Sunday, April 1, 2018

Boeing 787 March 2018 Month End Review

Testing Complete3
To be assembled in Everett107
To be assembled in Charleston83
Parts Arriving6
Undergoing final assembly8
Storage/Change Incorporation and Re-Work0
Change Incorporation and Re-Work3
Pre-Flight Prep11
Production Testing5
Non Customer Flight Tests0
Ready for Delivery2

March was a busy month for the 787 program in more ways than one.
Singapore's 1 787-10 9V-SCA. Photo by Mike Cassidy (with H/T)

First, Boeing delivered the 1st 787-10 to launch customer Singapore Airlines in an elaborate delivery ceremony that took place on March 24th.  The aircraft was contractually delivered on March 14th but Singapore kept it in Charleston for 10 days to conduct training flights in the area until the delivery ceremony and flyaway this past week.

Second, Boeing delivered 15 787s in March, the largest number of deliveries of 787 since December 2014 when Boeing delivered 18 aircraft.  Of the 15 delivered, Boeing turned over 14 x 787-9s and 1 787-10.  The manufacturer now has delivered a total of 670 787 (350 x 787-8, 319 x 787-9 and 1 x 787-10).  For the first quarter, 2018  Boeing delivered 34 787s (33 x 787-9, 1 x 787-10).

Besides the delivery to Singapore, the other notable deliveries in March include:

El Al's first direct purchase 787-9 (they've been receiving 787s on lease).
Virgin Atlantic's penultimate 787-9 with their 17th and last aircraft in flight tests to be delivered next month.
Xiamen's last 2 787-9s on order thus completing their order for 6 787-9s.
LOT Polish Airlines 1st 787-9 leased from Aviation Capital Group.
British Airways' penultimate 787-9.

On the production side, Boeing was also very busy as they started final assembly on 14 787s while rolling out 13 aircraft.  Of those airplanes, Boeing assembled 6 787s within the month of March.  Boeing delivered more airplanes than they rolled out in March thus reducing the crowded flightlines at Charleston and Everett.

On the sales side, it appears that American Airlines is close to placing a large 787 order with Boeing after Airbus walked away from American's widebody competition.  American has been looking to get out of the A350 order that merger partner US Airways had placed and which the carrier inherited after the two airlines combined.  American made known their desire not to have a sub-fleet of aircraft in their inventory. Boeing pushed the 787 while Airbus pushed the A330NEO.  American has the A330CEO (also inherited from US Airways).  Airbus indicated that they could not beat Boeing on price that was being offered for the 787 and thus walked away.  It remains to be seen which version of the 787 American will order but rumors pointed to the 787-8 and 787-9.  American holds 58 options thus I see them exercising a good chunk of those options and cancelling the A350 order which will incur a forfeiture of the deposit that was paid to Airbus.  I believe that Boeing probably offered to pay American the deposit in the form of services and spare parts for the 787 though I don't have any solid information on this.  It would be in keeping with other Boeing's sales practices from other campaigns.  With a little bit more than three months to go until Farnborough 2018, I expect Boeing to be finalizing a few 787 deals over the three months including Emirates' mega deal for the 787.

Lastly,  I want to thank Mike Cassidy for allowing me to use his gorgeous photos of the Singapore 787-10 that he took at Charleston.  Give him a follow on Flickr:

Here are a couple more examples of his work:

Photo by Mike Cassidy

Photo by Mike Cassidy

787 Spreadsheets


Andrew Boydston said...

A minor correction needed: you wrote: " a total of 370 787" shouldn't it be 670 787? Other than that I am excited for 2018's announced 787 sales which should exceed 100 units with

Hawaiian 10
Emirates 40
American 30 or so

Already in play pushing a number of about 70-80 787's waiting for booking announcement.

NCPx said...

Typo: 670 program-to-date deliveries, rather than 370.

Uresh said...

My bad. Thanks!

Uresh said...

Corrected, thnanks!

Anonymous said...

HZ-AR22/23 should be 14/15 i believe.

Stephan Walter said...

Any word regarding the deffered cost? Where are we at the moment and how fast do they pay back the hugh amount of money´?

Daniel D'Arcangelis said...

Stephan Walter -

787 deferred production costs are the first item. Updated quarterly about the time of the earnings call. 2 things -

1) You'll notice that the numbers have been headed down since the 2nd quarter of 2016.

2) This is not a debt that has to be repaid. It is the extent to which past earnings were "inflated" relative to the "unit-cost" accounting method (closer to cash-basis). When it goes down, all that means is that earnings were a little less than they would have been under the other method. Smoothing earnings over the accounting block for the 787 program in this way is required by GAAP.

It will be interesting to see what happens with this quarter's number, as -10 deliveries have started, and the sales-mix shifts further away from the -8.

Daniel D'Arcangelis said...

One other thing - the accounting block for the 787 stands at 1400 planes right now. So when 787 #1400 is delivered, the deferred production cost should zero out.

That is (to me anyway) a reasonable estimate - they've actually have sales on the books for nearly 1300 units, so it won't take all that many sales over the next several years to get them to that number. If there are a lot of new orders, Boeing might extend the block further to reflect that.

Daniel D'Arcangelis said...

one more point. Amateur accounting nerd doing his thing. Apologies to everyone.

If, at some point in the future, Boeing determines they won't be able to zero that out over the remaining accounting block, and also there aren't enough sales to justify extending the block, then they will have to take a charge when that is determined to square up with the new expectations. That would indicate the actual learning curve did not achieve expectations - the actual efficiency gains realized were not as large as predicted. Even if this happens, that does not mean the program was unprofitable - just less profitable than predicted / reported earlier.

Seeking Alpha has a pretty good write-up explaining a lot of this stuff here:

Phil Garnatz said...

On the "787 Monthly Delivery Tracking" tab I noticed that the Total deliveries (cell B4) is stuck at 636, not reflecting anything this year.

A few edits are needed to update this tab for 2018:

cell J3 needs a label "2018"
cell J4 needs formula "=P116"
cell P114 needs formula "=sum(D114:O114)"
cell P115 needs formula "=sum(D115:O115)"
cell P116 needs formula "=sum(D116:O116)"

I'm a big fan of your site, keep up the good work.

Uresh said...

Thanks! Corrections made!