Friday, January 30, 2015

Boeing to curtail 787 surge line final assembly activities later this fall

According to analysis of final assembly activities for the 787, Boeing is planning to shift final assembly of some 787s currently being built on the surge line (in 40-24) to the main final assembly line in Everett and the North Charleston line.  Currently, Boeing assembling 4 787s/month on the main line in 40-26, 3/month on the surge line in 40-24 and 3/month on the North Charleston line in 88-30.

Around October, Boeing will reduce the number of 787 airplanes assembled on the surge line by 2 aircraft/month and reallocate 1/month each to 40-26 and the North Charleston line.  40-26 will assemble 5/month and North Charleston will assemble 4/month while the surge will still assemble 1/month.  It has been Boeing's plan to use the surge line as a temporary line while they got the North Charleston line up and running and increasing the production rate from 3/month to 10/month.

I believe Boeing has enough confidence in the North Charleston facility to to increase its production rate early.  Boeing is supposed to increase the North Charleston rate to 5/month in 2016 but it appears this may happen sooner than expected.  I do believe that in 2016 Boeing will shut down the 787 surge line reallocate the lone aircraft on that line to 40-26 and then when they ready to up the rate to 12/month, assign 1 each to 40-26 and 88-30.

The surge line is planned to be used for final assembly of the initial batch of 777X.

New 787 Tables for All Things 787

I created two new tables for readers to get a better sense of which customers and operators are getting their 787 from Everett and North Charleston.

The first one is 787 Build Location By Operator and the second is 787 Build Location By Customer.

You can bookmark these links as I'll be updating them as frequently as I get updates.

Wednesday, January 28, 2015

Boeing give 787 delivery guidance for 2015

Boeing released its 2014 financial results and while the company reported record earnings as well as higher 787 deliveries, it also reported higher deferred production cost (the gap of actual cost of production of each aircraft vs. the average cost over the accounting block which at this moment is 1,300 aircraft) had increased by almost $1bn over the 4th quarter to $26.149bn up from $25.189bn.  Year over year increase in deferred production costs was $4.5bn, an increase of almost 21% year over year!  Mush of this increase was due to increasing the inventory of parts as well as maintaining high employment levels within the 787 program.

Boeing’s 787 delivery guidance was reported by CFO Greg Smith as the annual production rate plus 3 to 4 early build aircraft.  This would mean a total delivery guidance of 123-124 787s for 2015.

However, one question that was not asked if this delivery guidance included the 3 787-9s that were used for flight testing and certification purposes. The big question is that do they consider the 3 787-9 that were used for the certification program last year as early build? If so, then are the only "early build" deliveries would be the 787-9s that are earmarked for customers this year?  If not then Boeing can deliver the 120 regular production + 3 787-9 from test flight + 3-4 early deliveries (terrible teens) which would add to 127 deliveries.  2 out of the 3 787-9 test airplanes are at the EMC being bought up to certification standards for delivery to Air New Zealand while the third is parked on a runaway at Everett. 

Boeing expect that the 787 program should become cash positive this year meaning that revenue for each delivered 787 will exceed the cost of production though the program as a whole will still be running at a loss.  Additionally, Boeing expect deferred production cost to moderately increase this year before declining next year when the 787 rate goes to 12 from 10.  Obviously getting a handle on production costs will include renegotiating (read: squeezing) the supply base as well as lowering labor costs within the program.  Greg Smith reported during the earnings call that 787-9 production costs fell 20% from the first delivered aircraft and 30% for the last 175 delivered 787-8 airplanes.

In other news it looks like Air Force One will continue to be a Boeing product.  The Air Force is going to negotiate for the delivery of three 747-8 air frames to replace the current 747-200 that have been in service for over 20 years but are dated.  This will be a non competitive acquisition but mission equipment and furnishing will be competitively sourced. The only question that remains is will they acquire a 747-8I or 747-8F?

