Future 787 Deliveries, an opinion

Now that 787 deliveries have started, many are wondering what 787 deliveries will look like going forward. I've put together a quick spreadsheet in Google Docs to estimate the number of deliveries Boeing can possibly make from now to the end of 2012. I'm taking into account the current inventory of 787s that Boeing has assembled but still has to finish change incorporation, 787s that have yet to finish final assembly and also go through change incorporation, and finally 787s that have yet to be assembled but would not have to go through the change incorporation process.

In deriving this delivery curve I've had to make a few assumptions.

• 1) Assume that airplanes 7 to 60 will undergo some type of change incorporation/re-work. Boeing has said that they expect that all changes that have flowed up the supply chain would have been incorporated by airplane 60.
• 2) The more recently completed 787s will not have to go through as much change incorporation/re-work compared to the earlier completed aircraft.
• 3) Boeing cannot put too much resources to completing all the aircraft that need work thus the very long timeline to liquidate the inventory backlog.
• 4) Production rate is assumed as follows: 2.5/month from November 2011 to June 2012, 3/month from July, 2012 to August, 2012, 3.5/month from September, 2012 to October, 2012, and 4/month from November 2012 to December 2012.
• 5) All 787 that are assembled starting in March 2012 are assumed to be ready for delivery after painting and pre-acceptance test flights by Boeing and the customer. It is assumed that these newly assembled aircraft would not need any change incorporation or re-work after leaving the factory.

Analysis of results

Currently Boeing has 35 airplanes which have completed the majority of final assembly and are in various stages of re-work and storage around Everett. There are two more 787s in San Antonio that are undergoing change incorporation and four more airplanes that are being assembled. This is a total of 41 airplanes in Everett. I expect no 787 deliveries in November (though that could change) but 6 deliveries in December including 5 to ANA which I expect to be a mix of early and late build aircraft as well as the first GEnx powered 787.

After that the deliveries would start out in 2012 at 3/month slowly rising to 8 per month in April and staying steady for about 5 months. This is basically the time that Boeing is flushing the inventory pipeline but also delivering newly built 787s fresh out of the final assembly hall. This number starts to decrease and taper off to a point that all aircraft that are delivered are ones that are coming off the assembly line. Given that I expect Boeing to go through the inventory within one year (52 airplanes), I projecting that Boeing can deliver 83 787s between now and Dec. 31st, 2012. Undoubtedly, Boeing has probably done a more detailed analysis than I have but this is something which I hope can provoke a discussion.

787 officially starts earning revenue; Boeing drops 787/747 delivery forecast for 2011...again

787 Entry into Service

The 787 Dreamliner officially entered into airline revenue service with ANA flight 7871 flying from Narita, Tokyo to Hong Kong's Chek Lap Kok International Airport. The start of revenue service allows the opportunity to hear about the passenger experience from those not connected to the airline or to the manufacturer. Initial passenger reaction has been very positive especially with the dimmable windows as well as the noise level of the aircraft. One of Boeing's aims was to greatly improve the passenger experience while on board the airplane and it seems that they have accomplished just that. Overall this is a very promising start the the 787s service life though it's only one flight. Boeing has prepared for this day over the course of 7 years and with the delays have aimed to mature many of the systems that are on the 787.

Orders and Deliveries

the last month has been a mixed bag for Boeing in terms of orders and deliveries for Boeing. They did deliver the first two 787s to ANA and has supported the airline's efforts to put the airplane into service but the news from the order's front does dampen some of the enthusiasm stemming from the start of deliveries. China Eastern Airlines has cancelled their order for 24 787s and has decided to take 45 737s. Boeing has since said that they expect more cancellations though they would give a number. One of those might be a partial cancellation by Air India. The financially troubled airline which is run by government bureaucrats instead of airline executives, has concluded that they ordered too many aircraft when they placed a huge widebody order with Boeing in 2005. They want to cut the 787 order by more than half to 12 airplanes from the original 27 that they have on order. Presumably Boeing and Air India have entered into discussions about the 787 order but currently Boeing has several 787 already built and undergoing change incorporation. Two of them also have engines hung.

ANA did announce that they expect to have 7 Dreamliner's delivered to them by the end of the year (thanks to Flightblogger for Tweeting that particular bit of news). This bit of news is very interesting given Boeing's announcement this morning that they will deliver 15-20 787s and 747-8 this year. The reason for the reduction in estimated deliveries is due to the amount of time needed for change incorporation. During the earnings conference call, Boeing estimated that about 2/3 of this range will be 747-8 deliveries and the rest 787-8. This two pieces of information indicates that Boeing will probably deliver 5-8 787 (with 8 being the more likely number) and 10-12 747-8. Of the 8 787s delivered, I believe there will be 7 going to ANA and one GEnx aircraft possibly to Air India. Given the dynamics of the Air India situation and the pace of re-work on the $18bn of 787 inventory sitting at Everett, the number delivered will be very fluid.

