Boeing studying consolidation of 787 production to 1 location after 2Q losses

Boeing is reporting a $2.4 billion loss for the second quarter due to the grounding of its 737 Max jet and the coronavirus pandemic, which is expected to depress airline travel even longer than previously expected. (WCIV)

Boeing is reporting a $2.4 billion loss for the second quarter due to the grounding of its 737 Max jet and the coronavirus pandemic, which is expected to depress airline travel even longer than previously expected. (WCIV)

NORTH CHARLESTON, S.C. (AP/WCIV) — Boeing is reporting a $2.4 billion loss for the second quarter due to the grounding of its 737 Max jet and the coronavirus pandemic, which is expected to depress airline travel even longer than previously expected.

This could lead to some changes as far as where some of its aircraft, like the 787, will be produced.

The company said Wednesday that revenue fell 25%, which is worse than analysts had expected.

“The reality is the pandemic’s impact on the aviation sector continues to be severe,” CEO David Calhoun said. “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.”

Calhoun said it will take “around three years” to return to 2019 passenger levels. On Tuesday, an airline industry trade group said air travel won’t recover to pre-pandemic levels until at least 2024, a year longer than its previous forecast. The International Air Transport Association cited the inability of the United States and developing countries to contain the coronavirus.

So far this year, Boeing deliveries of new airliners — a critical source of cash for the Chicago company — are down 71%. Boeing recorded 59 orders but 382 cancellations, mostly for the Max. Another 323 orders, also mostly for Max planes, were removed from Boeing’s backlog because of uncertainty about the deals going through.

The company has taken steps to help offset the impact of the pandemic:

“…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…” Calhoun’s letter read.

The following adjustments to production were also announced in Calhoun’s letter:

“Unfortunately, it’s become clear that we need to make further adjustments based on the prolonged impact of COVID-19.

The changes include further lowering our commercial airplane production rates:

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

We will reduce the combined 777/777X production rate to two per month in 2021, which is one unit lower per month than we announced last quarter.

We will further reduce 787 production to six per month in 2021. This is an adjustment down from the reduction we announced last quarter to 10 per month currently and seven per month by 2022. With this lower rate profile, we will also need to evaluate the most efficient way to produce the 787, including studying the feasibility of consolidating production in one location. We will share more with you following our study.”

Final production of the 787s currently takes place at the Boeing Everett Factory in Washington and at Boeing South Carolina in North Charleston.

For Boeing, the pandemic has compounded problems that began with its 737 Max airliner, which remains grounded after two crashes killed 346 people.

The second quarter would have been worse for Boeing if not for its defense and space business, which depends on contracts with governments and has been largely insulated from the pandemic. Revenue in that business was flat with a year ago.