787 Deferred Production Cost drop by $1.06 bn as Boeing prioritizes 787 sales.

Boeing reported its 2nd quarter financial performance and it seems that things are a little bleak.

First off the continued issue with the 737 MAX has Boeing considering slowing down or even completely stopping production on the aircraft until it is re-certified and back in the air.  They've been producing the aircraft and then parking them all over the Pacific Northwest.  The higher margins from the 787 program has helped partially offset the 737 MAX financial hit.

They also announced that the 777X first flight has been pushed to early 2020 from late 2019 due to the continued GE9X issues.  There is a huge amount of schedule risk in that program.

Not to mention that Airbus seems to be getting the better of them in the NMA/A321 market where Boeing has yet to launch their new widebody aircraft.

The 787 program is a bright spot as Boeing did report that the deferred production cost dropped by over $1 bn to $20.969 bn. Last quarter the deferred production cost was around $22.029 bn. The main issue for Boeing is getting more orders for the 787.  Currently the remaining backlog of 787s is 581 airplanes which is about 3.5 years of production at the current rate.  The word out on the Street is that Boeing is willing to trade away some 777X orders with Emirates in exchange for the 40 787-10 that they signed an LoI for in 2017.  Boeing did note that recent orders from Air New Zealand, Korean Air and Air Lease Corp. has bolstered the 787 skyline but they do need to make a more aggressive push for more orders or they would have to look to cutting production.  They are aiming at the widebody replacement market as a source of new orders down the road.

Boeing and Korean Air Finalize 787 Order Announced At Paris

Boeing Photo

Korean Airlines finalized the letter of intent for 20 787s that was signed last month at the Paris Air Show 20 10 x 787-9 and 10 x 787-10.  Korean Air will be leasing an additional 10 787-10 for Air Lease Corporation.  When all 30 aircraft have been delivered, Korean Air will be operating a fleet of 41 787s including one 787-8 for the Government of South Korea.

There is no official word on when deliveries but I anticipate that it'll be around the 2022 time frame.

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Here is the text of Boeing press release today:

Boeing and Korean Air Finalize Order for 20 787 Dreamliner Airplanes

Carrier modernizes widebody fleet with super-efficient 787-10, and 787-9 jets

SEATTLE, July 19, 2019 – Korean Air has finalized an agreement with Boeing [NYSE: BA] to order 20 787 Dreamliner airplanes – including 10 each of the 787-10 and 787-9 models – valued at $6.3 billion according to list prices. Along with an agreement to lease 10 additional 787-10 jets from Air Lease Corporation [NYSE: AL; "ALC"], the carrier will quadruple its Dreamliner fleet as it looks to bring greater efficiency and passenger comforts to its operations.

Korean Air, one of the largest transpacific carriers in Asia with 16 non-stop routes to North America, is adding the 787-10 to its long-haul fleet to complement its existing 787-9 and 777 airplanes.

The 787-10 is the largest member of the super-efficient Dreamliner family. At 224 feet long (68 meters), the 787-10 can serve up to 330 passengers in a standard two-class configuration, about 40 more than the 787-9. Powered by a suite of new technologies and a revolutionary design, the 787-10 offers carriers the lowest operating cost per seat of any twin-aisle jet in service.

“As we continue to innovate our product offering, the 787 Dreamliner family will become the backbone of our mid-and long-haul fleet for many years to come,” said Walter Cho, Chairman of Korean Air. “In addition to 25 percent improved fuel efficiency, the stretched 787-10 offers around 15 percent more space for passengers and cargo than our 787-9s, which will be critical to our long-term business goals.”

Korean Air announced its commitment to order the 20 Dreamliner jets and lease 10 more at the Paris Air Show in June. The airline plans to deploy the 787-10 on medium-range routes, while continuing to leverage the longer-range capabilities of the 787-9 Dreamliner on long-haul flights.

“As Korean Air celebrates a half-century of excellence in flight, they have earned the respect and admiration of the global aviation community. We are honored to partner with them again as they build out a world-class fleet of airplanes for their next 50 years,” said Ihssane Mounir, Boeing senior vice president of Commercial Sales and Marketing. “With the 747-8, 777 and now the 787 Dreamliner family, Korean Air operates one of the most efficient and comprehensive widebody fleets in the world.”

Korean Air employs a variety of Boeing Global Services to support its fleet, including Airplane Health Management services, which optimizes aircraft scheduling using predictive analytics with real-time flight data to reduce delays for its 787 aircraft. The airline also employs Jeppesen FliteDeck Pro electronic flight bag services that streamline access to digital navigational data, charts, manuals, and weather information for pilots. In addition, Korean Air also uses digital flight planning and runway performance analysis solutions, to further enhance operational efficiency and reduce costs across all phases of flight.

Korean Air’s Aerospace Division is a key Boeing partner on the 747-8 and 787 programs, supplying the distinctive raked wing-tips for each model. The division is also a supplier of the Advanced Technology (AT) Winglet on the 737 MAX.

