Plane maker Boeing Co. (BA), Thursday said it would cut down production of 777 Airplanes, citing weaker demand from airlines and cargo operators, amid economic headwinds. The lower production is also expected to be reflected in Boeing's first quarter results. Production rate of 737, however, were kept unchanged, while plans were delayed to raise production of 747-8 and 767 planes.
As per the revised production plans, monthly production of the 777 will be cut down to five from seven airplanes per month beginning June 2010.
The production cut is expected to dampen first quarter earnings of Boeing by $0.38, as the 747 program is currently in a loss position, due to unfavorable price escalation.
On average, twenty analysts polled by Thomson Reuters currently expect earnings of $1.21 per share for the first quarter. Boeing said guidance for 2009 would be updated along with the release of its first quarter results on April 22.
In the sequentially preceding fourth quarter, Boeing reported a slip to loss of $56 million or $0.08 per share as revenues dropped to $12.68 billion from the year earlier quarter.
The reduced earnings, however, will be recorded for most units in the 747 backlog and the impact, somewhat offset by a refinement in cost estimates, accounts for nearly $0.31 per share of the first-quarter charge.
For other programs, Boeing said the impact would be reflected in lower margins on deliveries, including an estimated $0.07 per share net earnings reduction in the quarter.
Scott Carson, Boeing Commercial Airplanes President and Chief Executive Officer said, These are extremely difficult economic times for our customers. It's necessary to adjust our production plans to align supply with these tough market conditions.
Weaker economy had also hit Boeing, creating significant declines in the escalation indices, affecting forecasted pricing for commercial airplanes already ordered.
Boeing also noted that no 767, 747 or 777 orders have been cancelled during the year. The newest member of the Boeing 777 family, the 777 Freighter, received its formal approval from the European Aviation Safety Agency or EASA in February 2009.
On January 9, 2009, Boeing revealed a plan to cut about 4,500 jobs at its commercial airplanes business unit bringing its commercial-airplane workforce to about 63,500 employees, similar to the level it was at the start of 2008. Boeing employed 162,191 workers as of December 31, 2008.
The job cuts in January came a day after Boeing reported a 15% decline in passenger jet deliveries for 2008 to 375 from 441 in 2007. Deliveries were affected by a strike that halted commercial production for several weeks. The company also said its net new commercial aircraft orders dropped 53% last year to 662, from the record 1,413 achieved in 2007.
In November, Boeing said it would cut about 800 jobs at its Integrated Defense Systems facility in Wichita, Kansas during 2009, following the end of some programs and the delay in the U.S. Air Force tanker-replacement program.
On April 09, 2009, brokerage, Citigroup initiated a 'Hold' rating on Boeing shares, with a mean target range of $47.89.
BA closed Thursday's regular trading at $39.15, up $2.28 or 6.18%, to trade at $9.06 million shares. In after-hours trading, that stock dropped $1.76 or 4.50%, to trade at $37.39. In the last 52-week period, the stock traded in the range of $29.05 to $88.29, with a three-month average volume of 8.53 million shares.
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