Boeing Cuts Outlook, 777 Output


The global economic downturn harms income and prompts Boeing to trim jumbo-jet production in 2010

It seems that Seattle may have just heard the economic alarm that Boeing's (BA) largest customer warned about last month. As many expected, the global economy's sharp contraction is beginning to buffet Boeing, which makes its commercial planes in the Seattle area.

The airplane maker said Apr. 9 after the market closed that its quarterly income will fall short of estimates and that it will trim output of its widebody 777 line, a popular, fuel-efficient mainstay of international fleets. Customers the world over have been deferring plane orders, although Boeing says it has gotten no cancellations on a 747, 767, or 777 order this year—yet. In February, the company said it booked orders for a paltry four jets, down from 125 in February 2008.

Chicago-based Boeing says it will cut 777 production from seven planes per month to five starting in June 2010 "due to significant deterioration in the business environment for airlines and cargo operators driven by unprecedented global economic conditions." Boeing will also keep output of 767s and 747-8s at current levels, reversing plans to increase production of those airliners.

Stock Tumbles

Boeing shares tumbled 4.5% in late trading, giving back most of the session's 6% gain. "These are extremely difficult economic times for our customers," Scott Carson, president and CEO of Boeing Commercial Airplanes, said in a statement. "It's necessary to adjust our production plans to align supply with these tough market conditions."

Just last month, at an airline industry conference in Phoenix, Steven Udvar-Házy, the CEO of Boeing's biggest customer, International Lease Finance Corp., noted that "when a bomb explodes, the light flash travels a lot faster than the sound. The flash occurred in September, but the sound hasn't reached Seattle and Toulouse yet." (The headquarters of Boeing rival Airbus (EAD.PA) are in Toulouse, France.) It seems as if now it has.

Bachman is deputy news director for BusinessWeek.com.

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