Boeing Company is considering another cut to production of its marquee 787 Dreamliner as the aerospace giant contends with sluggish demand, reported Bloomberg citing people familiar with the matter.
Executives are studying whether to trim monthly output by two planes to 10 a month from a reduced pace that was announced in October, the people said.
While no final decision has been made, a new production schedule for the twin-aisle jet could be announced as early as next week when the company reports earnings.
Boeing is grappling with slowing sales for wide-body aircraft in a market glutted with used models. The manufacturer has struggled to persuade airlines to accelerate deliveries to fill empty production slots, said one of the people, who asked not to be identified because the discussions are private.
Slowing output of the carbon-composite Dreamliner, with a list price that starts at about $250 million, would crimp a critical source of cash for Boeing as it attempts to recover from a global grounding of the 737 Max following two fatal crashes.
The 787 accounted for about 40% of Boeing’s jetliner deliveries in 2019 as the company was barred most of the year from shipping the best-selling Max, reported Bloomberg.
“We maintain a disciplined rate-management process, taking into account a host of risks and opportunities,” Boeing spokesman Chaz Bickers said when asked about a possible output cut for the Dreamliner.
“We will continue to assess the demand environment and make adjustments as appropriate in the future,” he added.
Boeing rose 1.7% to $323.05 at the close in New York. On a volatile day for the stock, Boeing fell in midday trading on the potential Dreamliner rate cut before reversing losses when Reuters reported that the Federal Aviation Administration was “pleased” with Boeing’s latest work on fixing the Max.
The shares have fallen 9.8% over the last 12 months, the second-worst performance in the Dow Jones Industrial Average.
Cutting Dreamliner output to 10 a month from last year’s levels would clip $324 million from cash flow, said Bloomberg Intelligence analyst George Ferguson. That’s “small vs. the $4 billion-plus the 737 will earn” when the Max grounding ends and production normalizes at a monthly rate of 57 jets, he said in a note to clients.
In addition, the impact on cash flow of any new cut in Dreamliner production could take years to materialize.
In October, Boeing executives cited an extended order drought from China when they said the company would slow production to 12 Dreamliners a month by late this year from its peak rate of 14, he added.