Boeing Co (NYSE:BA) has been forced to slash its 747-8 plane production by half later this year. The move followed after the company started seeing continuous weakness in the air-freight market at the global levels. It might have been somewhat surprising to a section of the investors in people as the global oil price is trading at a 12-year low currently.
After-Tax Charge
Boeing Co (NYSE:BA) indicated that it would shift the production rate of the jet at a rate of only six a year from September. That meant it would have to record an after-tax charge of $569 million in the fourth quarter. The company is slated to announce its financial numbers next Wednesday. Since 1960s, the company has been producing 747 in different models. Its four-engine 747 did not find enough favor from the buyers of new jets as the preference was in favor of two-engine, smaller, and more fuel-efficient aircraft.
As a result, the company has become heavily dependent on the air-cargo market. Incidentally, international trade has been witnessing a sluggish growth as the aero-plane maker was trying to escape a slump in the recent past. It was pointed out that currently air-freight yields were lower than those in 2009. Boeing Co (NYSE:BA) said that airfreight contracted in November with volumes fell 1.2% from the same period in the preceding year. On the other hand, passenger air travel witnessed 5.9% in the same period.
Dearth Of New Orders
At the end of the last year, the aero-plane maker had just 20 remaining orders. The company appears to be expecting confirmation from the Defense Department in the United States for the 747 jets. The Government has selected its 747-8 to replace its two hundred 747 jets, which were used in the Air Force One.
Boeing Co (NYSE:BA) has also been left with unclaimed passenger jets of 747 last year following the ceasing of operations by Russia-based Transaero. It appears that its rival, Airbus Group, also encountered similar problem for its Airbus A380 jetliner. The company was making two jets a month following the launch of 747. However, it slashed to 1.75 a month and then 1.5. In September, it was further slashed to 1.3.
