Tuesday, October 18, 2016

Big Boeing 777 orders are welcome, but insufficient to stop production cuts, says analyst

A Middle Eastern airline's recent order for ten Boeing 777-300ER (extended range) jetliners is terrific news, but sales of that wide-body remain well below 2016 sales targets, an aerospace analyst says.

Further production cuts and layoffs are possible in Everett unless more 777 orders land before year-end, according to Bainbridge Island analyst Scott Hamilton, who consults with aerospace companies and publishes news and his views on aerospace industry trends on his Leeham News website.

"The Qatar Airways orders for the ten 777-300ERs are welcome, bringing total net orders for the large jet to 16— (but still) well short of Boeing's target for between 40 and 50 for the year," according to Hamilton wrote Monday.

"The lack of orders for the 777 Classic jet continues to prompt aerospace analysts to predict that Boeing will have to announce a further rate reduction for the 777 line before it begins to make a more modern 777X aircraft, starting in 2018," Hamilton added.

Boeing has previously announced a production rate cut from 8.3 to seven 777s a month and an actual delivery rate in 2018 of 5.5 a month.

The difference comes from starting production on the 777X and “ 'shooting blanks' as part of the transition from the current 777 Classic to the X," Hamilton explained.

Hamilton said aerospace analysts now collectively think that, barring any large last-minute orders, a production cut is likely coming that would reduce the jet production rate to four jets a months, with investment banker Morgan Stanley's aerospace analyst predicting a more pessimistic rate of just 3.5 airplanes a month.

Any 777 production rate cut might mean layoffs at Boeing's factory in Everett where the 777 is built.


However, two months remain in the year and one order for 777s could change that landscape. Dubai airline Emirates is shopping for 70 wide-body jets and that could include a good number of 777s. Airbus and Boeing are pushing their planes hard for the lucrative deal.

Hamilton also noted that recent orders for 42 Dreamliner 787 jets from Qatar Airways (30) and China Southern Airlines (12) were also welcome, especially " in a year when there has been a dearth of wide-body orders."

(Andrew McIntosh - Puget Sound Business Journal)

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