Military

Boeing Finally Admits to 777 Production Cut

Paul Ausick

Published: January 27, 2016 12:10 pm

Last Updated: January 13, 2020 2:30 pm

Following Boeing Co.’s (NYSE: BA) disappointing 2016 forecast, the company finally announced a production rate cut to the current version of the 777 from 8.33 per month (100 per year) to seven per month. In reality, Boeing delivered 21 of the planes in the fourth quarter, a production rate of, wait for it, seven per month.

Why Boeing has delayed making an announcement of a production cut that has been virtually inevitable since at least mid-2014 is anyone’s guess. A cynical observer could say that the company was trying to hide a soft spot, but that’s not entirely true. The soft spot has been visible for a long time.

In order to have a smooth transition between the 777 and the new 777X, Boeing needed orders for the 777 to total more than 60 a year, the top of its expected order range for 2015. The company even came up with a new way of counting phantom 777s called “feathering in some blanks” by which the company meant it would leave open spaces on the 777 production line to accommodate the transition to 777X production, which is likely to begin sometime in 2018. The first delivery of a 777X is not due until 2020.

Leeham News reported on Tuesday that it its analysts believe Boeing needs to sell more than 200 777s between now and 2021 to bridge the gap to full production of the new 777X. Boeing took orders for just 38 of the planes in 2015 and its order book for the 777-300ER and 777F totaled just 218 at the end of December. Leeham is saying that Boeing needs at least 200 net new orders to bridge the 777-777X gap.

24/7 Wall St.
If OPEC Blinks and Cuts Production, Buy These Top Oil Stocks at Once