Paris Air Show 2019 - Day 2

The 2nd day of the Paris Air Show provided Boeing with a shot in the arm as far as the 737 Max is concerned but Airbus still outpaced Boeing in the orders race but also signed on more form customers whereas Boeing announcements were all letters of intent (LoI).  Boeing certainly needed to get a vote of confidence for the 737 Max and they got it from IAG when they signed an LoI for 200 737 MAX 8 and 737 MAX 10s.  The exact number s for each variant will be subject to the final firm order agreement.

The 787-10 also got a major shot in the arm today as Korean Air will be ordering 10 direct from Boeing and also will lease another 10 from Air Lease Corp. and take 10 more 787-9s as well.  Separately, Boeing got an LoI for 5 787-9s each from Air Lease and an unidentified customer.

Airbus was also busy signing up Cebu Pacific for the A30/A321 and the A330-900NEO, getting additional orders or the A321XLR from IAG (Aer Lingus and Iberia) and Saudia who will increase their total A320 orders to 100. 

Airbus

Aer Lingus - 6 x A321XLR - Firm; 6 x A321XLR - Options
ALC - 50 x A220-300 - LoI
ALC - 27 x A321XLR - LoI
ALC - 23 x A321NEO - LoI
Cebu Pacific - 5 x A320NEO - LoI
Cebu Pacific - 10 x A321XLR - LoI
Cebu Pacific - 10 x A321NEO - Options
Cebu Pacific - 16 x A330-900NEO - LoI
Delta Air Lines - 5 X A220-100 - Firm
Iberia - 8 x A321XLR - Firm; 7 x A321XLR - Options
Saudia - 15 X A320NEO - Firm; 35 x A320NEO - Options
Saudia - 15 X A321XLR - Firm
Virgin Atlantic - 8 x A330-900NEO - Firm; 6 x A330-900NEO Options

ATR

NAC - 20 x ATR 42-600 - Firm; 20 x ATR 42-600 - Options; 20 x ATR 42-600 - Option LoI
NAC - 15 x ATR 72-600 - Firm; 15 x ATR 72-600 - Options; 15 x ATR 72-600 - Option LoI

Boeing

ALC - 5 x 787-9 - LoI
IAG - 200 x 737 MAX - LoI
Korean Air - 10 x 787-9 - LoI
Korean Air - 10 x 787-10 - LoI
Unidentified - 5 x 787-9 - LoI

De Havilland Canada

Air Antillies - 2 x DHC-6 Twin Otter - Firm


Embraer

Binter Canaris - 2 x E175 E2 - Firm
Fuji Dream Airlines - 2 x E175 - Firm
United Airlines - 20 x E 175 - Firm; 19 x E175 - Options

Boeing Delivers 17 787s in March,; 36 for quarter amid ongoing 737 MAX woes

	Number
Testing Complete	3
To be assembled in Everett	123
To be assembled in Charleston	124
Parts Arriving	6
Undergoing final assembly	7
Storage	2
Storage/Change Incorporation and Re-Work	0
Change Incorporation and Re-Work	0
Pre-Flight Prep	9
Production Testing	4
Non Customer Flight Tests	0
Ready for Delivery	3
Donation	3
Delivered	818
TOTAL	1102

Even though Boeing really didn't have a good month in March, the 787 program finished the 1st quarter of 2019 in strong fashion with the delivery of 17 Dreamliners to customers as well as book a total of 20 net orders for the 787-9 (Lufthansa).  In the first quarter Boeing delivered 36 787 (29 x 787-9 and 7 x 787-10) thus averaging 12/month.  During the same period, Boeing received orders for 38 787s (34 x 787-9, 4 x 787-10).  Now that Boeing is delivering at a rate of 14/month, they have to target the same number, in terms of average monthly orders.  Boeing's order average for the 1st quarter is 12.67/month which I feel is a decent rate but my expectation is that they will book between 13 and 14 787 on average per month.

The notable deliveries that occurred in March include: Korean Air's final 787-9 on order and Egypt Air's first 787-9 on lease from AerCap.

During March, Boeing rolled out 14 787s, 7 from each assembly line thus reaffirming the production rate is 14/month and split evenly between Everett and Charleston.  The final assembly time for both locations range from between 15 days and 18 days but it is safe to say that there is no distinction between either locations with regards to 787 production except that Charleston will be the sole supplier of 787-10s while Everett will be the sole supplier of 787-8s.

I am expecting that Boeing will deliver up to 18 787s this month with 3 already delivered.  Among these deliveries is the 2nd 787-10 built and used for flight tests using the GE-GEnx-1B engines.  This airplane is to be delivered to United Airlines around the end of the month.  Also Air Canada will receive the final 787 from the order of 37 787s.  The bulk of the deliveries will be 13 787-9 with one 787-8 (already delivered) and 4 787-10s.

Lastly,  there is one notable 787-9 that has been sitting in Charleston for over a year now.  This Dreamliner, ZB061 (LN 688, B-1216) was to have been the last 787 delivered to Air China last year.  Instead it is currently serving the role as the most expensive paper weight made by Boeing.  It is still listed as assigned to Air China but there is still no dates for first flight or delivery.

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