Tuesday, August 9, 2016

787 program takes another financial hit as program deliveries continue to meet expectations, near term deliveries in question due to thrust reverser issue.

Number
Testing Complete3
To be assembled in Everett172
To be assembled in Charleston121
Parts Arriving6
Undergoing final assembly10
Storage0
Storage/Change Incorporation and Re-Work0
Change Incorporation and Re-Work5
Pre-Flight Prep12
Production Testing8
Non Customer Flight Tests1
Ready for Delivery0
Donation3
Delivered446
TOTAL787

Near term deliveries of the 787 look to slow down due to unspecified issues with the thrust reversers affecting both GE and Rolls Royce powered aircraft.  A source has indicated that this is not a fleet wide problem but concerns a batch of thrust reversers that are installed on current 787s that are on the flightline or that are currently being assembled.  New thrust reversers without the issue have been manufactured and are being installed on several aircraft on the flightline including ones for Hainan, JAL and Scoot as those aircraft have their engines removed.  I do expect that these aircraft should deliver before the end of the year and that this issue should not affect final delivery numbers though it could push deliveries to the fourth quarter.

Just when followers of the 787 program thought that the program was just starting to emerge from the financial black hole that was created, it was sucked right back in with Boeing's announcement of an incredibly high charge of $847 mm against 2Q16 earnings.  The charge is due to inability by Boeing to sell the last two original 787-8 flight test aircraft, namely LN 004 (ZA004, N7874) and LN 005 (ZA005, N787FT).  The cost of refurbishing them to certification standards is too high compared to where they can sell them.  This charge was in addition to the charges that Boeing has taken on the 747-8 program ($814 mm) and the KC-46A program ($393 mm).  Boeing will be reclassifying the unit costs associated for these two airplanes from inventory to R&D expense

So what is to become of the two flight test airplanes?  Well ZA004 is currently performing certification testing for the Rolls Royce Trent 1000 TEN.  Once that is complete I expect that this airplane will be donated to a museum. ZA005 flew back to Everett in 2013 and appeared to have some re-work and change incorporation performed on it.  Many of the movable flight surfaces were taken off as were the engines. However, the aircraft has remained in that stripped down state for the more than 2 years.  Now that Boeing is taking this charge I expect that the aircraft will be further stripped for usable spare parts that will probably have to refurbished.  The airframe will probably be destroyed, perhaps Boeing use this airframe as a demonstration on how to dispose of a carbon composite fuselage in a way that is environmentally friendly as recycling CRFP aircraft parts on a large scale has never been done.  This could give Boeing an opportunity to develop proper disposal techniques.
 
Getting back to the 787 production story, Boeing delivered 14 787s (3 787-8 and 11 787-9) in July including one early build 787-8 (ZD006, LN 14, ET-ATK) for Ethiopian Airlines.  Boeing has been making very good progress in getting these airplanes ready for delivery though it's taken the better part of 5 to 6 years for each.  Boeing is slated to deliver 3 more early build 787s (one each in August, September and November) this year with one already in paint and a second one being prepped for its first flight. Other notable deliveries include the first 2 787-9s that were directly purchased by Hainan (still listed as unidentified on Boeing's order and delivery website) and Qatar's 30th and final 787-8 that they have on order.  I'm still waiting for them to exercise their options.  Any day now U-Turn Al.
With the 14 deliveries in July, Boeing has delivered 82 787s this year through the end of July and 445 since program deliveries began.  There are 309 787-8s in operation and 136 787-9s flying. With one additional delivery made this month, Boeing is 54 deliveries away from achieving 500 customer deliveries.  This is something they can achieve by the middle to end of December as long as there aren't any delays in current delivery schedule.  This equates to roughly 11 deliveries per month for the next 5 months.  Boeing has been doing well on that account for the past 3 months.

