Boeing Will Cut Production Of 747s In Half Later This Year

In their own World Air Cargo Forecast, Boeing attributed the slowdown in commercial business to stagnating trade growth and the slow recovery from the 2008 global economic crisis.

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Due to slow demand in the cargo market, Boeing will lower the production rate for its 747-8 aircraft by half, the company announced on Thursday.

In their own World Air Cargo Forecast, Boeing attributed the slowdown in commercial business to stagnating trade growth and the slow recovery from the 2008 global economic crisis.

"Global air passenger traffic growth and airplane demand remain strong, but the air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 Freighter," said Ray Conner, CEO of Boeing Commercial Airplanes. "While we remain confident in the 747-8's unique value-proposition and an upcoming replacement cycle for late-model 747-400 Freighters, we're taking the prudent step to further align production with current market requirements."

Financial results for the fourth quarter of 2015 will therefore include recognition of a $569 million after-tax charge, or $0.84 per share. They will also report an earnings charge of $885 million.

Production will decline in September, from one airplane per month to one every two months. Today, planes are being built at a rate of 1.3 per month, but Boeing had previously announced that production will drop to one per month this March.

"We are closely monitoring the air cargo market as we work to win additional orders to support ongoing future production. At the same time, we continue to aggressively drive productivity to lower costs across our production system to offset the current market challenges," said Greg Smith, executive VP of Business Development & Strategy and CFO.

Air freight contracted in November declined by 1.2 percent year-over-year, while passenger demand grew at a healthy 5.9 percent.

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