(Recasts, adds CEO and CFO comments)
By Ankit Ajmera and Eric M. Johnson
July 29 (Reuters) - Boeing Co slashed production of
its biggest twin-engined jets, delayed its new 777X by up to a
year and began sunsetting the iconic 747 as it posted a
bigger-than-expected quarterly loss dominated by the COVID
pandemic on Wednesday.
The cuts mark the industry's latest effort to tackle a
crisis that has decimated demand for air travel, with
oversupplied wide-body models like the 787 Dreamliner and 777
plunging deeper into an existing downturn.
Boeing also remains exposed to tensions between the United
States and China, which has shelved plans to buy big U.S. jets.
"Our industry and our company are weathering challenges like
none we have ever experienced in our lifetimes," Chief Executive
Dave Calhoun told analysts.
Boeing said it would cut 787 output to six a month in 2021 -
down from a previous goal of seven and the third such cut since
a year ago when output touched a record 14 a month.
It also plans to cut combined output of the 777 mini-jumbo
and its new 777X sister model to two a month in 2021 from a
previous goal of three, while delaying the 777X entry to service
by a year to 2022, confirming a Reuters report.
Boeing shares fell 3% partly on the lower production, though
analysts said it had managed to contain its cash burn, a central
concern for investors.
Boeing lost an adjusted $4.79 per share, against average
estimates of a loss of $2.54, according to Refinitiv IBES data.
The commercial airplanes unit was hit by $468 million in
severance expenses related to plans to cut 19,000 jobs of its
roughly 160,000 workforce and Boeing warned deeper cuts were
possible.
"We'll have to further assess the size of our workforce,"
Calhoun told employees.
The financial impact of the health crisis has compounded the
safety grounding of Boeing's narrow-body 737 MAX 16 months ago.
Calhoun told analysts MAX deliveries would resume in the
fourth quarter, a fresh delay of several weeks that raises the
prospect that its U.S. return to service could slip into 2021.
Boeing also slowed plans to lift battered MAX production, by
pushing its target of 31 jets a month into 2022 from 2021.
"We still see a path to positive cash flow in 2021," CFO
Greg Smith added, noting it would take a year after MAX
deliveries begin to clear a backlog of around 450 parked jets.
787 FACTORY STUDY
In a further shake-up, Calhoun said Boeing was looking at
whether to consolidate 787 production in one location as it cuts
output.
It splits production on the 787 Dreamliner between Everett,
Washington, and North Charleston, South Carolina.
That raises questions over the future of the Everett hub
because the largest 787-10 can only be built in South Carolina.
Smith said Boeing would be able to return to a rate of 10-11
787s monthly at some point.
Calhoun said it was too early to predict the outcome of the
study, part of a wider industrial reassessment.
The wide-body production cuts reflect fears that it could
take until 2023 for air traffic to return to normal levels.
Long-range routes - served by bigger jets like Boeing 787 and
Airbus A350 - have been hit harder than short hops.
Industry sources said Boeing's production cuts would put
pressure on Airbus to further cut its own wide-body production.
Airbus declined comment ahead of earnings on Thursday.
Boeing also confirmed the last of its legendary 747 would
roll out of the factory in 2022.
The easily spotted hump-topped jumbo had democratized global
air travel in the 1970s and was a favorite of presidents and
potentates, before it fell behind modern twin-jets.
The coronavirus pandemic has added to the pain.
(Reporting by Eric M. Johnson in Seattle and Ankit Ajmera in
Bengaluru; Additional reporting by David Shepardson in
Washington and Tracy Rucinski in Chicago
Editing by Sriraj Kalluvila and Nick Zieminski)