Boeing's new CEO confronts culture in need of change
Boeing Co. is considering another cut to production of its marquee 787 Dreamliner as the aerospace giant contends with sluggish demand, people familiar with the matter said.
Executives are studying whether to trim monthly output by two planes to 10 a month from a pace that was already reduced 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 US$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 per cent of Boeing’s jetliner deliveries in 2019 as the company was barred most of the year from shipping the best-selling Max.
“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.”
Boeing has gotten more bad news into the open under new Chief Executive Officer David Calhoun, who took the reins this month. The Chicago-based company has already delayed expectations for the Max’s return to midyear and is expected to report a multibillion-dollar accounting charge for compensating airlines that didn’t receive planes on order.
A nascent thaw in trade tensions between the U.S. and China could weigh against reducing output of the Dreamliner, which can seat as many as 336 passengers. In a trade pact announced last week, China agreed to purchase almost US$80 billion in U.S. goods including aircraft through next year.
“I would expect a rate reduction sooner rather than later, with one caveat,” John Plueger, CEO of Air Lease Corp., predicted earlier this month. “If Boeing had any suspended 787 deals which get reactivated quickly, then that might modify their rate decision.” He said he had no particular knowledge of Boeing’s plans.
In October, Boeing executives cited an extended order drought from China when they said the company would slow production to 12 Dreamliners a month from its peak rate of 14.
--With assistance from Charlotte Ryan.