Stallard added that the revenue impact of any further cut is likely to be modest, though he expects the company may have to take accounting charges related to a significant step down in production rate.
The aircraft maker has been struggling with the grounding of its 787 Dreamliner jets worldwide since January after lithium-ion batteries burned on two of the planes.
The grounding has cost the company an estimated $600 million, but Reuters reported earlier this week that regulators are close to approving a key document that could start the process of returning the grounded planes to service within weeks.
Boeing said on Friday that it expects long-term average growth in the air cargo market to resume in 2014, and forecasts a demand for 790 large airplanes, such as the 747-8, to be delivered worldwide over the next 20 years.
The 747-8 is the latest version of the over 40-year old aircraft, which competes with the A380 super jumbo made by rival Airbus. Offered in two configurations — the 747-8 Intercontinental passenger variant and the 747-8 Freighter — the Boeing aircraft carries a list price of about $350 million.
Boeing shares were trading up about 2% at $87.50 on the New York Stock Exchange on Friday.
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First Published: Fri, Apr 19 2013. 09 05 PM IST
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