Boeing Co (BA) Slashing 747-8 Production in Sept 2015 Due to Reduced Demand

Boeing Co (NYSE:BA) announced on Tuesday a “minor change in production rate” that will see its production of the 747-8 jumbo jet slashed from the current 1.5 planes per month to 1.3. The company will implement the cut starting in September of next year. According to Boeing, the cut is a necessary measure in the face of a slow near-term recovery in the cargo market. Although the cut will mean a production of two lesser planes annually, it will not have any significant financial impact, Boeing said.

Boeing (BA)

The current plan to cut production rate is Boeing Co (NYSE:BA)’s 3rd for th3 747-8 in a period covering less than 2 years. There is a current backlog for 39 orders, 26 for the passenger and 13 for the freighter model. The company has not received any orders, however, for the 747 cargo model this year. On the other hand, its passenger version also has seen a reduced demand, with no new orders for the current year.  This is attributed to airlines looking for more efficient models such as Boeing 787-9 Dreamliner and 777 for use in redesigned route networks. Two 747 orders from General Electric’s GECAS in September was replaced with two 777-300ERs twin-engine passenger jets instead.

The latest production cut is in the rate of 35% compared to production as of April 2013, when Boeing Co (NYSE:BA) was manufacturing 24 jumbo jets annually, gradually reducing it to 21, and then to 18. The cut notwithstanding, Boeing is still hopeful of the long term viability of the freighter market, noting that the 747-8 is in a unique advantage to capture its demand.

Boeing Co (NYSE:BA) said that the production cut may mean job reductions at Everett, but it also gave assurance of mitigating such an eventuality by looking for other jobs for its employees.

This article has been written by Nonito Guntan.

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