Guy Norris/LOS ANGELES
Boeing plans to make dramatic cuts to commercial aircraft production and numbers of workers in 1999 and 2000 as a result of the Asian economic crisis.
"It's not a pretty picture," admits Boeing president Harry Stonecipher, who says the cuts are being made because "the growth rate kind of dropped from under us". The biggest production rate decrease is to the 747 line, the company's traditional money earner, while up to 48,000 jobs will be lost, most of them within Boeing Commercial Airplane Group sites around the Puget Sound area.
Boeing chairman and chief executive Phil Condit says the impact on the company of the Asian economic crisis "-is much deeper and more prolonged than we first estimated".
The 747 production rate will drop from 3.5 a month to two in late 1999, and subsequently to one a month in early 2000 "-if market conditions fail to improve", says the company. Deliveries of 747s will plummet from 49 and 48 in 1998 and 1999, respectively, to just 12 in 2000. This is by far the lowest rate for the widebody since deliveries of the -400 began in 1989. The last time the annual 747 rate dropped to below 20 units was in 1984, when 15 aircraft were delivered. Subcontractor Northrop Grumman will be particularly hard hit by the 747 cuts.
The monthly rate on the 777 line will drop from seven to five in late 1999 and stay at the lower rate in 2000, while the 767 will slow from four to 3.5 in early 2000.
The 757 line, meanwhile, will be reduced from five to four a month in early 2000 while the Next Generation 737 will be decreased to 21 a month in late 2000, after peaking at 24 in early 1999.
Announced 1999 rates for the 737-300, MD-80/90 and MD-11 are unchanged, while the company says it will establish "a formal production rate for the 717 after deliveries begin mid-next year". Condit says all the rates, and particularly that of the 747 can be "upsized and downsized" depending on market demand. "We can adjust the rate, and the year 2000 is still not locked in concrete. If things get better there is some upside potential," he adds.
Boeing estimates that, based on current plans, it will deliver 546 to 550 aircraft this year, four short of the original target. Deliveries for 1999 are expected to be around 620, dropping to 490 in 2000 as a result of the market fall-off.
Rival Airbus says that it has not been particularly hit by the Asian situation, and does not "-plan to alter production rates for next year to other than what we've previously announced".
The consortium says it will maintain announced assembly plans. It expects to deliver around 230 aircraft in 1998, increasing to 290 in 1999 and over 300 in 2000. "Obviously we are keeping an eye on the situation but at the moment we don't see any drastic need to make changes," says Airbus.
The financial impact of the cuts at Boeing are unclear. Company shares, already weakened by a series of setbacks connected with serious production problems over the last two years, slumped on the news of the cuts.
Nevertheless, consolidated revenues, including earnings from the Information, Space and Defense Systems Group, are expected to be close to $56 billion in 1998, rising to $58 billion in 1999. The impact of the rate decrease is expected to make itself felt in 2000 with a revenue drop to around $50 billion.
Operating revenues in 2000 are also expected to be lower as the proportion of newly developed, smaller-margin single aisles increases. Net earnings projections for 1998 continue to be around $1 billion, rising to between $1.5 and $1.8 billion in 1999.
Source: Flight International
