Boeing Execs Update on the 787 program through RBC Conference Call

Larry Loftis, VP and General Manager, 787 program and Pat Shanahan, Senior VP and general manager, Airplane Programs at Boeing were hosted on an investor conference call presented by RBC this afternoon.

Here's a synopsis of their comments and what was said on the call:

To date Boeing has delivered 38 787s overall and 35 in 2012 to 8 different customers. Boeing customers have told the company that the aircraft is meeting fuel burn expectations and passengers are also delivering great feedback in terms of comfort of the aircraft.

Started the year at 2.5/month production rate and will end the year at the current rate of 5/month. Boeing is tracking to plan to increase production to 10/month by the end of 2013. 

The next rate increase is to 7/month which is expected in mid 2013, whereupon it will stabilize at that rate before increasing to 10/month.

Boeing is well past the 90% engineering release milestone on the 787-9 and that was completed about 3-4 weeks ahead of schedule. The supply chain is largely the same as the 787-8 but have bought some work back in house. Schedule – the airplane is meeting all engineering milestones.  It is on original schedules with some suppliers ahead of schedule. The major components are currently being assembled by the major (tier 1) suppliers while wing assembly will start later this year into the very early part of 2013.  Boeing will introducing the 787-9 in to final assembly in late spring – late summer of 2013 and flight test in fall 2013 with EIS in early 2014. There will be 3 flight test aircraft with all three currently in production. the wing spars are currently being built at MHI (Mitsubishi Heavy Industries). There is a buffer in the schedule but it is looking like they won’t need it. The 787-9 weight has been stable and has improved by a couple hundred pounds. Boeing is planning for  6 months for flight test, but has been doing flight testing on the 787-8 to gather data to support the 787-9.  We now know why Boeing has been flying ZA005 lately. There is extra flow in the production system that has been allotted to the 787-9 in case there are issues during assembly of that aircraft.
 
Boeing has 3 final assembly lines going for the 787 and allows them a greater degree of flexibility to manage the ramp up of the 787 while introducing the 787-9 into the system.  The current plan is to continue to have the production split between Everett and Charleston at 70%/30%.  Boeing has been very pleased with the improvements in the production system over the last 12 months. The quality of the work and processes improve everyday, and the learning curve is tracking to their expectations. The curve at Charleston has been very good (for a new site, makes your wonder if Boeing had better expectations). Boeing has transferred best practices at Everett to Charleston and information is flowing back and forth very freely.  Boeing's intents is to make sure they have one standard set of best practices for both sites (one production system for 2 sites). 

Boeing has the ability to go beyond the 10/month production rate. The ability to go beyond 10/month will be determined by the market.  There's no constraint on bricks and mortar aspect of increasing the rate. Boeing has an understanding of the capabilities of the suppliers as well as their own capabilities.  The question will be the capacity of the suppliers and the rate to adding capacity.

By the end of the year, Boeing will have 60% of pre-LN 66 airplanes delivered. The remaining aircraft that are awaiting change incorporation will be delivered during 2013 to 2015 (Boeing currently has 23 aircraft undergoing change incorporation or awaiting change incorporation including 3 test airplanes).  The ones that remain are the lower line number and will take longer to complete as the extent of the changes  needed are extensive. There are firm homes for the majority of the planes that have yet to go through change incorporation. there are a couple that still need to find a customer (I'm guessing that these are ZA004 and ZA005).

With regards to delays, Boeing says that there  aren't any systemic delays (which would take weeks or months to resolve) in the production system but one off delays amounting  to a few days delivery of the 787 to customers because they are still learning.  Boeing would not comment on delays to specific customers or countries (China).

On the 787-10, Boeing is not ready to launch yet as they still have some work to do before they are ready to launch the program.  (Note they have said anything about Authority to Offer, ATO). Technically they are confident of the 787-10; operationally and financially they are trying to be more measured with their plans for the aircraft.  They are expecting an EIS at the back end of this decade (2017-2019 timeframe?).  It depends on when Boeing has finished the work they are engaged in with regards to the 787-10.  Boeing expects substitutions between the family of 787 models (go up or down within the different 787 models).