Boeing 777 Jet Production Decision Expected -- Update
August 10 2016 - 1:13PM
Dow Jones News
By Jon Ostrower
A senior Boeing Co. executive said Wednesday the company expects
to decide over the next two months whether to cut production of its
highly profitable 777 jetliner.
Greg Smith, Boeing's chief financial officer, said at an
investor event that the aerospace giant will have "better clarity"
by then about demand for the current-generation 777.
Production of the jet has become a big focus for investors
because of its importance to cash flows and profits, but demand for
larger jets has waned as Boeing prepares to introduce a revamped
model at the end of the decade.
Boeing currently builds 8.3 long-range 777s jets each month, or
about 100 annually, and plans to scale back output to seven monthly
starting in 2017. Boeing and rival Airbus Group SE are facing a
slowdown in demand for twin-aisle jets, forcing a re-evaluation of
production-rate plans.
Sales of the 777 jet have slowed and Boeing says it needs 40 to
50 new orders of the 777 annually to maintain its plans. The
company so far in 2016 has secured eight firm orders for the
jet.
Boeing late in the decade will transition production from its
current to its 777X, a 350- to 400-seat long-range airliner due for
service in 2020. During the transition, Boeing will build just 5.5
of the planes a month as its assembly lines share space with the
prototype test aircraft.
Mr. Smith said the company "will match supply with demand,"
signaling its unwillingness to over-supply the market with 777s to
maintain output at the risk of sacrificing its profit margin on the
jet or damaging future demand for the coming 777X.
Aengus Kelly, chief executive of lessor AerCap Holdings NV, said
Tuesday that if 777 prices fall to maintain output Boeing "would be
borrowing from the future and [it] will be an extremely expensive
loan for them to take."
Mr. Smith said Boeing's plans to accelerate output later this
decade of its advanced 787 Dreamliner to 14 jets monthly from 12
today would also be reviewed, but said the company still had time
before it has to make a decision.
"If it doesn't play out to be 14 [per month], then we'll adjust
accordingly," he said.
Robert Wall contributed to this article.
Write to Jon Ostrower at jon.ostrower@wsj.com
(END) Dow Jones Newswires
August 10, 2016 12:58 ET (16:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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