U.S. aircraft manufacturing giant Boeing Thursday said it would cut the production rate on the company’s 747-8 jet program amid weaker demand in the air cargo market.
Starting in Sept. 2016, production on the wide body planes will drop from one aircraft per month to one every two months, Chicago-based Boeing said in an announcement after financial markets closed. The reduction will result in a $569 million after-tax charge, or 84 cents per share, when the company issues fourth-quarter 2015 financial results next week.
The cutback expands Boeing’s previously announced plan to reduce 747-8 production to 12 planes a year starting in March, down from roughly 16 aircraft.
“Global air passenger traffic growth and airplane demand remain strong, but the air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 Freighter, said Ray Conner, a Boeing vice chairman and president, and CEO of Boeing Commercial Airplanes.
Citing International Air Transport Association statistics, Boeing said the most recent data show air freight contracted in November, with volumes declining by 1.2% compared to the same time last year. Global passenger demand, in comparison, increased 5.9% the company said.
While voicing confidence in the 747-8 production program’s value, Conner characterized the production cutback as “the prudent step to further align production with current market requirements.”
Boeing shares fell 1.13% to $122.01 in after-hours trading following the announcement. The stock had closed up 1.03% at $123.40 in Thursday’s regular trading session.