Sunday, May 15, 2016

10 Dreamliners delivered in April, 13 expected in May and Boeing gets a new -9 order!

Since it's been a while between posts, I have a lot of ground to cover so on with it!

April saw Boeing increase it's assembly rate to 12/month split 7 for Everett and 5 for Charleston.  It appears they executed the rate break flawlessly.  They are rolling out the airplanes at 12/month but don't expect to see the delivery rate to hit 12 until June or July (more on expected deliveries a little later).

Boeing did deliver 10 787s in April thus maintaining the 10/month delivery rate.  Through April Boeing has delivered 40 787s with 8 787-8s being delivered as oppose to 32 of the larger 787-9s including the first 787-9 purchased directly by Air France/KLM (for KLM) as well as the 400th 787 which went to Scoot (a 787-8, ZA857, LN 415, 9V-OFE) and the 100th 787-9 delivered - to Air Canada, ZB566 (LN409, C-FGEO).  Thus 2 significant milestons hit in one month.In terms of production efficiency in April, the numbers won't look good given the increase in production rate has yet to be met with a corresponding increase in the delivery rate.With 12 airplanes rolled out to 10 being delivered, the production efficiency was low at 1.2.

Thus far in May, Boeing has rolled out 6 787s and delivered 2 including the last 787-8 for the first buyer of the 787, ANA. Again most of the deliveries are at the backend of the month.  I expect deliveries to come in around 12 to 13 including 1 early build 787-8 for Air Austral, ZD002 (LN 22, F-OLRC) which is expected to deliver around May 20th.  I also expect that with the delivery to Air Austral, Boeing would have delivered 300 787-8 - another milestone achieved.  How ironic that the 300th 787-8 delivered would be an early build 787 that was first assembled in 2010, exactly 6 years ago.  Speaking of early build 787s, Boeing has 2 that have been rolled out and flown including the aforementioned ZD002 but also ZD004 (LN 12), the first of Ethiopian's top up order of 6 early build Dreamliners.  A 2nd one for Ethiopian (ZD006, LN 14) was also rolled out this month as is undergoing final assembly tasks on the interior as well as the tail while sitting on the tower apron at Everett.  The delivery of these early build airplanes will skew the delivery numbers a little higher and increase the production efficiency a bit.  I'm still expecting 6 early build 787 deliveries this year.

However, the deliveries to Ethiopian maybe put on hold due to continuing issues with the Export - Import Bank that would finance the purchase made by Ethiopian.  The issue is that the Republicans in the Senate are blocking the the approval of a third board member to the bank's board.  There are currently 2 board members but a 3rd is needed to approve purchase of over $10 million.  The bank needs a quorum of 3 out 5 board members to approve those large deals.  A single US Senator, Richard Shelby, is blocking the approval of the 3rd board member.

On the order front, Boeing finally signed a deal for 15 787-9 to China Eastern Airlines but I am anticipating that we'll finally see some more 787 order announcements (or revelation of unknown customers) at the 2016 Farnborough Airshow which starts July 11th.  The most anticipated order should come from Emirates for an order of 75 to 100 787s including options.  Turkish Airlines is talking to Boeing and Airbus about orders for the 787/A350 but it seems that those talks have gone on for a few years. Maybe this year will be the year.

Boeing held it's 1st quarter earning call late last month and about the only thing that was news worthy was the better than expected increase in deferred production costs which was $141 million. It raised total deferred production on the 787 program to $28.7bn.  Boeing attributes the lower increase to better mix of 787s being produced (787-9 vs. 787-8) as well as unit cost reductions.  QoQ deferred production cost growth decreased 30%.

Lastly as we look forward to future deliveries in 2016, Boeing still has to get it together in terms of delivery rate.  Some late deliveries are out of Boeing's hand like the late deliveries of 2 787-9 for British Airways which is attributable to issues at Zodiac (again).  However with 42 deliveries completed through mid May out of a projected total of 139, Boeing needs to deliver between 12 and 13 787s each month to hit the delivery mark by the end of the year.  So far in May it's looking ok but I would be more comfortable if they delivered 13 per month knowing that December will be a rather slow month in terms of delivery activity.  It is entirely possible that 500th 787 to be delivered could take place in December but it's way to early to know who lucky number 500 will go to.

787 Full Production Table