Boeing is cutting 747-8 production in half as demand slows

Boeing 747-8

Boeing said on Thursday it will cut production of its 747-8 jumbo jet in half and take a $569 million charge in the fourth quarter. 

The four-engine jet is used mostly as a cargo plane. It has been replaced by many companies who prefer the fuel-efficient twin-engine jets for passenger travel.

Boeing will continue to use the plane to upgrade the U.S. Air Force One presidential fleet, but that will require only a small number of planes.

“The air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 freighter,” Ray Conner, chief executive of Boeing Commercial Airplanes, said in a statement.

Productions cuts for the 747-8 shouldn’t come as a surprise, the company has revealed in regulatory filings for months that the cost of producing the plane was starting to outstrip sales. The company claimed an imbalance of about $1 billion.

Boeing shares slipped in extended trade to $121.60 from a close of $123.40 on the New York Stock Exchange.

The company will cut production to half a plane starting in September, down from a target of one a month that it will reach in March.

Boeing had already announced plans to cut production to one a month from 1.3 a month currently.

The after-tax charge of $569 million, or 84 cents a share, will be taken in the fourth quarter of 2015, Boeing said.

Boeing has deferred more than $28 billion in production costs for the 787, leading some industry experts to suggest Boeing could take an accounting charge on that program.

Sales of the jetliner are still selling quickly, which may offset charges.

Boeing booked 71 net 787 sales last year, but only booked two 747-8s. It was the first time the company marked any sales for the 747-8 in two years.