Boeing announced that it will adjust its twin-aisle airplane production plans for 2010 due to significant deterioration in the business environment for airlines and cargo operators driven by unprecedented global economic conditions. Monthly production of the 777 will decline from seven to five airplanes per month beginning in June 2010. Boeing will also delay previous plans to modestly increase 747-8 and 767 production. No change is being made at this time to the 737 production rate. In addition, the weak global economy has contributed to significant declines in the escalation indices that affect forecasted pricing for commercial airplanes already ordered.
The production decisions and unfavorable price escalation are expected to reduce Boeing’s first-quarter 2009 net earnings by approximately $0.38 per share. Because the 747 program is currently in a loss position, the reduced earnings associated with the factors above will be recorded for most units in the 747 backlog. That impact, somewhat offset by a refinement in cost estimates, accounts for approximately $0.31 per share of the first-quarter charge. For the other commercial programs, the impact will be reflected in lower margins on deliveries as they occur, including an estimated $0.07 per share net earnings reduction in the quarter.
The company will update its 2009 guidance when it reports first-quarter results on April 22.
“These are extremely difficult economic times for our customers,” said Boeing Commercial Airplanes President and CEO Scott Carson. “It’s necessary to adjust our production plans to align supply with these tough market conditions. We are in close contact with our customers as we continue to monitor this dynamic business environment.”
The production rate decisions announced today solely reflect delivery deferrals requested by customers in response to unprecedented declines in global passenger and air-cargo volumes. No 767, 747 or 777 orders have been cancelled this year. Boeing’s commercial backlog of more than 3,500 airplanes remains strong and well-diversified in terms of airplane models, geography and customer business models.
