Citing Lower Demand, Boeing Cuts 747 Production Rate for the Second Time in 6 Months

Today, Boeing (NYSE: BA  ) announced it would reduce the production rate of its 747-8 airplanes from 1.75 per month to 1.5 through 2015. It noted the reason for this resulted from "lower market demand for large passenger and freighter airplanes." This follows an announcement in April that it would cut production from 2 planes per month to 1.75.

Boeing originally planned to build 24 per year, but slow sales prompted the first cut to 21 and the latest cut to what is now 18 in a year. Counting cancellations, Boeing has not booked any new orders this year for its 747-8 jumbo jet.

The first delivery of planes at this new rate is expected to be in the early part of next year. The company did note "the production rate change is not expected to have a significant financial impact." In addition, the company said that it anticipates average growth rates in the air cargo market to return in 2014.

Eric Lindblad, vice president and general manager of the 747 Program, Boeing Commercial Airplanes, was quoted in the Boeing press release as saying, "This production adjustment better aligns us with near-term demand while stabilizing our production flow, and better positions the program to offer the 747-8's compelling economics and performance when the market recovers. Although we are making a small adjustment to our production rate, it doesn't change our confidence in the 747-8 or our commitment to the program."

There have been 107 orders of the 747-8 aircraft, of which 56 have been delivered. The first delivery was to Lufthansa in April 2012, and the first flight was on June 1 of that year.

The 747-8 faces tough competition from the larger Airbus A380, which has been available longer. It also competes with Boeing's smaller 777, which has been a best-seller.

-- Material from The Associated Press was used in this report.


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