Boeing Cuts 787 Rate Amid China Trade Tensions

 - October 23, 2019, 1:48 PM
Boeing 787s undergo assembly at the company's factory in Everett, Washington. (Photo: Boeing)

A day after now-former Boeing Commercial Airplanes CEO Kevin McAllister lost his job amid the crisis surrounding the grounding of the 737 Max, wholly unrelated difficulties involving trade tension between the U.S. and China prompted Boeing to announce a cut in production of its best-selling widebody—the 787 Dreamliner—from 14 to 12 per month starting next year. Speaking Wednesday during the company’s third-quarter earnings call, Boeing CEO Dennis Muilenburg acknowledged that the trade war has depressed the order outlook despite recent proclamations by U.S. President Donald Trump of $20 billion of impending business from China for the aerospace giant. Although Boeing still projects demand from China for 7,700 widebodies over the next two decades, the company clearly signaled that it sees no breakthrough in the short term, prompting it to plan for no rate increase beyond 12 a month for at least another two years.

While citing the fact that, as the country’s largest exporter, aerospace contributes some $80 billion a year in trade surplus to the U.S. economy, Muilenburg opined that China too maintains an interest in reaching an agreement that would further ease or lift Trump’s tariffs. “There’s mutual interest in both countries that we continue to see,” he said. “I think the recent trade discussions have been productive; they’re moving in a good direction. But given the timeline and the fact that we don’t have firm orders from China at this point, we’re going to continue to monitor and support the China trade discussions. Those are still very important for the future. But for the purposes of our company, we have to be very disciplined in our production rate management...and the decision we’re announcing today is consistent with that discipline.”  

Meanwhile, Boeing’s other high-profile widebody program, the 777-9, continues to face “challenges” of its own as GE continues to test durability improvements to the GE9X, resulting in delays that pushed back the widebody’s first flight target to early next year from the second half of 2019. Now Boeing has moved the first delivery target to early 2021, reflecting what Muilenburg called “some pressure” on the schedule during the company’s second-quarter earnings call three months ago.

“The GE9X remains a pacing item,” said Muilenburg. “GE has installed retrofit components in the certification test engines and testing has restarted. Once the engines become available, GE and Boeing will need to successfully complete additional testing before we are ready to fly...We continue to explore opportunities to improve the timeline such as leveraging our system integration labs and additional airplane ground testing.”