Sunday, November 24, 2019

787 Update - Boeing to make big 787 delivery push in December

Boeing has fallen far behind in delivering 787s to customers this year for a different reasons but the slow down deliveries has occurred at both Everett and Charleston though for different reasons.  Charleston seems to be catching up to their schedule whereas Everett is still far behind. Assuming a 7/month delivery rate (77 for each build site) Charleston currently has delivered 71 while Everett has delivered 63.  There are thee more 787s scheduled to be delivered this month: 2 from Everett and 1 from Charleston thus the final numbers should be 71 from Charleston and 65 from Everett.

So what gives?  Why is Boeing so far behind.  The answer depends on the delivery site. 

Charleston continues to have workmanship issues forcing them to move unfinished aircraft outside in order not to create bottlenecks within the Charleston final assembly line.  These airplanes are then moved back inside to finish assembly tasks that are not able to be done out on the flightline. The Charleston site is now utilizing all 8 assembly sports within building 88-30 to not only assemble but finish assembly and outfitting tasks.  Hurricane Dorian which hit the Charleston region in early September didn't help matters though production was stopped for a while there was no major damage to Boeing's plants there or to those aircraft that were stored there and could not fly to escape the storm.  Charleston has been making a comeback of sorts as deliveries from August through November have been 7/month or higher but they sill need to make a push if they're are to achieve 84 deliveries by the end of the year.  Currently there are 11 787s on the flightline at Charleston waiting to be delivered.

Everett has been consistently rolling out 787s at about 7/month this year but the flightline backlog has grown.  It's not due to production issues but rather customer issues have held up deliveries. Qatar Airways currently has 7 787-9 on the Everett flightline and this is probably due to Qatar's intense regard to workmanship issues and getting the planes in a condition that they find acceptable.  Readers of this blog understand these standards all too well.  Hainan Airlines delayed deliveries of 787-9s that were already built so but Boeing was able to reallocate these airframes to Vistara Airlines which will take delivery of them starting in January of next year. Similarly, two 787-9s for GECAS leased to Hong Kong Airlines were not taken up (NTU).  These airplanes were subsequently cancelled from GECAS' order and sold to Biman Bangladesh Airlines.  These two airframes will be delivered in December.  So the delays in deliveries at Everett are customer driven and it's impossible to separate the delays in deliveries for the Chinese bound aircraft from current Trump trade war with China.  Currently there are 20 787s on flightline at Everett waiting to be delivered.

Currently I'm projecting 21 deliveries in December which, if achieved, will be the highest number of 787s that Boeing has delivered in any single month since program deliveries began in September 2011. 8 of these deliveries will come from Charleston while the other 13 will come from Everett.  There maybe more as the data I have goes until Dec. 23rd and though Boeing goes on its usual Christmas break after that date, there could be a couple more deliveries made between Christmas and New Years.

The other big news is that Boeing will reduce 787 production rate from 14/month to 12/month starting in late 2020 with the eye of returning to 14/month around 2022 or 2023 depending on future orders.  Much of the 787s issues are related to the ongoing Trump trade war with China.  The orders for widebody aircraft has been taking a hit but Boeing did receive a huge shot in the arm with an order for 30 787-9s from Emirates.  The original LoI signed two years ago called for 40 of the larger (and more expensive 787-10).  Nonetheless Boeing needed this order and was willing to drop 30 777X from Emirates order book in order to keep the 787 skyline full.  However, Boeing does need to see more orders as deliveries are outpacing new orders.  By my count, Boeing has 1,475 total orders of which 915 have been delivered leaving a current backlog of 560 airplanes which is about 3 years 4 months of production.  The reduction in rate will no doubt extend that time frame but there is concern that about the landing future orders.  One bright spot in the program is the continued reduction in deferred production cost.  Boeing reported that total deferred production cost on the 787 program fell to $19.825 bn in the 3rd quarter from $20.969 bn in the 2nd quarter.  This is a drop of $1.144 bn quarter over quarter.  When Boeing moves to the lower rate, there will be a slowing down of the rate of burn off of the deferred production cost balance as Boeing was taking advantage of the scales of production to keep the burn down high.  This will undoubtedly hit Boeing's 787 program margins as well.

