American Airlines pulls the trigger on mega 787 order

American Airlines and Boeing announced a firm 47 strong order for the 787.  The order consists of 22 787-8s which will start arriving in 2020 and 25 787-9s which will be delivered starting in 2023.  These airplanes will be used to replace the 767-300ER, A330-300, and older 777-200ER thus simplifying American's widebody fleet.  The order includes another 28 options for the 787.

American Airlines will cancel the order for 22 Airbus A350 that was ordered by US Airways in a pre-merger deal.  American is also deferring deliveries of 40 737MAX airplanes that were to be delivered between 2020 and 2022.

While this is a firm order what is unclear is if this is an exercise of 58 787 options that American Airlines held as part of their original order.  Boeing will only confirm that the new order is firm and booked.  If the two orders were taken as separate then it would mean that American Airlines order (firm + options) 175 787s which doesn't seem realistic even for an airline as large as American.  A more reasonable conclusion is that the new order is a partial exercise of the 58 options plus adding more options for future replacement and growth.

Currently American's widebody fleet (not including the 787) is made up of the following:

A330-200 - 15
A330-300 - 9
767-300ER - 23
777-200ER - 47
777-300ER - 20

Excluding the 77-300ER which are young and should be in their fleet for years to come, the total near term widebody replacements that American will need is 94 airplanes (encompassing all the A330, 767 and 777-200).  By my reasoning, American has orders for 93 787s - 47 firm new order, 7 firm current order, 39 options (11 current order options + 28 new order options).  This will be enough to simply their widebody fleet to just three types by around 2026 or so the 777-300ER, 787-8 and 787-9.  It is possible that American can use the 39 options for the 787-10 (or any future improved model of the 787).

This order is a shot in the arm for the 787-8 whose orders have been lagging as of late as many customers have been opting for the larger 787-9.  In the futrue the 39 options will probably be used for A330-200 replacement (787-9) and 777-200ER replacement (mix of 787-9 and 787-10).

With this booked order, Boeing now has 1366 order for the 787 (440 787-8, 755 787-9 and 171 787-10).

Here's the text of Boeing's Press Release:

Boeing, American Airlines Sign Major Order for 47 787 Dreamliners

World's largest airline to more than double its Dreamliner fleet

Boeing and American Airlines today announced the world's largest airline will more than double its 787 Dreamliner fleet with a new order for 47 of the super-efficient airplane plus 28 options. The 47 787s are valued at more than $12 billion at list prices and makes American Airlines the largest 787 customer in the Western Hemisphere.

American originally ordered 42 787 Dreamliners and has been using the airplanes' tremendous fuel efficiency and superior passenger amenities to open new routes around the world, including Asia Pacific and Europe, and boost its network efficiency. While American still has more airplanes on the way from its initial order, the airline is buying the additional Dreamliners – 22 787-8s and 25 787-9s – to further modernize and expand its fleet.

"We are extremely honored that American Airlines, is deepening its commitment to the 787 Dreamliner. This new order is a powerful endorsement of the 787 family's unique passenger appeal and unmatched ability to help airlines open new routes and grow profitably," said Boeing Commercial Airplanes President and CEO Kevin McAllister.

Built with lightweight composite materials and powered by advanced engines, the Dreamliner family lowers operating costs by more than 20 percent compared to previous airplanes, and nearly 10 percent compared to today's competing jets.

American becomes the latest airline to place a repeat order for the 787 Dreamliner. More than half of the program's 71 customers have done so, which has helped the 787 program achieve more than 1,350 orders to date.

"We are showing again and again that the 787 Dreamliner is the champion in its class. The airplane's tremendous value proposition explains why it has become the fastest selling twin-aisle jet in history," said Ihssane Mounir, senior vice president of Commercial Sales & Marketing for The Boeing Company. "And when we match the Dreamliner with Boeing's suite of services, it is a combination that delivers unbeatable value for our customers."

Boeing's Global Services division provides American Airlines with efficiency tools such as Airplane Health Management and Toolbox, which help the airline improve operational performance and improve dispatch reliability.

The 787-8 Dreamliner can fly 242 passengers up to 7,355 nautical miles (13,620 km) in a typical two-class configuration. The 787-9, a stretch of the 787-8, can fly 290 passengers up to 7,635 nautical miles.

About Boeing and American Airlines' history

The relationship between Boeing and American Airlines spans over 80 years. Some of the key shared milestones include:

• June 1936: American becomes the first to fly the Douglas DC-3 in commercial service
• January 1959: American uses the Boeing 707 to offer the first coast-to-coast jet service
• March 1961: American is the first in-service with the Boeing 720B
• July 1971: The first DC-10 delivery goes to American
• May 2015: American flies its first revenue flight with the Boeing 787 Dreamliner.