787 Full Production Table

Thursday, January 22, 2015

American Airlines takes delivery of first 787-8 2 months late

American Airline formally too delivery of its first 787-8 today in Everett. The aircraft, ZA817 (LN 242, N800AN), will fly away for Dallas Ft. Worth tomorrow where it will be used for training before being pressed into service on AA's domestic routes initially in the 2nd quarter followed by international service later in the year. I expect that AA will take delivery of 11 more this year with the next delivery in February.

ZA817 was supposed to be delivered in November, 2014 but issues with seats took longer than expected due to issues with the seat manufacturer.

Even now AA 787s pulled out of final assembly spend some time at the Everett Modification Center (EMC) before heading to the flightline to continue the normal pre-delivery flow.

It is hoped that the seat issue will start to get resolved before it has a detrimental effect on future 787-8 deliveries to American Air.

Monday, January 19, 2015

787 Mid month report - January, 2015

Mid way through the 1st month of 2015, Boeing is setting it self up to deliver 10 787s. On the surface that may look like a good number especially when compared to January, 2014. However because several 787s that were supposed to be delivered late last year had been rescheduled to this month, there are expectations the deliveries in January were going to be higher than 10.  Earlier information that was received indicated 12 deliveries in January but now those deliveries were pushed to later in the first quarter.  Boeing needs to deliver a minimum of 11.5 787s per month for 2015 if it is to achieve its internal goal of delivering 138 787s.  As I had said in a previous post, I doubt that Boeing will be able to deliver 138 787s and the final number will most likely be between 125 to 130.

Thus far there are about 5 aircraft that are ready for delivery but there are also 1 more that need to conduct its B-1 flight which is a 787-9 for Virgin Atlantic and a 4 others that have yet to conduct their C-1 flights.  With 12 days left in the month it is possible for Boeing to all these aircraft tested and delivered but it will be cutting it close.  I do expect the first 787 deliveries of 2015 to start this coming week, thus again Boeing is making all its 787 deliveries in the last half of the month.

The customers that will be be receiving their first 787s include American Airlines and Scoot while AerCap (LAN) will be taking its first 787-9.

Line Number Variable Number Serial Number Registration 787 Model Customer Operator Delivery Date
240 ZB127 37112 9V-OJA 787-9 Scoot Pte Ltd Scoot Pte Ltd 1/23/2015
241 ZA817 40618 N800AN 787-8 American Airlines American Airlines 1/22/2015
250 ZA248 36291 VT-ANT 787-8 Air India Air India 1/30/2015
252 ZA198 34853 JA839J 787-8 Japan Airlines Japan Airlines 1/22/2015
254 ZA616 35263 C-GHQQ 787-8 Air Canada Air Canada 1/30/2015
256 ZB029 37968 G-VOOH 787-9 Virgin Atlantic Airways Virgin Atlantic Airways 1/30/2015
257 ZA222 36235 VH-VKI 787-8 QANTAS Jetstar 1/26/2015
258 ZA846 36111 ET-ASG 787-8 AerCap Ethiopian Airlines 1/30/2015
259 ZB224 35317 CC-BGA 787-9 AerCap LAN 1/30/2015
260 ZA323 36426 G-TUIG 787-8 TUI Travel Thomson 1/29/2015

In terms of production Boeing is well situated to roll out 10 787s (7 from Everett and 3 form North Charleston).  They are also starting final assembly on 10 787s this month with the same number as roll outs from each final assembly locations.

Interestingly, Boeing is looking to deliver 3 787-9 this month as well as roll out 3 and start final assembly of 3 787-9s this month.  I'll keep an eye on this but it does seem that for now, Boeing is going to keep the rate on the 787-9 at 3/month

787 Full Production Table

Tuesday, January 13, 2015

Boeing South Carolina head Jack Jones announces retirement.

The head of Boeing's North Charleston' plant, Jack Jones announced his retirement to the Boeing South Carolina employees in an email message.  In it he intends to leave the company in May and will be on hand during the next few months to transition his responsibilities to incoming BSC head Beverly Wyse.  Currently Beverly Wyse is VP and general manager of Boeing 737 program and was previously the VP and general manger of the 767 program at Boeing.

