Boeing to cut production of 757, 767 passenger jets

by Stanley Holmes
Seattle Times aerospace reporter

Boeing plans to cut production of 757 and 767 passenger jets, reflecting weakened demand for two of its steadiest performers, say company insiders familiar with the decision.

The production cuts could mean an undetermined number of additional layoffs next year. Boeing has been steadily paring its payroll over the past two years, already shedding nearly 32,000 jobs. It had been scheduled to eliminate a total of 50,000 jobs across the company by mid-2000.

Boeing's Renton plant will reduce 757 production to two airplanes a month by April, from the current output of five jets a month, insiders say. Boeing officials would not confirm that plan, however, saying they have no immediate plans to roll back production on the 757 line.

In Everett, Boeing officials did confirm that they will slow the 767 production rate to 3.5 jets a month in January, from four aircraft a month today. Boeing planners previously had forecast that the 767 would remain at four a month through the end of next year.

Officially, Boeing still plans to build 480 passenger jets in 2000, down from a record 620 this year.

Some supervisors in Renton have told workers to expect additional job cuts of up to 60 percent of the existing work force. Boeing officials, however, say no additional layoffs are planned beyond the previous target of 50,000.

Current total employment is about 202,000.

Boeing officials in Renton yesterday downplayed any imminent production rate change for the 200-seat 757.

"There are no changes to the 757 figures at this time," said Cheryl Addams, a Boeing spokeswoman. She added, "There is no major change to the head-count reductions we have already announced."

But those on the factory floor and engineers assigned to the venerable twin-engine jet say the decision has been made. And in crew meetings, managers have warned employees not to talk to the media about the production-rate changes.

Analysts are not surprised by Boeing's decision, pointing out that sales of the 757, its largest single-aisle jet, have dropped off. So far, Boeing has had orders for only three planes 1999.

"The order rate for the 757 has been sluggish," said Howard Rubel, an analyst for Goldman, Sachs. "At some point, it was clear Boeing would have to change the rate."

Even more worrisome is the current backlog for the 757.

For the 757-200, the backlog is 68 airplanes; for the newer and larger 757-300, the backlog is 10. But about half of the 757-200 orders are questionable and may never be converted to deliveries, analysts say.

That's because two of the 757 customers - Northwest Airlines and British Airways - have bought Airbus airplanes, and analysts question whether they still want the Boeing jets. And the third - Trans World Airlines - is struggling financially.

Of the three, Northwest, with orders for 25 757-200s, poses the biggest problem to Boeing. The Minneapolis-based carrier first ordered those planes in 1989, and industry analysts say it no longer wants them.

"The Northwest ones are really shaky," said Paul Nisbet, an aerospace analyst for JSA Research. "They have a dispute going on with Boeing. Northwest doesn't look like they want the airplanes. They are buying gobs of A320s, A321s and A319s. Why would they want the 757s?"

Northwest spokeswoman Jon Austin confirmed the Boeing orders and said the airline plans to receive the passenger jets, beginning in 2004. He declined to comment on whether the airline had changed its mind about the airplanes.

Boeing says it still is planning to deliver the planes to Northwest.

Some workers fear that slow sales and low backlog mean the 757 program could be eliminated in the future. Even analysts say that the 757 competes not only with Airbus but also with other Boeing models, which has hurt recent sales.

Some of Boeing's larger new-generation 737 models can now fly coast to coast and carry nearly 200 passengers - the main flight profile of the 757. The 737-900, for example, can seat up to 190 people.

"The 757 is a victim of the new 737 success," said Richard Aboulafia, an analyst for The Teal Group. "You can do an awful lot with a new generation 737 that was once the domain of the 757."

Still, no one yet believes Boeing is considering shutting down one of the most efficient passenger jets ever built. Boeing launched the 757 in 1979 and has since sold 969 of the various models.

The drop in the production rate reflects the downturn in the commercial jet business, analysts say. They say sales will pick up in the future.

Boeing is betting on the future as well. The company is upgrading the cockpit and it has invested huge sums to modernize the 757 production process, officials say.

"We really think the 757 have an excellent future," said Boeing's Addams. "We really believe in the airplane."