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 Complete	3
To be assembled in Everett	172
To be assembled in Charleston	121
Parts Arriving	6
Undergoing final assembly	10
Storage	0
Storage/Change Incorporation and Re-Work	0
Change Incorporation and Re-Work	5
Pre-Flight Prep	12
Production Testing	8
Non Customer Flight Tests	1
Ready for Delivery	0
Donation	3
Delivered	446
TOTAL	787

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

787 Current Production Table

Delivered 787 List

787 Production and Delivery Trends

787 Monthly Delivery Tracking

Current 787 Operators

Total 787 Deliveries By Customer
2016 Projected Operator Deliveries
2016 Projected Customer Deliveries
2015 Projected Operator Deliveries
2015 Projected Customer Deliveries