I have received information that as of now Boeing is not planning any 787 deliveries for November though that may change. A reasonable measure of how close a 787 is to being delivered is when the aircraft has been fitted with its engines. Currently only a handful of 787s have their engines attached including two that were flown to Boeing's facility at Lackland Air Force Base in San Antonio, Texas. There are probably three other airplanes that I know of that have engines attached (LN 31, LN 35 and possibly LN 38). There are 5 other airplanes including 3 for ANA that are in the Everett Modification Center (EMC or otherwise known as ATS) that are undergoing re-work and could quite possibly have their engines on. These are later build airplanes (LN 40, LN 41, and LN 42) which don't require much re-work to be ready for service. It is quite possible that these airplanes would be ready for delivery in late November to December. Other airplanes that would be ready for delivery include LN 7 and LN 9 which was used for Boeing's ETOPs and F&R testing.

Speaking of re-work, Boeing is reporting improved build of parts that are flowing into Everett and they are projecting that the production system will reach a point where most if not all change incorporation will not be needed by airplane 60.

Production and Testing

First the testing update. Boeing reported that the testing program on the GEnx-1B powered 787 is well into the F&R/ETOPs phase and overall they are 95% complete with testing of this model. ZA006 is the only aircraft that is dedicated to F&R/ETOPS testing as Boeing is not using a production standard aircraft for this testing (they probably convinced the FAA that it is not necessary to use a production standard aircraft for some reason).

Additionally, ZA004 which has been conducting flight tests with the Trent 1000 package "B" engines has probably wrapped up most of the flight testing (it has not flown since Oct. 19) though I don't know if they have to do ETOPS/F&R testing using the modified engines or not. Boeing is planning to deliver the first 787 equipped with the package "B" Trent 1000 sometime in December as it will be these 787s that ANA will start using on long haul international flights.

Now on to production. Now that Boeing has most of the 787-8 flight testing and development out of the way, they can proceed with focusing on reducing inventory ($18bn now) and ramping up assembly. Certainly having the North Charleston line open will help but right now many of the techs there are building LN 46 very slowly as they are in the process of learning their job. However, Boeing needs to clear the 40 some odd 787s that are listed as work in process (WIP). 38-39 are at Everett while two more are at San Antonio. Change incorporation is going slowly especially with the early build aircraft that I anticipate that most of the WIP aircraft won't be cleared until late next year. However Boeing did announce that they will be increasing the 787 production rate to 2.5/month starting this week (I'm projecting this Sunday) starting with LN 50 which is for Ethiopian Airlines. It seems that Boeing is planning for another rate increase very soon after going to 2.5 as they are reporting that the supplier base is positioned for further rate hikes very soon though timing and rate of these increases is still a matter of speculation. I'm thinking that Boeing can increase the rate to 3 or 3.5 by February. Boeing is still reiterating their position that they will be able to produce 10 787/month by the end of 2013. After that rate has stabilized over a course of 1 to 2 years Boeing sees that 787 unit revenue will exceed unit cost by around 2014-2015. The program won't be profitable after about 10 years of production. They have now set their accounting block for the 787 program at 1,100 units (they are spreading all development costs across 1,100 airplanes). Of course this is all predicated on Boeing reaching the 10/month goal by the end of 2013.

The story of two press releases

There is a story between the lines of the two press release (actually one) sent out by Cargolux and Boeing. To boil it all down, there is animosity over what happened last month and it reflected in what was said and what wasn't said. Here are the two releases. The first was not a press release but blog posting by Boeing's marketing chief, Randy Tinseth:

Delivery day for Cargolux
I’m happy to announce that we’ve resolved the contractual issues that delayed the first delivery of our new 747-8 Freighter last month. I’m even happier to let you know that Cargolux will take delivery of their first freighter today (October 12) and immediately put it into service with a stop at Sea-Tac Airport for a cargo pickup. On Thursday, Cargolux will take delivery of its second 747-8F.

Even though we had to wait a bit longer than expected, it doesn’t make these deliveries any less sweet. We know Cargolux and every customer after them will love this airplane in every way—from how it flies to how it performs.

