Boeing to lower build rate on 747-8; Spirit says no impact

Boeing Commercial Airplanes will further lower its production rates on the 747-8, its largest airplane, but it’s not clear what effect that move will have on Spirit AeroSystems.

Boeing on Thursday confirmed to The Eagle that it will lower the 747-8 rate from 1.5 airplanes a month to 1.3 a month in September, and beginning in March 2016 will drop to one airplane a month.

“The market drives our production rate and we adjust accordingly to keep our business running smoothly,” Boeing said in a statement e-mailed to The Eagle. “We are making the right decisions to allow us to continue to run a healthy business with a change to our production rate.”

Spirit AeroSystems builds the forward fuselage section of the jumbo jet as well as the nacelles, struts and wing leading edge.

Spirit said in a statement to The Eagle that because of its other Boeing business, the rate change shouldn’t have any effect, at least on its employment.

“Spirit works closely with our Boeing customer to ensure that we can meet their schedule requirements on all programs,” the company said in an e-mail. “The demand for other products we deliver to Boeing is at record levels. There will be no impact to Spirit employees as a result of this rate decrease.”

According to Boeing, it has four orders for the 747-8 – three from Silk Ways Airlines and one from an unidentified customer – so far in 2015. It is expected to deliver seven jets this year.

Its 747-8 orders in 2015 lag by a large margin orders for its other commercial aircraft: 203 for its 737, 19 for its 787 and 49 for its 777, which is its second-largest jet.

Boeing offers the jet in two configurations: the 747-8 Intercontinental, which is the passenger version, and the 747-8 Freighter. Its orders and deliveries do not distinguish between the variants, although recent demand for the aircraft has largely been to cargo operators.

Boeing said in its statement that it has long-term confidence in the airplane.

“The 747-8 is a great airplane; we stand behind its capabilities and believe it serves a unique need in the market,” Boeing said. “With recent orders and MOUs (memorandums of understanding) and these changes announced today, we anticipate a stable future for the production system.

“We continue to believe in the long-term strength of the freighter market and the 747-8 is uniquely positioned to capture this demand; of note is the 747-400 Freighter replacement market which begins next decade.”

Analyst Cai von Rumohr of Cowen and Co. said in a research note early Thursday that the rate cut will have a “modest” impact on Boeing’s profit and loss and cash flow.

He said in the note that the cut “is not a shock to us given the cargo market has been weak.”

This story was originally published June 25, 2015 at 3:13 PM with the headline "Boeing to lower build rate on 747-8; Spirit says no impact."