Boeing 777 Jet Production Decision Expected

A senior Boeing Co. executive said Wednesday the company expects to decide over the next two months whether to cut production of its highly profitable 777 jetliner.

Greg Smith, Boeing's chief financial officer, said at an investor event that the aerospace giant will have "better clarity" by then about demand for the current-generation 777.

Production of the jet has become a big focus for investors because of its importance to cash flows and profits, but demand for larger jets has waned as Boeing prepares to introduce a revamped model at the end of the decade.

Boeing currently builds 8.3 long-range 777s jets each month, or about 100 annually, and plans to scale back output to seven monthly starting in 2017. Boeing and rival Airbus Group SE are facing a slowdown in demand for twin-aisle jets, forcing a re-evaluation of production-rate plans.

Sales of the 777 jet have slowed and Boeing says it needs 40 to 50 new orders of the 777 annually to maintain its plans. The company so far in 2016 has secured eight firm orders for the jet.

Boeing late in the decade will transition production from its current to its 777X, a 350- to 400-seat long-range airliner due for service in 2020. During the transition, Boeing will build just 5.5 of the planes a month as its assembly lines share space with the prototype test aircraft.

Mr. Smith said the company "will match supply with demand," signaling its unwillingness to over-supply the market with 777s to maintain output at the risk of sacrificing its profit margin on the jet or damaging future demand for the coming 777X.

Aengus Kelly, chief executive of lessor AerCap Holdings NV, said Tuesday that if 777 prices fall to maintain output Boeing "would be borrowing from the future and [it] will be an extremely expensive loan for them to take."

Robert Wall contributed to this article.

Write to Jon Ostrower at jon.ostrower@wsj.com

(END) Dow Jones Newswires

August 10, 2016 11:55 ET (15:55 GMT)

Aercap Holdings NV (NYSE:AER)
Historical Stock Chart
From Mar 2024 to Apr 2024