Boeing cuts 787 production, suffers 737 MAX cancellation - Reuters

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SEATTLE, July 13 (Reuters) - Boeing Co (BA.N) said on Tuesday it will cut 787 production after finding another production-related structural defect, and a major customer partially canceled a 737 MAX order, in a double hit to the U.S. planemaker's COVID-19 pandemic recovery.

Chicago-based Boeing now forecasts delivering fewer than half of the lingering 100 or so 787 Dreamliners in its inventory this year - instead of the "vast majority" it had expected - as it continues forensic inspections and costly repairs to address quality flaws in the aircraft.

Boeing did not disclose a new production rate for the 787 program, but said it would shift temporarily below the already-slow current rate of five jets per month.

"To us this is more significant than the cut to the delivery forecast, as it ripples down through the supply chain," Vertical Research Partners analyst Robert Stallard said in a client note.

"The supply chain cannot just be turned on and off like a switch," Stallard added.

Separately, United Arab Emirates airline flydubai said on Tuesday it has agreed with Boeing to cut the number of 737 MAX aircraft it will take delivery of by 65. The airline has already taken delivery of 16 MAX jets out of its total order of 251, according to Boeing's website.

Boeing shares were down 3.3% in afternoon trading against a fractionally lower Dow Jones Industrial Average.

For the year so far, the company has delivered 156 jets of all types, compared with 157 for all of 2020, Boeing said.

The latest production-related flaw, first reported by Reuters on Monday, involved unacceptable gaps around the forward pressure bulkhead, the U.S. Federal Aviation Administration said.

The FAA said late on Monday that Boeing, which spotted the problem, would fix it before the planes are delivered.

The U.S. planemaker's 737 MAX and 787 have been afflicted by electrical defects and other issues since late last year. Boeing halted deliveries of the jet in May, the second pause after it initially stopped handing over the jet in late 2020.

"We will continue to take the necessary time to ensure Boeing airplanes meet the highest quality prior to delivery," Boeing said, adding that the new issue poses no immediate threat to flight safety.

The FAA said it will review data to "determine whether similar modifications should be made on 787s already in commercial service."

In June, Boeing booked 146 jet orders. That net figure takes into account instances in which the buyer converted an order to another model or canceled it entirely, including 71 737 MAX jets, the company said.

Its backlog increased from 4,121 to 4,166 aircraft, Boeing said.

Boeing handed over 45 planes to customers in June, its highest monthly total since March 2019, when the second of two fatal 737 MAX crashes occurred.

Its June delivery tally includes 10 widebody aircraft, one of which was a 787-9 for Turkish Airlines, Boeing said.

It also delivered 35 737s, including 33 737 MAXs and two P-8 maritime patrol aircraft to the U.S. Navy.

Reporting by Eric M. Johnson in Seattle; additional reporting by David Shepardson in Washington; editing by Will Dunham

Our Standards: The Thomson Reuters Trust Principles.

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