Boeing trimming production rate of 747-8
Boeing will build 16 of its biggest-ever planes annually, a reduction of two from the current pace.
Boeing is paring production on its 747-8 jumbo jet, the third cutback announced in less than two years, as new, more-efficient models eliminate the need for four-engine aircraft.
Output will fall to 1.3 planes a month next September from 1.5, Boeing spokesman Doug Alder said Tuesday. That means Boeing will build 16 of its biggest-ever planes annually, two less than its current pace.
“We’re making this minor adjustment because the near-term recovery in the cargo market has not been as robust as expected,” Alder said in an emailed statement. “We continue to believe in the long-term strength of the freighter market, and the 747-8 is uniquely positioned to capture this demand.”
Alder added that while there may be some employment reductions in Everett due to the rate slowdown, Boeing would “do our best to mitigate that by placing employees in other jobs” within the commercial-airplanes unit.
With demand for the jet slumping, this latest reduction will cut the production rate to 35 percent below what it was in April 2013.
Boeing twice reduced the monthly output of the 747-8 in 2013, initially from 24 jumbo jets per year to 21 per year, then to 18 per year.
Boeing has no net orders this year for the plane, which is sold in passenger and cargo models.
Two new orders were canceled out in September when GECAS, the airplane leasing unit of General Electric, replaced its prior order for two 747-8s with two 777-300ERs twin-engine passenger jets.
The dearth of orders has prompted concern that production of the plane will end within a few years.
Boeing now has just 39 unfilled orders for the 747-8, including 26 for the passenger version and 13 for the freighter model. With the newly announced rate cut, that’s 2.4 years of production left. Maintaining production past 2017 now depends on additional sales.
As of the end of September, financial filings show Boeing has deferred $1.9 billion in 747-8 production costs, and $518 million more in outstanding 747-8 tooling costs.
For accounting purposes, those amounts are projected to be recovered over the next 76 deliveries of the jet.
But with only 39 remaining orders on its books, Boeing needs to sell 37 more of the jets just to ensure it makes that number of deliveries. Even then, it seems unlikely the sales could be profitable enough to recoup such heavy deferred costs.
Boeing’s hopes for more orders rest largely on the freighter version of the jet. The airfreight business has been in a prolonged slump, but this year has shown signs of increasing demand.
And one more prestigious sales opportunity for the passenger version lies ahead. The Pentagon is considering an order for two new large jets to replace today’s older 747 Air Force One airplanes. The 747-8 is almost certainly the preferred replacement to carry the president.
InsideDefense, an industry trade journal, this week reported that the Pentagon may purchase the new Air Force One jets in 2016 for delivery in 2018.
However, winning that order still wouldn’t extend the life of the 747 assembly line beyond 2017.
The reported Pentagon schedule would require Boeing to roll out the airframes from the Everett factory in 2017 ahead of extensive interior and systems installation.
The 747-8 is the latest variant of the iconic, humpbacked aircraft family that revolutionized air travel more than 40 years ago with its size and range.
The 747-8 competes with the double-decker Airbus A380, another plane that has struggled to find buyers.
Larger twin-engine models with upgraded engines can now fly routes once within reach only for jumbos, shrinking the need for the biggest aircraft.
Yet Boeing insists more sales will come.
“The 747-8 is a very competitive airplane with a significant market segment for both the passenger and freight markets,” Alder said. “The 747-8s in service are performing well with the highest dispatch reliability of any four-engine airplane in service.”
The 747-8 freighter variant entered commercial service in 2011, and the first passenger version was delivered in 2012.
The Wall Street Journal reported earlier Tuesday on the production cut via a Twitter message.
Information from Seattle Times aerospace reporter Dominic Gates is included in this report.