Boeing on Thursday came a step closer to ending production of its best-known aircraft when it announced that it would halve production of the 747 jumbo jet to just six a year from September.
The company, which along with Europe’s Airbus forms a near-duopoly in international civil aircraft manufacturing, said it would take a $569m post-tax charge against its fourth-quarter 2015 profits to cover the costs of the change.
The 747 has been one of history’s most successful aircraft types. Boeing has delivered more than 1,500 jumbo jets since handing over the first to customers in 1969.
However, the cut comes amid a near-evaporation in demand for the four-engine aircraft as airlines shift to twin-engined jets for even the longest-haul routes.
The new rate is below the one a month that had previously been regarded as a bare minimum. It suggests the company is maintaining production only because the 747 has been selected for the new fleet of US presidential aircraft — known as Air Force One — for later this decade.
Ray Conner, chief executive of Boeing Commercial Airplanes, insisted that global air passenger traffic growth and demand for aircraft remained strong. But a recovery in the air cargo market had stalled, slowing demand for the 747-8 freighter that had been expected to produce most orders for the latest version of the aircraft. The company had only 20 orders for 747s outstanding at the end of last year.
The company had previously announced that it planned to reduce production from its current rate of 1.3 a month to one a month from March this year.
“While we remain confident in the 747-8’s unique value proposition . . . we’re taking the prudent step to further align production with current market requirements,” Mr Conner said.
He nevertheless said the company remained confident that there might be future orders for the 747-8 freighter to replace ageing 747-400 freighters.
The rate cut marks the latest stage in a long fall-off in demand for the 747, which Boeing was building at a rate of seven a month in the early 1970s. The aircraft transformed long-haul international travel by slashing the cost per seat of carrying passengers on intercontinental journeys.
Richard Aboulafia, an analyst at the Virginia-based Teal Group, said it was “a bit of a leap of faith” to think significant freighter orders might materialise.
“The real reason they want to keep alive the line is so that they can build the few planes for Air Force One,” he said. “They just have to keep the civil line going for as long as needed to build those air force planes.”
The six-a-year production rate was not sustainable, Mr Aboulafia added. “It’s a question of continued losses until the line either recovers or dies,” he said.
The aircraft has suffered from the growing range and efficiency of alternative long-haul aircraft such as Boeing’s 777 and regulators’ decision in the 1980s that it was safe for twin-engined aircraft to fly the Atlantic.
Boeing will take the non-cash charge — $885m at the pre-tax level — against fourth-quarter 2015 results next Wednesday.
Boeing’s shares fell 1.3 per cent in after-market trading following the announcement, to $121.82.
Financial Times
Boeing slows down 747-8 production rate
