Some quick notes about Boeing’s break.
Boeing shares cracked almost 10% shares this morning, courtesy of fewer planes to be delivered in 2016, or about 740 to 745 planes, versus’ 2015′ delivery of 762 birds. 747-8 orders have been cut due to weaker demand and a production transition to 737 MAX models. Not only will less money be made with fewer 747 deliveries going forward, there was also a pre-tax $885M charge, for the 747 production cut, shoving earnings to $566M for Q4. With Q4’15 earnings per share coming in at $8.15-8.35, over a dollar below average Street per share estimates, it’s no wonder shares are down.
The former flagship 747 has aged from premier civilian passenger to cargo transport, becoming a kind of barometer regarding economic activity. It’s less about the storied past of the model and more about demand for cargo transport. It was only a few days ago that the market was informed about the 747’s continued production decline, down from one plane to half a plane a month.
“The new rate is below the one a month that had previously been regarded as a bare minimum. It suggests the company is maintaining production only because the 747 has been selected for the new fleet of US presidential aircraft — known as Air Force One — for later this decade. Ray Conner, chief executive of Boeing Commercial Airplanes, insisted that global air passenger traffic growth and demand for aircraft remained strong. But a recovery in the air cargo market had stalled, slowing demand for the 747-8 freighter that had been expected to produce most orders for the latest version of the aircraft. ”
A tidbit, which appeared to confirm these things happen slowly and then suddenly all at once. It almost seems as if all company commentary about the 747-8 was about seeking consolation prizes, since there were no booming cargo transport sales to trumpet.
Boeing’s 747-8 Production Cuts (Dec. 2014)
Boeing had announced over a year ago about cut-backs for the cargo carrying variant of the 747-8 but also noted that “…demand for the passenger-carrying version of the 747-8 has failed to pick up the slack. In July, Boeing revealed proposed design changes that could allow the 747-8 Intercontinental to fly from Asia to the US east coast or from the Middle East to the US west coast non-stop.”
There are other newer, most cost-effective passenger planes available. This about making sure the next President gets to fly in style and so 747-8 production continues, with less and less lift from more pedestrian cargo plane sales.
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