Monday, October 27, 2014

Boeing Delivers 200th 787

Boeing officially delivered the 200th 787 today to Qatar Airways.  The delivery was made at Everett where the aircraft was assembled and tested.  This aircraft is the 16th delivered to Qatar Airways and is the 86th Dreamliner delivered this year and the 7 delivered this month.  Boeing delivered the 100th 787 on Nov. 4th, 2013 to Japan Airlines so it too just under one year to deliver the 200th 787.  Qatar is expected to fly the aircraft away by tomorrow to Victorville, Ca.

If Boeing is able to maintain 10 deliveries per month then we should see the 300th 787 delivered around early to mid August 2015.

787 Full Production Table

Thursday, October 23, 2014

787 Mid Month Report - October, 2014

With 10 days left in the month, Boeing seems to be struggling to get production airplanes into the air for testing prior to delivery by the end of this month.  Thus far Boeing has delivered 5 787s this month but I do expect 1 more to deliver by the end of this week.  With those deliveries Boeing will hit 199 deliveries and I believe the 200th delivery will go to Qatar Airways when ZA475 (LN 207, A7-BCP) is delivered to the carrier around October 27.  Boeing is trying to deliver a total of 11 787s this month including a -9 to United Airlines.  Production flight testing seems to have slowed though it's unclear why.There are still a number of aircraft that still need to perform further Boeing and/or customer flights before they're ready for delivery within the next 10 days.

On the production front Boeing has rolled out 8 787s and started final assembly on another 8.  They will end rolling out a total of 11 787s from final assembly this month.  The inventory backlog sitting on the flightlines at Everett and Charleston won't change this month.  The schedules for many 787s deliveries have been pushed to the right.  For example, Avianca's first 787 was supposed to have been delivered in September.  It is now scheduled to be delivered in mid November.  As we move into November Boeing will change the final assembly line slightly in 40-24 (the surge line).  Instead of the 6 positions that are currently in use (0, 1A, 1B, 2, 3, 4), Boeing will go back to 5 positions starting around October 29th. (0, 1, 2, 3, 4).  I believe this is in preparation of winding down the surge activities by 2016 and moving all Everett 787 production to 40-26.

Production is slow and 787 inventory is growing.  While I don't have any concrete information as to why 787 deferred production costs are rising ($25.2bn through the end of the third quarter), I feel that it is undoubtedly due to the traveled work following all these airplanes.  For a 787 to go from the start if final assembly to delivery takes almost 4 months and therein lies the problem for the increase in deferred production costs.  These airplanes, going through the production system at Everett and Charleston, have to spend a lot of time finishing assembly tasks after final assembly is completed.  The promised efficiencies on the final assembly level have yet to materialize but Boeing insists they will start turning profitable on the 787 program in 2015. Part of the increase in production cost is due to the introduction of the 787-9.  These aircraft had to spend time at the EMC undergoing change incorporation as well as finishing traveled work.  As the aircraft is more integrated into the 787 production system and change incorporation is no longer necessary, cost to produce the 787-9 should come down  and should aid the overall reduction of deferred production costs in 2015.

I believe that in order to gauge that is to closely examine the time it takes for Boeing to get a plane from start of final assembly to delivery.  We need to see the aircraft coming out of final assembly without any traveled work.  This means that the 787 goes from the final assembly hall to the paint hangar then directly to the flightline to start production testing.  It also means that Boeing minimizes company and customer test flights which indicates improved build quality.  Currently Boeing has 32 787s (including the the "Terrible Teens" but not including those that are in production) in Everett.  This rising inventory needs to be cleared faster than the current rate which can be tracked on the production Trends spreadsheet.  Simply, Boeing needs to deliver 787s faster than then they are rolling them out at the factory.

787 Full Production Table

Wednesday, October 8, 2014

Boeing rolls out the first 787 for American Airlines.

