The Strategist

Boeing 747 may go out of production

07/28/2016 - 11:16

Boeing assumed cessation of production of aircraft models 747. This suggestion is reasoned by decline in sales of the model, which is considered one of the most successful in the company’s history.

Alex Beltyukov
Alex Beltyukov
American aircraft manufacturer Boeing Co. has revised plans on production of Boeing 747 aircraft. The company's financial statements indicated that insufficient number of orders and sluggish growth of aviation operations made Boeing abandon plans to resume production of one Boeing 747 a month starting from 2019. Since September, Boeing is going to produce a total of six aircraft per year, two of which, apparently, will be sent to serve the US President. The company pointed out that if it gets an insufficient number of orders for this machine, it will lead to additional losses. In this case, Boeing may decide to completely terminate the aircraft’s production.

According to The Wall Street Journal, sales problems of Boeing 747 are linked to the fact that the airlines have become less inclined to purchase spacious aircraft. This, in turn, forced the world’s manufacturers to change their plans. In particular, Airbus previously announced plans to halve production of A-380 aircraft.

Boeing Corporation has manufactured Boeing 747 model from 1970. During all this time, it produced more than 1,500 machines, bought by both American and foreign carriers. Sales peaked in 1970, when Boeing sold 92 aircraft of this kind.

Net loss of Boeing Aircraft Corporation in the second quarter of 2016 amounted to $ 234 million against a profit of $ 1.11 billion for the April-June 2015. This is stated in the company's report, prepared in accordance with GAAP accounting standards. In terms of loss per share, the sum was $ 0.37.

Boeing has received a quarterly loss for the first time in nearly seven years. The last time, when the company showed negative results, was in the third quarter of 2009. The loss then amounted to $ 1.564 billion.

Boeing's revenue in April-June 2016 exceeded the figure for the same period of 2015 by 1%. The sum increased from $ 24.755 billion to $ 24.543 billion.

Boeing itself is justifying losses by reclassification of R&D expenditures under the Boeing 787 programme. Above that, the losses are also associated with implementation of programmes for Boeing 747 and KC-46, a military aerial refueling and strategic military transport aircraft.

The company made a profit by the end of the first half of 2016. Its amount, however, fell more than by one half - from $ 2.446 billion in January-June 2015 to $ 985 million.

Boeing’s forecast for 2016 states that the company expects to deliver 740-745 aircraft during the year. Revenue per share will be $ 8,15-8,35. This forecast noticeably disappointed analysts and investors. After all, following the results of 2015, the American company delivered 762 aircraft to customers, and analysts expected considerably higher revenue per share - at around $ 9.43. Speaking about the reasons for such a forecast, the company only told about a "slow recovery in the air cargo market," which, in particular, led to $ 885 million-worth write-off on the Boeing-747 production program.