Boeing to Reduce Production Rates of 777 and 787; Stop Making 747

Boeing has announced that it will end production of the iconic Queen of the Skies - the Boeing 747 - in 2022.

The airline manufacturer will also reduce the production rates of its 777/777X to two per month, and 787 to six per month in 2021.

In a letter to employees on Wednesday, Boeing President and CEO Dave Calhoun, wrote, "These past few months have been unlike anything we’ve seen. The pandemic’s effect on our communities and industry is ongoing. And the challenges we face as a company are still unfolding. As cases continue to rise in areas around the globe, health and safety remain a top priority. My thanks go to everyone who is supporting our safety efforts, wearing face coverings and upholding our shared accountability for keeping one another safe. All those affected directly by COVID19 also have my sympathies.

"The reality is the pandemic’s impact on the aviation sector continues to be severe. Though some fliers are returning slowly to the air, their numbers remain far lower than 2019, with airline revenues likewise reduced. This pressure on our commercial customers means they are delaying jet purchases, slowing deliveries, deferring elective maintenance, retiring older aircraft and reducing spend - all of which affects our business and, ultimately, our bottom line. While there have been some encouraging signs, we estimate it will take around three years to return to 2019 passenger levels.

"That’s why we’ve been taking decisive actions. To bolster our near-term liquidity, we suspended our dividend, terminated our share repurchasing program, reduced discretionary spending and overhead costs, and issued $25 billion in new debt.

"While these steps help us navigate the pandemic, they don’t change the fact that the commercial marketplace is different, and we must change with it. To align to a smaller market, we lowered commercial production rates and took tough workforce actions throughout the quarter. Unfortunately, it’s become clear that we need to make further adjustments based on the prolonged impact of COVID19."

Part of the measures include:

- A slower ramp-up in 737 production than previously planned, with a gradual increase to 31 per month by the beginning of 2022.

- Reduce the combined 777/777X production rate to two per month in 2021, which is one unit lower per month than Boeing announced last quarter.

- Further reduce 787 production to six per month in 2021. This is an adjustment down from the reduction Boeing announced last quarter to 10 per month currently and seven per month by 2022. With this lower rate profile, Boeing says that it will also need to evaluate the most efficient way to produce the 787, including studying the feasibility of consolidating production in one location.

 - While Boeing's 767 and 747 rates remain unchanged, Boeing will end production of the iconic 747 in 2022. The company will however continue to support 747 operations and sustainment well into the future.

In the letter, Mr. Calhoun also warned that the company may be forced to make further layoffs.

"As you know, we previously announced a net 10% workforce reduction in 2020 through a combination of voluntary layoffs, attrition and involuntary layoffs (ILOs) to align to a smaller market. The first wave of associates affected by ILOs received notification in May, and we continue to conduct smaller, phased workforce reductions to reach this target. Managers are communicating the latest wave of those reductions beginning today," Mr. Calhoun said. "Regretfully, the prolonged impact of COVID19 causing further reductions in our production rates and lower demand for commercial services means we’ll have to further assess the size of our workforce. This is difficult news, and I know it adds uncertainty during an already challenging time. We will try to limit the impact on our people as much as possible going forward. And as always, we will communicate openly, honestly and transparently with you."

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