Boeing President and CEO Dave Calhoun on Wednesday confirmed the end of production of the 747 in a letter to employees addressing the aerospace market realities.
The iconic Boeing 747 production will conclude in 2022, and production of other models will be adjusted because of the ongoing effect of the coronavirus pandemic on the industry and unfolding challenges faced by Boeing.
Calhoun reassured his team that while the 747 production is coming to an end, customer commitment does not end at delivery, and the company will continue to support 747 operations and sustainment well into the future.
The production rates for commercial airplanes will be further lowered. The Boeing CEO stated that there will be a slower ramp-up in 737 production than previously planned, with a gradual increase to 31 per month by the beginning of 2022.
The combined 777/777X production rate will be lowered to two per month in 2021, which is one unit lower per month than was announced last quarter.
Boeing plans to reduce the 787 production rate to six per month in 2021, a downward adjustment from the previous announcement. With the lower rate profile, the manufacturer will be looking for the most efficient way to produce the 787.
In his letter, Calhoun stated “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 COVID-19 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,” Calhoun continued.
Boeing has taken decisive actions to bolster its near-term liquidity by suspending its dividend, terminating the share repurchase program, reducing discretionary spending and overhead costs, and issuing $25 billion in new debt.
Calhoun said “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.”
The Boeing CEO made it clear that the cut in production rates is not a reflection the team’s work or capability, but that the market simply won’t support higher output levels at this time.
Boeing 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. However, more job cuts may be likely in the coming months.
“As we look to the future, we also are focused on not just adapting and recovering but also emerging stronger and more resilient. That includes proactively reviewing every aspect of our company to identify opportunities to improve, align to our new market and strengthen our culture. We are looking holistically at our infrastructure footprint, our overhead and organizational structure, our portfolio and investments, our supply chain health and stability, and our ability to drive operational excellence and a keen focus on safety in everything we do,” Calhoun stated in his letter.
Despite the challenges, Calhoun wants his team to remember the good work and innovation underway across our company, and that both Boeing and the aerospace industry will be resilient.