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Boeing to slash SC-made Dreamliner rate again; production could go to one plant

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Boeing Co. is cutting 787 Dreamliner production again and may close one of the two assembly lines. File/Grace Beahm Alford/Staff

With commercial airplane sales gutted by the coronavirus pandemic, Boeing Co. will further cut production of the 787 it builds in South Carolina and Washington state and will study whether to eliminate one of the two production lines. 

By the end of next year, the company will be making just six Dreamliners per month at the plants, down from a peak of 14.

Previously, the planemaker said it would cut production to 10 per month and later to seven by 2022. 

Right now, the 787 is made in Everett, Wash. and North Charleston. That's poised to possibly change, CEO David Calhoun said Wednesday, when Boeing reported a wider-than-expected loss for the second quarter.

"With this lower rate profile, we will also need to evaluate the most efficient way to produce the 787, including studying the feasibility of consolidating production in one location," Calhoun wrote in a letter to employees. "We will share more with you following our study."

Boeing's latest earnings report, as expected, reflected COVID-19's crippling effects on the aerospace sector and losses associated with the continued grounding of the 737 Max after two deadly crashes.

The company reported a $2.4 billion loss for the April-June period. Revenue tumbled 25 percent to $11.8 billion compared to the same quarter last year, more than financial analysts projected.

"This pressure on our commercial customers means they are delaying jet purchases, slowing deliveries, deferring elective maintenance, retiring older aircraft and reducing spending — all of which affects our business and, ultimately, our bottom line," Calhoun wrote Wednesday. 

Boeing delivered 20 planes during the quarter, compared to 90 during the same period last year. Because of the dearth of deliveries, completed aircraft are piling up at Boeing facilities, including the plant off International Boulevard in North Charleston, where well more than a dozen Dreamliners were parked outside this month.  

While Calhoun maintained confidence about an eventual recovery, he still anticipates it will take years for travelers to return to the skies en masse. Despite some "encouraging signs," he predicts it will be about three years before passenger counts return to 2019 levels. 

Boeing also is cutting output of its other commercial jetliners, including the still-grounded 737 Max along with the 777 and the 777X. 

Calhoun said the additional rate reductions will force the company to "further assess" how many workers it needs. This comes after Boeing said during its first quarter earnings report that it would shed 10 percent of its roughly 160,000 jobs worldwide. 

A large share of those layoffs were initiated in May when 6,770 U.S. workers, including an undisclosed number at Boeing South Carolina, were told their jobs had been cut. Smaller rounds followed, with the "latest wave" of workforce reductions starting Wednesday, according to Calhoun's letter. 

Boeing has not broken down the layoff figures by location, but its North Charleston business could be shrinking by about 1,000 workers based on a previous estimate that jobs within the commercial airplanes and services divisions would be reduced by 15 percent. 

At the beginning of the year, Boeing South Carolina had almost 7,000 workers, making it Charleston County's largest private-sector employer. 

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Calhoun said during a conference call Wednesday that the company does not have a "predisposed notion of what's going to happen" as it studies whether to merge the two 787 lines into one. 

Boeing selected North Charleston for its East Coast Dreamliner assembly plant and delivery center in October 2009. The campus at Charleston International Airport builds all three versions of the twin-engine widebody, including the newest and largest 787-10 or "Dash 10."

The Everett site has production lines for several widebody models — 747, 767, 777 and the 787 — and completes final assembly of two of the three Dreamliner versions. 

Despite the downturn, the company expects to return to making 10 or more 787 jets each month, though the timing will depend on how quickly the air-travel market recovers.

Calhoun insisted Boeing isn't favoring one Dreamliner manufacturing site over the other, but some industry analysts and observers seemed more certain of what the conclusion of the study will be. 

"Good bye Everett," Scott Hamilton, an aerospace analyst and editor of Leeham News and Comment, wrote on Twitter. He pointed specifically to the "Dash 10" model, which accounts for much of the Dreamliner backlog and is built exclusively in North Charleston, as one reason the South Carolina site would remain open. 

Another factor in the Palmetto State's favor is cost, said Richard Aboulafia, vice president of analysis at Teal Group in Fairfax, Va. 

The North Charleston campus not only makes all three 787 models, but it also supplies fuselage sections for all of the versions, including the planes that are assembled near Seattle. 

Aboulafia also pointed to one of South Carolina's initial selling points to Boeing: a low union participation rate. 

Despite attempts by the International Association of Machinists to organize Boeing South Carolina employees — including an unresolved effort to represent flight-line workers — the North Charleston workforce is union-free. 

Still, keeping the Everett plant running would have some advantages. For example, it would be easier for Boeing to make any major changes or upgrades to the 787 in the Puget Sound area, the longtime home of its engineering nerve center. 

The company might also want to hold onto the West Coast line for when demand for commercial airplanes comes back, Aboulafia said.

But he also warned of a "genuine risk" that Boeing will be forced to reduce production rates again.

"Right now, it's all about cutting costs," he said.

Reach Emily Williams at 843-607-0894. Follow her on Twitter @emilye_williams.

Emily Williams is a business reporter at The Post and Courier, covering tourism and aerospace. She also writes the Business Headlines newsletter and co-hosts the weekly news podcast Understand SC.

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