I’d like to personally congratulate every employee who had a hand in working on this beautiful new symbol of Boeing. We all look forward to seeing it take to the sky as an official member of the Cargolux fleet.

Here's Cargolux's statement:

Cargolux successfully resolves contractual issuesLuxembourg,

12th October 2011

Cargolux announced today that the delivery of the first two Boeing 747-8
Freighters initially scheduled for 19 and 21 September is proceeding on 12 and
13 October 2011 following the resolution of contractual issues between Boeing,
GE and Cargolux related to the performance of the aircraft and the engines.
In its meeting on 7 October, the Cargolux Board of Directors appreciated
that the negotiation team (Akbar al Baker (Director), Frank Reimen (President
and Chief Executive Officer) and David Arendt (Executive Vice President and
Chief Financial Officer)) and Company management took the appropriate actions to
ensure that the 747-8 entry into service issues be resolved successfully.
Frank Reimen, President and Chief Executive Officer of Cargolux, said: ‘I am
pleased that we have reached agreement on the contractual issues. The 747-8
Freighter will be a driver of profitable growth for Cargolux’.
Launch customer Cargolux has 13 Boeing 747-8 Freighter airplanes on firm order.
As an enhanced variant of the 747-400 cargo aircraft, the new-generation 747-8
Freighter offers a variety of benefits over its predecessor, including
additional payload, less fuel burn and carbon emissions and a considerably lower
noise footprint.

Nowhere in either statement does either company congratulate the other. Randy thanks the employees of Boeing who designed and built the aircraft whereas the Cargolux statement thanks the CEO Frnak Reimen, CFO David Arendt and first and never least, Akbar Al-Baker (U-Turn Al) for leading the negotiations. Funny enough that Cargloux does acknowledge the better fuel burn over the 747-400. The last telling clue about the now strained relationship is that there was no ceremony celebrating the first delivery of this airplane like there was for the 787 and that there appears to be a "stealth delivery" with no mention from either side that it was taking place until after the Flightaware notifications went out.

I do think Boeing will eventually hold an appropriate ceremony when the next customer 747-8F is delivered (which I believe to be Cathay Pacific Cargo) if anything to put this awful experience behind them. At least U-Tuen Al won't be there to spoil the celebrations.

Cargolux might be taking delivery of first 747-8F today

UPDATE: Boeing just confirmed (through Randy Tiseth's "Randy's Journal" not a press release) that Cargolux is taking delivery of it's first 747-8F and it will fly ti Sea-Tac to pick up its first load of cargo and will conduct its first revenue flight. Boeing will deliver the 2nd airplane to Cargolux tomorrow.

Here's Randy Tinseth's post:

Delivery day for Cargolux
I’m happy to announce that we’ve resolved the contractual issues that delayed the first delivery of our new 747-8 Freighter last month. I’m even happier to let you know that Cargolux will take delivery of their first freighter today (October 12) and immediately put it into service with a stop at Sea-Tac Airport for a cargo pickup. On Thursday, Cargolux will take delivery of its second 747-8F.

Even though we had to wait a bit longer than expected, it doesn’t make these deliveries any less sweet. We know Cargolux and every customer after them will love this airplane in every way—from how it flies to how it performs.

I’d like to personally congratulate every employee who had a hand in working on this beautiful new symbol of Boeing. We all look forward to seeing it take to the sky as an official member of the Cargolux fleet.

Cargolux may be taking delivery of its first 747-8F today in what might be the first stealth delivery of a new airplane program. The only clue is a flight plan through a Flightware.com posting:


Cargolux Airlines International #1JS (B748) has just filed a flight plan. It
is scheduled to depart from Snohomish County (KPAE) at 11:00 PDT heading for
Seattle-Tacoma Intl (KSEA) for an estimated arrival at 11:16 PDT.

Expected route: ERYKA MGNUM ANVIL SODOE

For more information visit http://flightaware.com/live/flight/CLX1JS

Visit http://flightaware.com/mobile to download FlightAware's all-new mobile
apps for Android, iPhone, iPad, BlackBerry, and WP7!

To edit or disable these alerts please visit http://flightaware.com/account/manage/alerts/

Cargolux's plan after taking delivery of the first 747-8F was to fly it to Seattle-Tacoma International Airport where it would pick up its first revenue cargo load and immediately begin revenue service. This aircraft's flight plan is to fly from Paine Field to Sea-Tac. Boeing, GE, Cargolux and Qatar Airways are close to hashing out a final agreement and Qatar Airways chief Akbar Al-Baker (U-Turn Al) has said that Oct. 12th was a target date to accept delivery.