Boeing cuts 787 jetliner production as deliveries slow

By Eric M.

Reuters December 05, 2020 00:07:29 IST
Boeing cuts 787 jetliner production as deliveries slow

Boeing cuts 787 jetliner production as deliveries slow

By Eric M. Johnson and Tim Hepher

SEATTLE/PARIS (Reuters) - Boeing Co is reducing production of its 787 Dreamliner for the fourth time in 18 months after posting zero deliveries in November as recent production flaws compound delays from the COVID-19 crisis, a top executive said.

The reduction to five jets a month from six will take place by mid-2021 and follows a downturn in demand for long-haul jets.

"We've got a large number of undelivered 787 aircraft," Chief Financial Officer Greg Smith told a Credit Suisse conference.

Deliveries have been slowed further by inspections related to 787 production flaws in recent months, which U.S. regulators said they were investigating in September.

Extra quality inspections are taking longer than expected and will continue to slow deliveries in December, he added.

Shares in Boeing fell 1.4% after rising sharply on Thursday after an order for the 737 MAX, which returns to service this month following a 20-month safety ban.

During the grounding, Boeing has relied heavily on the 787 to stem ouflows of cash but demand for such wide-body models has been hit hard by the pandemic, worsening existing oversupply.

Boeing has already cut planned production of the 787 three times from a peak of 14 a month since the middle of last year.

It had previously boosted output in the hope of reaching a deal to supply dozens of the jets to China, but prospects faded amid trade tensions with the United States followed by the pandemic.

Industry sources have said there are tentative hopes of a revived deal once U.S. president-elect Joe Biden takes office in January, following a pattern of government-brokered Chinese jet orders coinciding with transfers of power or diplomatic resets.

But they cautioned that demand remains thin, despite Chinese traffic rebounding more quickly than elsewhere.

CAUTION ON DEPOSITS

Europe's Airbus has also halved production of the competing A350 to an official rate of 5 a month, and is currently producing 4.5 a month, industry sources say.

It delivered at least four and up to five A350s in November as it works to reduce a factory surplus during the pandemic, tracking data shows.

Airbus is expected to publish November data on Monday.

Boeing's Smith also sounded a note of caution about deposits or pre-delivery payments (PDPs) for aircraft still unbuilt.

Planemakers traditionally rely on progress payments to help fund the rest of their business. But many airlines have held back cash as they weather the pandemic, triggering negotiations to unjam the flow of deposits from airlines by end-year.

Smith said there was no "normal profile" for pre-delivery payments during the crisis pending more stable production.

"There are even more moving pieces around PDPs than there would typically be," he said.

The COVID-19 pandemic has sharply reduced air travel, pushing some airlines to bankruptcy or forcing them to seek aid.

"I think we've got a couple years here where PDPs will be a little bumpy," Smith said.

He also said the market entry of the 777X mini-jumbo would be influenced by the requirements of regulators. The MAX crisis is widely expected to yield tougher certification requirements.

(Reporting by Eric M. Johnson in Seattle, Tim Hepher in Paris; Editing by Chizu Nomiyama, Nick Zieminski and Barbara Lewis)

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