Boeing rolled out the first 787 for American Airlines on Oct. 6th.  The aircraft was originally supposed to be delivered in November is now slated for delivery on December.  It is on the 40-51 Ramp finishing up assembly activities followed by painting.

Around KPAE 10-7-14 (in the fog)
First 787 for American Airlines, Photo by MOONM
Additionally Boeing has finally delivered one of 3 787-8 flight test aircraft to a customer.  The Fuerza Aérea Mexicana (Mexican Air Force) took possession of ZA006, the last test flight aircraft. After undergoing extensive re-work and re-build, the aircraft was bought up to FAA certificate standards though I am not sure if it has it full passenger interior installed or not. The aircraft is at the Charleston Delivery Center and is supposed to fly away tomorrow Oct. 9th).

ZA006 at the Charleston Delivery Center, Photo by reader
Boeing 787 production looks to be in ok shape but it is taking quite a bit of time to deliver the 787 into customer hands. I have observed a continuing movement of delivery dates to the right of the schedule that at this point I think Boeing will deliver about 10 to 11 787s in October. This is not a bad number but it only gradually reduces the built up inventory. I examined the average number of days it took Boeing to get an aircraft from final assembly to delivery.  I took out outliers or aircraft where I did not have complete information. The results may surprise you:

February, 2014 - 114.8 days
March, 2014 - 117.6 days
April, 2014 - 126.4 days
May, 2014 - 112.4 days
June, 2014 - 206.5 days
July, 2014 - 141.4 days
August, 2014 - 117.7 days
September, 2014 - 127.5 days

These averages need to be put into proper context.  They include the 787-9 (from June on)  These early 787-9s had to go through change incorporation and required more build time compared to the 787-8 thus the number of days fro the start of final assembly to delivery were  higher for these airplanes and distorted the results. Here are the average number of days it took to build the 787-8:

February, 2014 - 114.8 days
March, 2014 - 117.6 days
April, 2014 - 126.4 days
May, 2014 - 112.4 days
June, 2014 - 125.6 days
July, 2014 - 121.1 days
August, 2014 - 117.7 days
September, 2014 - 118.4 days

As you can observe the average time it takes to build the 787-8 (this includes both Charleston and Everett) is fairly stable.  As Boeing get more familiar with building the 787-9 and the need for change incorporation goes away as well as the need for extensive time  to finish traveled work, we should see build times for both versions of the 787 go down to below 100 days.

There is still no known timetable when the stabilization of the production system will occur and it appears that Boeing is continuing to struggle with traveled work which has been the bane of the 787 program currently.  There has been flashes of hope for a 90 day rate or lower (start of final assembly to contractual delivery).  For example Boeing delivered a 78 to Tui Travel in 84 days from Everett and Charleston delivered a 78 in 86 day to Kenya Airways.  2015 should bring much required and welcomed improvements to the 787 production system.

787 Full Production Table

Sunday, October 5, 2014

Boeing 787 September deliveries end third quarter on a high note.

September Month End Review

Boeing delivered 11 787s in September thus ending the third quarter on a high note after a a slow start in July.  For the quarter, Boeing delivered 31 787s.  The yearly total thus far is 80 aircraft in 2014 (includes one aircraft delivered on Oct.1) and 194 since deliveries began a little over three years ago.

The target is still 110 deliveries in 2014 and they can easily make that with and average of 10 aircraft delivered a month for the next 3 months.  Earlier I had projected that Boeing can deliver around 120 aircraft.  Clearly that number can't be reached but they do have the ability to deliver between 110 and 122.  787s deliveries were lackluster in July but rebounded nicely in August with 13 deliveries and maintained a strong pace with 10 in September.

In terms of efficiency. Charleston delivered 3 Dreamliners and rolled out only 2.  That translates to and efficiency of .667 (the lower the number the more efficient the plant is.  The Everett plane had an efficiency rating of 1 (rolled out 7 and delivered 7).

Future Deliveries

Deliveries included 3 787-9 (one each to United, ANA and Air New Zealand).