Boeing delivers 11 787 in August; 600th Dreamliner due to be delivered on September 26th

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	Number
Testing Complete	3
To be assembled in Everett	152
To be assembled in Charleston	117
Parts Arriving	6
Undergoing final assembly	9
Storage	0
Storage/Change Incorporation and Re-Work	0
Change Incorporation and Re-Work	0
Pre-Flight Prep	12
Production Testing	6
Non Customer Flight Tests	4
Ready for Delivery	1
Donation	3
Delivered	589
TOTAL	902

Boeing delivered 11 787s in the month of August (3 x 787-8 and 8 x 787-9).  The batch of aircraft that were delivered included Air India's penultimate 787-8 and El Al's 1st 787-9 leased from Air Lease Corp.  Total 2017 deliveries stand at 89 as of August 31st (21 x 787-8, 68 x 787-9) and for the program Boeing has delivered 589 787s (345 x 787-8, 244 x 787-9).

With these totals Boeing is on track to deliver the 600th 787 in late September.  Based on the current delivery schedule, this delivery should occur on September 26th. However, Boeing has 2 787 deliveries schedule for that day:  ZA458 (LN 609, G-ZBJI) a 787-8 for British Airways which has already flown it B-1 flight and ZB247 (LN 613, F-HRBC) a 787-9 which is being leased to Air France from AerCap.  We probably won't know until late that day or the next day.

Other notable deliveries in August include Thai Airways 1st 787-9 being leased from AerCap and the end of the terrible teens.  That's right ZD012 (LN 19, VP-CSC) will deliver around September 29th to RTX (which is a holding company) thus marking the end of the painful gestation of the 787 program. While this delivery will also mark the end of Boeing's need to devote resources to aircraft that were overweight and somewhat hard to sell, it also is a symbolic turning of the corner for the program though the program continues to face challenges.  The foremost of this challenge is to whittle down the almost $30 billion in deferred production cost racked up by the 787 program.  Another challenge (which is facing Airbus as well) is the anemic widebody aircraft market as sales in this sector have slowed significantly.  More on these two challenges later.  The program has changed immeasurably.  The 787-8 was the dominate version when Boeing first launched the program. Now the 787-9 is by far the more popular version and the 787-10 may even more popular in the years to come as airlines look to replace A330-300 and 777-200.  Boeing has changed the way the program was managed and the production system that caused many of the headaches in 2007/2008.  Instead of being the integrator of parts coming in from around the world, Boeing took some production and assembly tasks back in house from many suppliers.

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Boeing's production continued apace with 13 aircraft rolled out (versus the 11 deliveries) thus the number of airplanes waiting to be delivered increased by 2 and outpaced the delivery rate.  Boeing seems to have normalized the production rate after introducing the 787-10 into the production system.  In fact the first 787-10 for Singapore Airlines is under going final assembly in Charleston as evidenced in the photo below (see top center of photo the aircraft in front of the one for Air New Zealand).

Boeing Photo

We also now know how many 787s can fit inside 88-30 - 9. Speaking of production, my 787 firing order was updated to reflect the firing order up to LN 769.  Next year we'll see the first 787-9 for Juneyao Airlines.  Also revealed was an unidentified customer now known as Bank of Communications Leasing.  This is a Chinese bank which has bought at least 1 and possibly more 787-9s.  The 1st one is being leased to Hainan Airways and will be delivered next year.  We also know that Etihad will receive at least 2 787-10 next year.

Today was a big news day for the 787.  First Boeing announced that the production rate would increase from 12 to 14 in 2019.  This is pretty surprising as orders have been slow to come in and Boeing hasn't had a book to bill above since 2013.  Boeing needs more orders, quite frankly, to justify the increase in production rate but management had other reasons.  By increasing the rate they can generate more free cashflow and increase margins per aircraft.  They're also anticipating a resurgence of widebody aircraft orders as a replacement cycle should be coming up in the early 2020s. They still need orders though.  The other big news was that Malaysia Airlines signed a MoU for 8 787-9s but after news that Emirates was about to order the 787-9 and 787-10 came out in July,  the airline later came out this month and told Aviation Week that market conditions have forced them to shelve the order for either the 787 or A350 "for now."  This order would have been a major shot in the arm for the 787 program though surprises could still happen two months from now.  Orders will continue to be a challenge as will the continued challenge of reducing the almost $30 billion in deferred production cost accumulated by the program.  Heck I'm still waiting for Garuda Indonesia to finalize its order for 30 787s or for Turkish to announce their order (they're supposedly now buying 8 747-8I). Boeing added 100 to the accounting block going from 1300 to 1400 and thus spreading the production cost across a larger number of units and showing greater profitability (margin) on each aircraft delivered. At the end of the day Boeing will need to up it's sales campaigns as well as start convincing those customers that hold 787 options and purchase rights to exercise them.

Lastly, 787-10 flight testing is continuing and has crossed over 650 flight test hours by my estimation.  Boeing has also started final assembly of ZC003 (LN 622, 9V-SCB) for Singapore Airlines and I anticipate that this airplane will be the first 787-10 delivered after conducting flight test in support of the -10 certification.  I continue to believe that flight testing should wrap up early in the 1st quarter of next year.

787 Production Tables