Boeing Misses Estimates, Announces Broad Production Cuts and Delays

Reuters  |

Image: Boeing 787 Dreamliner. Source: Boeing

By Ankit Ajmera, Eric M. Johnson

(Reuters) - Boeing Co slashed production on its widebody programs, delayed the arrival of its newest jet and confirmed the demise of its iconic 747, as it reported a bigger-than-expected quarterly loss on Wednesday amid fallout from the COVID-19 pandemic.

The U.S. planemaker, which is also grappling with the 16-month-old ban on its 737 MAX after fatal crashes, delayed its timeline to hit build rates of 31 narrowbodies monthly to early 2022 from 2021, as the pandemic decimates new jet demand.

The outbreak has crippled passenger travel and pushed major airlines to the brink of bankruptcy, resulting in many carriers deferring aircraft deliveries.

Boeing also confirmed the last 747, the iconic hump-topped jumbo jet that democratized global air travel in the 1970s but fell behind modern twin-engine aircraft, would roll out of its Seattle-area factory in around two years.

Boeing Chief Executive Dave Calhoun said the Chicago-based company was working closely with airlines and suppliers to manage the downturn.

“Air travel has always proven to be resilient - and so has Boeing,” he added.

Shares were up 2% in premarket trade.

The 737 MAX grounding has cost Boeing some $20 billion, ousted executives, halted production and hobbled its supply chain, with criminal and congressional investigations and lawsuits still ongoing.

The coronavirus pandemic has exacerbated this crisis.

Boeing will now reduce 787 production to six jets a month in 2021 - a third rate drop from a year ago, when it was producing the Dreamliners at a record monthly rate of 14 planes.

Boeing also said it would again reduce the combined production rate of the 777 and 777X jets to two planes per month in 2021, while delaying the 777X’s entry into service by up to a year, as Reuters previously reported.

The company had earlier announced plans to cut the 777 and 777X production to three jets per month in 2021, from five currently. It was previously aiming to get the 777X, a larger version of the 777 mini-jumbo, into the hands of customers in 2021.

Boeing’s commercial airplanes operating profit was hit by $845 million in abnormal production costs on 737 and factory closures related to COVID-19 fears. Boeing also logged $468 million in severance expenses related to reducing its roughly 160,000 workforce by 10%, saying on Wednesday deeper cuts were possible.

“We’ll have to further assess the size of our workforce,” Calhoun told employees in a memo on Wednesday, lower production and demand.

On an adjusted basis, Boeing lost $4.79 per share, bigger than analysts’ average estimate of a loss of $2.54, according to IBES data from Refinitiv.

The company’s sales tumbled 25% to $11.81 billion in the quarter, missing estimates of $13.16 billion.

Reporting by Eric M. Johnson in Seattle and Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila and Nick Zieminski.

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Source: Reuters

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