Boeing Opts to Keep Making Money-Losing 717, but at Lowered Production Rate

Boeing Co. announced Thursday that it has decided to keep manufacturing its slow-selling 717 jetliner but at a reduced production rate reflecting lower demand.

The verdict on the unprofitable jet comes nearly two months after Boeing said it might scrap the program.

There was no immediate word about layoffs at the Boeing production plant in Long Beach, Calif., that makes the 717.

But the company said in its announcement that it expects to take $700 million in fourth-quarter charges related to the Sept. 11 attacks, which prompted a precipitous falloff in air travel. Those charges, it said, include additional employee severance and out-placement service costs, aircraft and spares inventory valuations, and exposure from contractual obligations with customers and suppliers.

The 717, known as the MD-95 before Boeing acquired it in the 1997 merger with McDonnell Douglas, is the industry's leading 100-passenger plane but the only one of Boeing's production lines currently losing money. It was in trouble even before the Sept. 11 attacks further dried up the market for it, resulting in hundreds of workers at the Long Beach plant being laid off in August.

Boeing's Web site reported just six new 717 orders in 2001 and 20 cancellations, all by TWA.

"After a thorough evaluation of the program and market, Boeing has made a business decision to continue production of the 717," the company said in an early-morning news release. "However, due to reduced near-term demand following the events of Sept. 11, the program will go forward with a lower production rate and revised delivery projections."

The announcement was a mixed verdict for workers. Analysts had said until the past few days that the program was certain to be abandoned, but slashing production is certain to result in further job cuts at the plant that employs 4,500 workers.