Boeing to cut 747-8 production in half as demand slows

Thu Jan 21, 2016 6:18pm EST
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By Alwyn Scott

(Reuters) - Boeing Co (BA.N: Quote) said on Thursday it will cut production of its 747-8 jumbo jet in half and take a $569 million charge in the fourth quarter as it faces dwindling sales.

The four-engine jet is now mostly a cargo workhorse, eclipsed by more fuel-efficient twin-engine jets for passengers. It also is being used to upgrade the U.S. Air Force One presidential fleet, but that will be a small number of planes.

"The air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 freighter," Ray Conner, chief executive of Boeing Commercial Airplanes, said in a statement.

Boeing has disclosed in its regulatory filings for months that the costs of making the 747-8 were outstripping sales, suggesting an imbalance of about $1 billion, so the charge is somewhat less than analysts had expected and had already been factored into Boeing's stock price.

Boeing shares slipped in extended trade to $121.60 from a close of $123.40 on the New York Stock Exchange.

Boeing said it will cut output to half a plane a month in September, down from a target of one a month that it will reach in March. Boeing had already announced plans to cut production to one a month from 1.3 a month currently.

The after-tax charge of $569 million, or 84 cents a share, will be taken in the fourth quarter of 2015, Boeing said. Before tax, the charge amounts to $885 million. Boeing said the charge will not affect 2015 revenue or cash flow.

The announcement, coming days ahead of Boeing's release of fourth-quarter results on Wednesday, also suggests Boeing will not take a charge in the fourth quarter on its 787 Dreamliner.   Continued...

A Lufthansa Boeing 747-8 touches down at Dulles International Airport outside Washington for the first time June 1, 2012. REUTERS/Larry Downing