Airbus boosts production as Boeing cuts Douglas line
Tuesday 04 November 1997
Michael Harrison examines the prospects for the world's two leading manufacturers of commercial airliners.
The Toulouse-based Airbus consortium plans to increase production from 185 planes this year to 234 next year to cope with an orders backlog that now stands at more than 1,000 aircraft worth $70bn.
The decision was taken after USAirways confirmed an order for 124 jets from the A320 range worth between $4.3bn and $6bn.
Together with further options and orders to be confirmed, the deal with USAirways could involve as many as 400 aircraft worth $17bn, making it one of the biggest commercial jet contracts ever.
Shares in British Aerospace, which has a 20 per cent stake in the four- nation consortium, closed 35p higher at pounds 16.17 on confirmation of the giant order. BAe makes wings for the Airbus range at its Chester plant in the North-west.
Meanwhile, Boeing announced in Seattle last night that it was to scrap production of the McDonnell Douglas MD-80 and MD-90 by mid-1999 once existing orders have been completed.
The wide-bodied MD-11 will continue in production but mainly as a freighter aircraft, not a passenger jet.
Boeing, which took over McDonnell Douglas for $13bn earlier this year, has also put the future of its most recent jet, the 100-seat MD-95, under review.
Boeing has agreed to honour a launch order for 50 of the aircraft from Air Tran but said it would need to assess the market to decide whether it can keep the jet in production.
Analysts believe that the closure costs involved in running down the McDonnell Douglas production lines in Longbeach, California, could force it to write-off a further $500m-$1bn.
This is on top of the $2.6bn charge Boeing is incurring to cover the costs of production difficulties at its Seattle plants caused by the unprecedented increase in manufacturing rates.
Boeing wrote off $1.6bn in the third quarter and expects to take a further $1bn charge next year to cover the costs of penalty payments for late deliveries and production bottlenecks.
Ron Woodard, president of Boeing Commercial Airplane Group, refused to be drawn on the scale of the write-offs at McDonnell Douglas, saying they would be released with the group's fourth-quarter results.
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