Planned deliveries for October are looking to be on the order of 11 to 13 aircraft.  This includes the 10th and final 787-8 for Ethiopian that is company owned which was delivered on October 1st.  Ethiopian will be taking 3 or 4 more 787-8s on lease from AerCap over the next year or so.  Boeing should break 200 deliveries easily though it's difficult to speculate which aircraft/customer will have that honor.

Deliveries should include:

1 787-9 to Virgin Atlantic (expected around Oct. 6)
1 787-9 to Etihad Airways
1 787-9 to United Airlines
1 787-8 to Fuerza Aérea Mexicana (Mexican Air Force) (around Oct. 8th)
1 787-8 each to Avianca, Kenya Airways, Xiamen, Thai Airways (leased from AerCap), Royal Jordanian (leased from CIT Leasing), and Air Canada
2 787-8 to Qatar Airways

Of course much of this depends on the preparations and readiness of the individual aircraft to be delivered including undertaking ground testing and production flight tests s well as the readiness of the customer to induct them into service.  Of the aircraft mentioned in the above list, three have yet to conduct their B-1 flights.


Etihad 787-9 on 40-51 Ramp. Photo Courtesy of Brandon Ferris

Japan Airlines 787-9 in the EMC. Photo Courtesy of Brandon Ferris

In terms of production, Boeing should start final assembly on 10 to 11 787s this month. 4 will start on on the main line in 40-26, 3 on the surge line in 40-24 and 3 to 4 on the Charleston line.  They should roll out 10 this month but it is key that current month deliveries exceed the number of aircraft rolled out in order to reduce the carried inventory.  Boeing had built up a large 787 inventory during the first half of 2014 that they are now trying to catch up to deliveries in the second half.  They did a good job in the third quarter but the 4th quarter will be critical in reducing it further.

Boeing is also aiming to move the aged inventory (test flight aircraft plus the early build 787s (terrible teens).  ZA006 will be delivered to the Mexican Air Force and ZA003 will be donated to the Museum of Flight in November.


In the meantime, Boeing is continuing with several sales campaigns which can yield some significant orders for the 787.  However late last month they booked a cancellation for 15 787-9 for Air Berlin as part of a cost cutting move.  Interestingly, at the same time Boeing booked an unidentified order for 15 787-9s.  It is widely believed that the unidentified customer is Etihad which will use the aircraft either for itself or for one of the partner airlines in which the carrier has a financial interest.  This is reinforced by the fact that Air Berlin didn't pay any penalties for the order cancellation because Etihad took up the order.  This cancellation may have ramifications for a another sales campaign that is currently on going.  It is expected that Virgin Atlantic will exercise 5 787-9 options and I wouldn't be surprised if they make that announcement when they pick up their first 787-9 from Everett on Tuesday.  Sir Richard Branson also indicated that he is interested in the 787-10 so we might even see a new 787-10 order from them on Tuesday but let's wait and see on that one.

The two big sales campaign are Delta's order for 50 widebody aircraft.  Delta has shortlisted the selection to the 787-9 and the A350-900 and this is where the Air Berlin cancellation may have an effect.  The cancellation frees up early delivery slots which can entice Delta to buy the -9.  However, with Etihad taking up the order it remains uncertain if they kept Air Berlin's delivery slots.  If not then Boeing may have a leg up on Airbus for this order.

The second major 787 order would be one from Emirates which Boeing has coveted for a long time.  With the success of placing an incredibly huge number of 777 (777-300ER and 777X) with Emirates, Boeing still wanted to get them signed on to the 787.  With Emirates' cancellation of their entire A350 order, which will now be competed with the 787 and the A350, Boeing has a tremendous opportunity to finally place the 787 with the only holdout of the ME3 that hasn't placed a 787 order.  The decision is expected to come sometime in the first quarter of next year but I suspect that Boeing will be very aggressive in the pricing vs. the A350.

787 Full Production Table