‘No surprise’ Boeing will reduce 777 production in Everett
Dec 12, 2016, 3:01 PM | Updated: 4:36 pm
Orders for Boeing 777s, such as these jets that fly for Air China, are not as high as expected, causing the company to lower production. (AP)
(AP)
Boeing is expected to lower production, and likely staffing levels, as demand for its 777 jets are lower than predicted.
“It’s no surprise whatsoever,” said Scott Hamilton with Leeham Company, an aviation consulting firm based in Issaquah.
“This has been long predicted by Wall Street analysts and myself,” he said. “It means the delivery rate will be as few as 3.5 a month … It means a lot lower cash flow. It obviously means there is a lack of demand for the airplanes.”
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The Seattle Times reports that Boeing doesn’t have enough 777 widebody airplane orders to justify its plan to deliver seven jets a month. The aerospace company will drop its production rate to five planes a month starting next August. The production rate will be further dropped to 3.5 planes per month in the year after that.
That translates to lower production at the company’s Everett location, reducing the 100 planes slated to be produced in 2018 down to 42. A considerable financial blow given that Boeing generally sells the jets for around $160 million each.
It is uncertain how many jobs will be threatened in Everett, and beyond.
“It’s tough to say,” Hamilton said. “Boeing holds very close to the chest how many direct jobs are on the assembly line. But clearly they are going to have to be some layoffs on the assembly line.”
“You will have a trickle-down effect of the supply chain,” he said. “Even though you would focus on the number of jobs at Boeing, I think you would see, potentially, some job reductions in the supply chain that feeds the 777 as well.”
Other issues looming for Boeing
This is all separate from another issue Boeing is dealing with involving a $16.6 billion deal with Iran that was recently finalized. But the deal has run afoul of Republicans, and the incoming Donald Trump administration.
“Even with the Iran deal, assuming that Trump doesn’t eviscerate the deal, that’s not enough to fill the product gap Boeing has,” Hamilton said.
Washington Congressman Denny Heck has previously spoken about the ramifications of blocking Boeing Iran deal on the local economy and jobs in the state.
“It will hurt our economy and make us less safe,” Heck previously told KIRO Radio. “And I fear that this is a preview of what will come in winter and spring if this trend continues.”
“This sale is in absolute complete compliance with the JCPOA, which most people refer to as the ‘Iran agreement,’” he said. “It will cost us jobs and render us less safe.”
Republicans in Congress previously passed a bill that would essentially halt the sale between Boeing and Iran. The bill places restrictions on such a sale using banks in the United States.
“The bill is a straight-forward, black and white violation of the Iran agreement,” Heck said. “It would probably cause it to implode. It would make us unsafe because it would start Iran back on a track to make nuclear weapons, and in the meantime, it would cost American jobs — $17 billion in airplane sales works out to over 100,000 jobs throughout the Boeing company and its supply chain.”
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