Here is Beverly Wyse's bio from Boeing:

Beverly Wyse was named vice president and general manager of the 737
program in January 2010. In this position she is responsible for the design,
development, certification, production and delivery of the Boeing Next-Generation 737
airplane family. Wyse also is responsible for maintaining customer relationships and for
the safety and security of employees at the Renton, Wash., plant as well as its property
and equipment. 
Before this assignment, Wyse was vice president and general manager of the
767 program for more than three years. Wyse was responsible for all aspects of the 767
program as well as the Boeing Commercial Airplanes role in the competition for the U.S.
Air Force KC-X tanker program. 
Wyse previously was director of Strategy and Business Development for
Connexion by Boeing. In that assignment, she was responsible for coordinating the
development of the company’s business strategy and for identifying and pursuing new
market segments to expand the reach of the Connexion system. 
Wyse joined Connexion in August 2002 as director of Aircraft Deployment and
Installation, where she led a team responsible for the design and certification of the
Connexion service for installation aboard aircraft. 
Before joining Connexion, Wyse was director of program management for
the 757 program. She was responsible for all aspects of business operations and
program and project management. Before that, she served as a senior manager for
the Boeing twin-aisle airplane program management office. Wyse was responsible
for identifying which interior features would be offered to airline customers, for
delivery of interior systems and for project management of all new product
Wyse has a bachelor’s degree in mechanical engineering and a master’s degree
in business administration, both from the University of Washington in Seattle. She
graduated from the Boeing Executive Development Program in 2000.
Here is Jack Jones' email to the Boeing South Carolina employees:

Goodbye and Thank You
Today Pat Shanahan announced some leadership changes at the BCA Airplane Programs level. One of those included my decision to retire in May of this year.
 This was a bittersweet decision for me. I’m overjoyed to be able to spend more time with my wife, Karen, who retired from Boeing just last year, and do the things that we’ve talked many years of being able to do when we hit this stage in our lives. The other part of me is saddened to be leaving such an incredibly well-respected, successful corporation – one that has offered me amazing career opportunities in an industry that has been a passion of mine since early adulthood. 
 Throughout my 35-year career I have had the privilege of working on some of Boeing’s most iconic and challenging programs. The Boeing South Carolina assignment certainly qualifies as one of those programs, and has been one of the more challenging assignments I’ve had. However, thanks to you and this remarkable Boeing South Carolina team, and our unprecedented accomplishments in a relatively short period of time, I will leave with this being my most rewarding and satisfying assignment.
 Since my first day here in 2011, I’ve seen many positive changes, not only in production, quality and efficiencies, but in our teammates. Everyone at BSC is learning and growing, and doing remarkable things – turning dreams into reality at a site that just over five short years ago was two small suppliers surrounded by a lot of open land. Now look at BSC today! It’s truly amazing and each and every one of you is to thank for that.
Retirement was a hard decision for me, especially at a time when BSC is operating at an all-time high, firing on all cylinders, and proving to our early skeptics that we are truly Boeing Strong.  However my decision was certainly made easier knowing I was leaving it in the hands of a team I know well, and will never stop making this site the world class facility it is or ever retreat when faced with adversity. In other words … You Guys Rock!
 I know that you’ll continue to provide the same world-class support and attitudes to Beverly as she transitions to BSC’s new site leader over the coming months. I’ll be working closely with Bev from now until May and I have no doubt that with her long and successful history with our company and our products, combined with your talent, professionalism, and dedication, BSC’s future remains extremely bright and is in very capable hands.
 Again, thank you for this remarkable experience. I’ll be making rounds across the site with Bev over the coming months, and hope to see many of you face-to-face and shake your hands before my official exit in May.

Friday, January 9, 2015

2015 Look Ahead for the 787

With 2014 firmly in the rear view mirror, we can start looking ahead at what's next for the 787 program.

