Dwindling Orders: Boeing to Cut 747 Production Rate
The Boeing Company announced yesterday it will lower the production rate on the 747-8 program to match supply with near-term demand in the cargo market.
To account for the market and production impacts, the company will recognize a $569 million after-tax charge ($0.84 per share) when it announces financial results for the fourth quarter of 2015.
In September 2016, the 747-8 program's production will decline from one airplane per month to 0.5 per month. The company previously announced that the rate would drop from 1.3 per month to one per month in March 2016.
On a pre-tax basis at the segment level, Boeing Commercial Airplanes will report a charge of $885 million. The earnings charge will not affect the company's 2015 revenue or cash flow. Boeing will announce its fourth quarter financial results and provide guidance for 2016 on Jan. 27.
The most recent air transport industry data show that air freight contracted in November, with volumes declining by 1.2 percent compared to the same time a year ago. This contrasts with global passenger demand which grew at 5.9 percent, above the 10-year average rate, according to the International Air Transport Association (IATA).