The Boeing Company today announced it will reduce production rates for some of its commercial airplane programs based upon updated assessments of the Asian economic crisis and its impact on air travel and airplane customers.

Production on the 747 program is now scheduled to decrease from 3.5 to 2 airplanes per month in late 1999, and subsequently to 1 per month in early 2000 if market conditions fail to improve. Based upon updated customer demand forecasts, the 757 program will be reduced from 5 to 4 airplanes per month and the 767 program will be reduced from 4 to 3.5 airplanes per month in early 2000. The 777 program, currently scheduled for a rate reduction from 7 to 5 airplanes per month in the fourth quarter of 1999, is now projected to continue at the lower rate in 2000. The 737 Next Generation is scheduled to increase to 24 airplanes per month early next year, as previously announced, and is projected to remain at that rate until late 2000, when the rate is planned to decrease to 21 airplanes per month. Announced 1999 rates for the Boeing 737 Classic, MD-80/-90 and MD-11 programs are unchanged. The company plans to establish a formal production rate for the 717 after deliveries begin mid-next year.

Production rates for all models of aircraft are reevaluated on an ongoing basis based on customer demand and worldwide economic trends. Production rates will be adjusted, upward or downward, to match supply with demand.

"Clearly, the economic slowdown in Asia is driving air traffic down which impacts our customers' plans and operations," said Alan Mulally, Commercial Airplanes president. "Our actions today will match production to market demand to support our customers."

Domestic and international air traffic growth in many Asian markets has dropped significantly since the economic crisis hit, with most airlines reporting operating losses or significantly reduced profits. Worldwide airline passenger traffic currently is expected to grow at only 2 percent in 1998, compared to 1997's performance of more than 6 percent. As a result, several customers have requested deferral of deliveries out of 1999 and 2000, and the company is working with the airlines to reschedule deliveries.

The revised production plans will result in further employment decreases. The company expects to reduce employment, from the June 1998 high point of 238,000, by as many as 38,000 by year-end 1999, and an additional 10,000 in the year 2000.

Financial Outlook for Full Year 1998, 1999 and 2000

Based on current schedules and plans, which include approximately 550, 620 and 490 commercial aircraft deliveries for the full years 1998, 1999 and 2000, consolidated revenue is expected to be in the range of $56 billion, $58 billion and $50 billion, respectively. The net earnings projection for 1998 continues to be slightly above $1 billion. Because of the impact of the production rate reductions on the commercial aircraft margins, net earnings for 1999 are now projected to be in the range of $1.5 -- 1.8 billion. The operating margins for the year 2000 are expected to be somewhat lower when compared to 1999 due to the commercial aircraft delivery mix. Commercial aircraft deliveries in the year 2000 will be predominantly newer aircraft programs, which have lower initial operating margins than established aircraft programs.

The production process for Commercial Airplanes continues to improve. Production health metrics indicate that the production process has stabilized, and are well within the plans set forth in October 1997. "We delivered our planned 62 airplanes in November and we are on target to deliver 550 airplanes in 1998," said Alan Mulally. The 62 deliveries consisted of 9 737 Classics, 18 Next-Generation 737s, 5 747s, 6 757s, 5 767s, 6 777s, 2 MD-11s, 1 MD-80 and 10 MD-90s.

Overall performance in the Information, Space and Defense segments continues to show improvement, even as research and development expenditures continue at relatively high levels in support of Space and Communications Programs.

Cash flow is expected to be strong over the next several years, well in excess of our operating requirements, which will continue to support the share repurchase program and other activities to benefit our shareholders. Through Nov. 30, the Company has repurchased 22.7 million shares of stock (approximately 2.3 percent of outstanding stock) for $864 million.