According to sources, Boeing is planning for 138 deliveries.  Given they just finished a year where program execution was not good, the prospect of Boeing hitting 138 deliveries is a little far fetched.  They would need to execute final assembly perfectly and drive down  assembly to delivery times.  In December, if the delivery outliers (namely aircraft going to Avianca, Etihad and Azerbaijan Airways) are taken out, then Boeing was able to assemble and delivery the 787 at an average of 107 days.  This is much to long if they intend to increase the number of deliveries in 2015.  In my view Boeing should be able to deliver around 125 to 130 787s.  I'll track their progress vs. the 138 plan deliveries and their delivery guidance for 2015 as it can help gauge how well the production system is working especially in terms of their internal goals.

2015 will be notable year for a few reason.  First there will be customers taking deliveries of their first 787s as well as existing operators taking delivery of their first 787-9.  Last year Boeing managed to deliver 10 787-9.  In the new year Boeing expects to deliver a significant number of the enlarged version of the aircraft.  The expectation is for 64 deliveries of the 787-9 which will help profitability of the 787 program overall.

Here is a list of operators who will be receiving their first 787 this year:

1st Time 787 Operator
American Airlines
Kalair (Bermuda)
Korean Air
Oman Air
KLM - Royal Dutch Airlines
Saudi Arabian Airlines
Scoot Pte Ltd
Tuifly Nordic
Vietnam Airlines
An a list of operators who will be receiving their first 787-9:

1st Time 787-9 Operator
Air Canada
British Airways
Japan Airlines
Kalair (Bermuda)
KLM - Royal Dutch Airlines
Saudi Arabian Airlines
Scoot Pte Ltd
Vietnam Airlines
Obviously some of these deliveries had rolled over from last year, namely American Airlines, Korean Air, and Scoot.

However, the overriding theme of the year will not just be making timely deliveries but also trying to further reduce the cost of the 787 program and that starts with reducing deferred production costs and trying to cap it at the current $25.2bn level.

Finally here's a projection of the 2015 operator deliveries:

Projected 2015 Deliveries (Operator)Expected Total DeliveriesActual DeliveriesExp.Pre-L/N 66 DeliveriesActual Pre-L/N 66 DeliveriesExpected 787-8 DeliveriesActual 787-8 DeliveriesExpected 787-9 DeliveriesActual 787-9 Deliveries
Air Canada523
Air India44
Air New Zealand33
American Airlines1212
British Airways55
Ethiopian Airlines33
Etihad Airways44
Hainan Airlines22
His Majesty The Sultan's Flight11
Japan Airlines642
Kalair (Bermuda)11
Kenya Airways33
KLM - Royal Dutch Airlines22
Korean Air111
Norwegian Air International Ltd11
Oman Air22
Qatar Airways77
Royal Air Maroc11
Saudi Arabian Airlines11
Scoot Pte Ltd1046
Thai Airways International22
Tuifly Nordic22
United Airlines1111
Vietnam Airlines55
Virgin Atlantic Airways77
Xiamen Airlines44

And a list of 2015 customer deliveries:

Projected 2015 Deliveries (Customer)Expected Total DeliveriesActual DeliveriesExp.Pre-L/N 66 DeliveriesActual Pre-L/N 66 DeliveriesExpected 787-8 DeliveriesActual 787-8 DeliveriesExpected 787-9 DeliveriesActual 787-9 Deliveries
Air Canada523
Air India44
Air New Zealand33
American Airlines1212
British Airways55
CIT Leasing22
Etihad Airways44
Hainan Airlines22
Japan Airlines642
Kalair (Bermuda)11
Kenya Airways33
Korean Air111
Norwegian Air International Ltd11
Oman Air22
Qatar Airways77
Royal Air Maroc11
Saudi Arabian Airlines11
Scoot Pte Ltd1046
TUI Travel44
United Airlines1111
Vietnam Airlines55
Virgin Atlantic Airways77
Xiamen Airlines44

Monday, January 5, 2015

Undelivered Air Canada 787 heading to Iqaluit, Canada, Why?