Lastly, Boeing is now at a cross roads with the 787 program and there may be opportunities to take advantage of any upcoming wide body replacement market that would come in the mid-2020s.  Namely Boeing could look to do a 787NG/NEO that could be ready around the 2025-2026 time frame.  They should also look at doing a 787F as a replacement for the 767F/A330 Freighters that are currently in service.

AS always I'll keep you all updated with the latest news from the 787 program.  In the meantime you can keep abreast of the 787 production and delivery schedules using my 787 spreadsheets.

787 Spreadsheets

Saturday, August 3, 2019

787 Deliveries drop in July - 787 Month End Report

Testing Complete3
To be assembled in Everett93
To be assembled in Charleston93
Parts Arriving6
Undergoing final assembly8
Storage/Change Incorporation and Re-Work0
Change Incorporation and Re-Work0
Pre-Flight Prep16
Production Testing6
Non Customer Flight Tests0
Ready for Delivery1

As the 737 MAX and 777X issues take a bite out of Boeing's bottom line, we are seeing that BCA needs to have its other aircraft programs (widebody aircraft) step up. However the 747 is down to a 6/year production rate and the 777NG/777Classic is at 6/month down from 8.3/month and the 767 which is at 1.5/month is projected to go up to 2/month due to demand for freighters and the KC-46A program. Freighter demand may also increase the 777 output.  

Most importantly the 787 program needs to be firing on all cylinders. Until the 737 MAX is back to normal production and delivery rates, it will be the 787 and 777 programs that will be carrying the financial burden and will provide a level of revenue stream that will allow BCA to weather the 737 MAX/777X storm.

In July, Boeing delivered 12 787 (1 x 787-8, 10 x 787-9 1 x 787-10).  A total of  90 787 have been delivered in 2019 through the end of July (3 x 787-8, 70 x 787-9, 17 x 787-10). Total program to end of July 2019 deliveries stand at 871 aircraft (363 x 787-8, 476 x 787-9, 32 x 787-10).

The July delivery number has examined a little bit more closely however.  Boeing missed the delivery target by two units (12 vs. 14).  8 deliveries came from Everett so they exceeded their expected deliveries but Charleston fell way short of it's delivery target of 7 airplanes by 3 units (4 vs. 7).

787s built in Charleston are taking a long time to get through final assembly, ground and flight testing, and eventually to delivery with some planes taking as long as a 104 days.  Everett built 787s are being assembled and delivered 50 to 60 days...this is a huge difference and the reason is unclear though one can think back to the New York Times article that came out on April 20th, 2019 regarding shoddy work on the 787s built at Charleston.  These delays out of Charleston may be a backlash from that article. I theorize that Charleston managers are spending extra time to correct any workmanship issues but also the pace of assembly may be more than the Charleston facility can handle thus forcing them to roll out the aircraft not fully completed and doing some assembly tasks on the Charleston flightline.  This is similar to something we saw before in the early days of the 787 program at Everett. Unfinished assembly tasks known as traveled work followed airplanes out of the final assembly building onto the flightline where they were completed before ground testing and first flight of each new 787.  Also looking at the backlog on the flightline is evidence of something going on at Charleston:  There are currently 25 787s on between the two flightlines.  9 are at Everett and 16 are at Charleston while both final assembly locations are producing 787s at 7 airframes per month.  At Everett, of the 9 787s there, 5 have taken their B1 flight. At Charleston of the 16 airframes only 3 have flown for the first time. So the time between the roll out of the Charleston built aircraft and it's first flight is more than those built at Everett and thus the total amount of time from final assembly to delivery has increased at Charleston and has caused a large backlog of airplanes at Charleston waiting to be delivered.

As mentioned previously, 787 production continues at the set pace of 14 per month equally distributed between both locations.  Both locations load and roll out aircraft virtually on the same dates.

It is clear that with the 787 program that this is now a high margin business for Boeing and, in light of the current issues in the other commercial aircraft programs, a key revenue driver.  Boeing can ill afford to have the 787 program stumble at this critical period and Charleston's contribution that the 787 bottom line is crucial thus it must look to remediate the issues that are holding back deliveries.  August and September deliveries will be telling if there is any improvements in their production.

in the meantime you can follow the latest production and delivery progress of the entire 787 program by clicking on the link below for my 787 Spreadsheets.