Boeing Says 777 Production May Fall

Boeing said it could cut production by 15 percent on the 777, one of its most profitable planes and a key source of cash.

The talk of a possible slowdown to seven a month from the current 8.3 came as Boeing posted narrower losses on its 787 Dreamliner and voiced confidence in that plane's ability to generate cash and fill the gap.

The plane maker said it also is still considering an increase in production of the single-aisle 737, despite concerns from engine maker CFM International about meeting those rising rates.

Taken together, the moves would cushion the blow of what had already appeared to be an inevitable 777 production cut as Boeing shifts to the 777X in 2020, because it has failed to sell out all of the remaining production slots.

The cut grew more likely last week when the head of Delta Air Lines said prices for used 777s were falling, a comment seen undercutting new sales.

Boeing has a lot of 777s to sell before switching to the 777X, said RBC analyst Rob Stallard. "Delta has got the word out there that pricing is soft and that has not made Boeing's life easier."

Boeing chief executive Dennis Muilenburg stressed that 777 production is "essentially" sold out until 2016 and more than half of 2017. "The value of the 777 is holding up very well," he said.

But he acknowledged Boeing was doing "scenario planning" for a rate reduction, even though "we don't see any scenario that would take us below seven a month." A decision would come early next year and take effect around 2018, he added.

A cut in rate would hit profit, since the 777 has a cash margin in excess of 20 percent, Stallard said.

Boeing is banking on the 787 to begin generating cash flow in the fourth quarter. Figures it released on Wednesday showed the loss on each 787 leaving the factory narrowed to about USD$15.5 million in the third quarter, continuing a narrowing this year and smaller than a USD$20 million loss many analysts had expected.

The improvement came as some analysts questioned whether Boeing would ever recover its full investment of more than USD$40 billion, and may have to take an accounting charge to write off some 787 costs.

Boeing notched up its forecast for jet deliveries for the year to between 755 and 760, from 750 to 755.