Boeing cuts 747-8 production on weak airfreight demand

The commercial aircraft manufacturer will recognize an after-tax charge $569 million ($0.84 per share) in its fourth quarter 2015 financial results, but said the charge will not affect top line revenues.    The Boeing Company will reduce production of its 747-8 freighters to around one every two months, effective September, 2016, according to a statement from the company.
   The commercial aircraft manufacturer attributed the decision primarily to lackluster global airfreight demand.
   As a result of the production cut, Boeing will recognize an after-tax charge $569 million ($0.84 per share) in its fourth quarter 2015 financial results. On a pre-tax basis at the segment level, Boeing Commercial Airplanes will report a charge of $885 million, but the company said earnings charge will not affect the its 2015 revenues or cash flow.
   The move comes after Boeing previously announced the production rate for the 747-8 would drop from 1.3 aircraft per month to one per month, effective in March 2016.
   Boeing noted the most recent air cargo industry data show that airfreight volumes contracted 1.2 percent year-over-year in November, 2015, in sharp contract with global passenger demand, which grew at 5.9 percent, according to the International Air Transport Association.
   “Global air passenger traffic growth and airplane demand remain strong, but the air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 Freighter,” Ray Conner, Boeing vice chairman and president and CEO of Boeing Commercial Airplanes, said of the announcement. “While we remain confident in the 747-8’s unique value-proposition and an upcoming replacement cycle for late-model 747-400 Freighters, we’re taking the prudent step to further align production with current market requirements.”
   “We are closely monitoring the air cargo market as we work to win additional orders to support ongoing future production,” added EVP of Business Development & Strategy and CFO Greg Smith. “At the same time, we continue to aggressively drive productivity to lower costs across our production system to offset the current market challenges.”