Boeing linking 787 production to market demand
Low oil prices have slowed orders for widebody jetliners
Boeing said on Wednesday it will not increase 787 output unless sales improve, its clearest indication yet that its large jetliner production may have peaked for now.
“If the market’s not going to demand it, we’re not going to go,” Chief Financial Officer Greg Smith said on the sidelines of an investor conference in New York organized by global investment bank Jefferies, confirming remarks made during the formal program.
“It’s not the end of the world” if Boeing keeps 787 production at 12 a month instead of lifting it to 14 as planned, Smith said during the event. “We can still be profitable in the program as I see it today at 12.”
Analysts said Smith’s statement confirmed that Boeing will not overproduce widebody planes and, most importantly, does not foresee an accounting charge for the 787 if output stays at 12.
Boeing recently took an $847 million after-tax charge in its latest result for the 787 program. It also took an $814 million charge for the 747 because sales outlooks did not justify assuming output of that aircraft would rise in 2019 as planned.
Smith’s comments went beyond what he and Boeing Chief Executive Officer Dennis Muilenburg said on Boeing’s results conference call last month. Muilenburg said Boeing would “keep supply and demand in balance” but did not discuss keeping 787 production at 12 a month in detail.
Low oil prices and a series of boom years have slowed orders for new widebody jetliners such as the 787, 777 and 747, raising concerns that Boeing will have to notch down cash and profit targets along with production.
Smith said on Wednesday that Boeing still has about two years to decide whether to raise 787 output, given lead times for components.
The 777 has won eight net orders this year and the 787 has won 19. Boeing plans to reduce 777 production by 15 percent next year as it switches to a newer model, the 777X.