So this morning, a lot of 787 watcher, including myself observed that Boeing is sending a 787 that is scheduled to be delivered to Air Canada later this month to Iqaluit, Canada.  I'm at a loss to explain why though I'm going to speculate.

Iqaluit has an airport that used for extreme cold weather testing of aircraft.  Boeing has done cold weather testing on the 787 so this may be additional testing of a fully kitted out Air Canada 787 being done for the airline.  The aircraft ZA616 (LN 254, C-GHQQ) was flown to Portland, Or. for painting and then to Boeing Field which is unusual except Boeing's Test Flight group is headquartered there.  It is possible that the test flight crews were fitting out the aircraft with test flight equipment and the engineers were running tests prior to flying to Canada.  Again this is speculation on my part but it's the best possible explanation.

Thursday, January 1, 2015

787 2014 Year End Report - Boeing finishes 2014 with 114 787 deliveries

Boeing finished 2014 with a typical December delivery rush including handing over 18 787s during December 2014.  This is a new 787 delivery record which surpasses 15 787 that was delivered in June of this year in order to make mid year delivery goals.

Here are the 787 numbers thus far:

228 - the total number of 787 that have been delivered to customers since deliveries began in 2011
114 - the total number of 787s delivered in 2014
35 - the total number of 787s delivered in the 4th quarter
18 - the total number of 787s delivered in December, 2014
118 - the total number of 787s that started final assembly in 2014
120 - the total number of 787s rolled out the 2 787 assembly halls
10 - the total number of 787-9s delivered in 2014
104 - the total number of 787-8s delivered in 2014
1.05 - the efficiency of the 787 production system in 2014 (the number should be below 1 to indicate an efficient production system)
0.97 - the efficiency of the North Charleston final assembly
1.09 - the efficiency of the Everett final assembly (includes both the main Everett and surge lines).

Boeing overall did well on the 787 program in 2014 though it does remain to be seen how they've been able to handle deferred production costs. Boeing did exceed their guidance by 4 aircraft though they were planning to deliver 120 787s in 2014.  Several had to be deferred to 2015 for various reasons including the lack of seats for completed aircraft. The fact that the production efficiency is above 1 indicates that the the production system is still not stable.  The difficulties that with traveled work and the need to re-hire temporary workers in North Charleston highlighted the ongoing production system issues that continue to plague the 787 program.  Even now aircraft that have finished final assembly are still worked on to complete assembly tasks.

Still Boeing was able to flawlessly execute on the 787-9, as well as get the production rate up to 10/month despite issues coming out of the North Charleston campus with traveled work.  Deferred production cost has increased to over $25bn as Boeing stockpiled parts to mitigate shortages and reduce traveled work.

787s were delivered to first time new operators including:

Air Canada
Air New Zealand
Azerbaijan Airlines
Etihad Airways
Kenya Airways
Royal Air Maroc
Royal Jordanian
Thai Airways International
Virgin Atlantic

Plus new BBJ owners

December's delivery count was unusually large due to the delayed delivery of several 787s to Avianca (4) and Azerbaijan Airlines (2).  Earlier this year I was projecting that Boeing would deliver 120 787s.  Several were deferred due to delays with seats as well as knock on effects from previous delays.  Notably American Airlines and Scoot were to receive their first 787s in 2014 are now expected to receive them in 2015.  One early build 787 for Korean Airlines (VIP) was ready for delivery in 2014 but is now taped and sealed at the Everett Modification Center.  The fact that this aircraft is not being worked on and is sealed indicates that there is an unknown issue(s) holding up delivery to Korean Airlines.  This aircraft is to be used as a government VIP aircraft and it is possible the delay can be attributed to the finished interior that is to be installed in the aircraft including classified military gear though this is speculation on my part.

Boeing has set it self up for a 2015 rather well but issues still remain including deferred production cost and continued traveled work.  If they are able to over come these issues then we should see a high number of 787 deliveries in 2015 compared to 2014.

Stay tuned for my 787 2015 look ahead which will be out soon.

787 Full Production Table