In terms of production, the two production facilities are still turning out the aircraft as the planned rate of 12 per month.  The efficiency ratio last month was at 0.79 which was driven mainly by higher deliveries from Everett which had a pretty good efficiency ratio of 0.67.  Charleston had a respectable ratio of 1.0.  It should be noted that the one early build 787-8 is included in the calculation of Everett's efficiency ratio.

Looking forward, Boeing was planning for only 9 787 deliveries in August but with the thrust reverser issue it will probably be lower, around 5-6.  One of those deliveries with, ZA155 (LN4457, CN-RGT) for Royal Air Maroc, has already been made.  ZB368 (LN 396, G-ZBKG) a 787-9 for British Airways is finally set to be delivered at the end of this month after being grounded due to issues with Zodiac in delivering the interiors to Everett for installation.  Another early build 787-8, ZD005, (LN 13, ET-ATJ) should also be delivered by the end of this month.  I can only attribute the lower delivery number to the typical August slow down for the summer as well as the aforementioned issue with the thrust reversers.  I do see the delivery rate picking back up in September to catch up to the needed 11/month delivery rate that Boeing needs to make for the remainder of the year.


I'll be following this post with another one reviewing Boeing's comments on the 787 during the 2nd quarter as well as prospects for a rate increase by the end of this decade.


787 Full Production Table

11 comments:

Lee Gaillard said...

For those two 787 frames that are unmarketable, I'd suggest they be donated to the NTSB and FAA for training of emergency crews. Equip one of them to fly unpiloted but controlled from a chase plane and then crash it on a runway that is no longer in use. Firefighters have not yet had to deal with a carbonfiber airframe on fire...with its attendant dangers of toxic fumes and miniscule carbon fibers being released into the air. Key questions would be how to suppress the flames quickly at such a crash site and how to properly outfit the firefighters. Full body hazmat suits? Special masks and air filters? What precautions need to be taken in terms of the spread of toxic fumes and fibrils into the surrounding community? (etc.)

Such training has not yet been done. Are major airports properly equipped and firecrews adequately trained for this new situation?

Rob D. said...

Hey Uresh, what about the other 27 planes?

In your numbers you say that there are 309 -8's operating, and 109 -9's. there are the two that aren't going anywhere, but 25 of them are delivered but not operational.

Uresh said...

My bad, there are 136 787-9s operating (delivered) not 109.

Pete Templin said...

Why are you not more excited about any "efficiency ratio" that's <1? A 0.67 ratio is phenomenal, and an ER of 1.00000 indicates perfect sustainability. Right now, with 26 frames past "Undergoing Final Assembly" and not yet "Delivered", they could only have, at a maximum, 26 months that are <1.0 ER, and that assumes that an aircraft could actually go from Undergoing Final Assembly to Delivered immediately. Cross out the 7 early-builds plus the delayed British Airways frame, and it's only 18 planes, or ~1.5 months of production. If they can get it down to 3 weeks of Pre-Flight Prep plus Production Testing plus time spent Ready for Delivery, that'd only be 9 frames to shove out the door to be 100% caught up and back to a point where 1.0 ER is perfect.

John N Mitchell said...

Checking on text in the first paragraph.
Shouldn't:"should deliver before the end of the year and" actually be "should deliver before the end of the month and"


year to month

You may delete this message, no need to publish.

NCPx said...

LN 440 is noted on the "Delivered" spreadsheet as the 30th for Qatar, delivered on 7/18/16. The table on Wikipedia that you have a link to also reports that Qatar have 30 units delivered. However, the graph on Wikipedia shows only 29. So, . . .?

Uresh said...

Wikipedia is wrong.

Uresh said...

John,nope, I meant end of year. I don't know how long this issue is going to last and what knock on effects it may have, if any.

James Graham said...

The incident with ET-AOP (emergency locator beacon fire) was sufficiently serious. In addition to proving that the particular carbon fibre used in the 787 fuselage is not prone to spreading fire.

Uresh said...

OFG

Joshua Yuen Jia Jun said...

Is there a possible reason why registration 9V-OFF is skipped?