GUY NORRIS / SEATTLE
Boeing is to continue production of the 717-200 but is reducing the manufacturing rate, revising delivery projections and taking a one-time charge, estimated at around $175 million, to cover losses on the slow-selling programme.
The surprise announcement, coming after a two-month re-evaluation of the 717 and its projected 100-seat market, gives the programme a new lease of life and follows widespread speculation that Boeing was preparing to axe the project. Despite strenuous sales efforts, only 137 firm orders have been booked to-date, and after the 11 September attack on the USA and the subsequent downturn in the market, the outlook for the aircraft looked extremely bleak.
However, the move is likely to renew market interest in the 717, and should prompt the finalisation of long-running contract negotiations with Midwest Express over a deal for 20 firm and 30 options. If confirmed, the deal will raise the twinjet backlog to around 67, as well as boosting options to 124. Ninety aircraft have been delivered.
Boeing chief financial officer Mike Sears says: "With the uncertainty in the marketplace it was the right decision to continue production. It is best for us to continue making this aircraft." He says the reprieve "gives us time to see how the world turns, and a chance to market the aircraft strongly."
Although Boeing declines to detail the production decrease at Long Beach, California, where the rate had risen to five per month, it is expected to be cut back to around two per month.
Boeing 717 brand manager Richard Wynne adds that BAE Systems' recent decision to end the RJX, and large-order deferrals and developmental problems with the competing Airbus A318 were factors in the decision. He says, however: "We want to rely on ourselves, and not what's happening with our competitors. The decision would have been made with or without the RJX." Wynne adds: "We think there is a market for up to 3,000 aircraft in this category over the next 20 years, and this decision means we will keep the 717 available in the long term for when the market rebounds."
The company says the proposed Russian Regional Jet RRJ-75/85 feasibility study did not have a bearing on the 717's reprieve, but admits that it will help maintain Boeing's credibility in the market.
The $175 million charge on the 717 was announced as part of a $700 million after-tax impact predicted across the firm for the fourth quarter as part of the post-11 September downturn.
Source: Flight International
