787 Program: 2014 Look ahead

What's in store for the 787 program in 2014.  A lot it appears.  Let's take a look at what is expected for this program:

787-9

Undoubtedly, the biggest development that will come in 2014 is the certification and entry into service of the larger version of the 787, the 787-9.  This aircraft is already in the middle of certification testing by Boeing with FAA personnel on board observing.  First delivery of ZB003 is scheduled for sometime in July of 2014 which indicates that Boeing should be complete with testing around May of this year.  The FAA should give its blessing around mid to late June and first delivery in July to Air New Zealand.  Boeing is giving ANZ a preview as it flies ZB002 to Auckland tonight where it will be toured by company brass and local media. ZB002 will be eventually delivered to ANZ after it is refurbished at the conclusion of the testing and certification program (along with ZB001).

All indications are that the testing is going well though there hasn't been much official word from Boeing regarding progress.  ANZ plans to use the aircraft on routes from Auckland to Perth, Christchurch, Shanghai and Tokyo with the 3 aircraft they expect in 2014.  ANZ is expected to stat service on Oct. 15, 2014 on the Auckland-Perth route.

Dispatch Issues

Boeing has been bombarded with reliability issues which have caused numerous headaches for their customers and the flying passengers.  Boeing has promised to get these issues down over the next 6 months so that the dispatch rates of the 787 will be at or better of the 777 rates.  Most of the issues seem to emanate from software and the frequency of warning messages that the pilots receive in the cockpit.  This has caused a lot of needless delays and cancellations.  Boeing is planning a major software change that will be certified by the middle of 2014 to reduce these false warning messages.  There are some who believe that this will not be the answer or the end to the reliability issues of the 787.

Production

Boeing has stated that 787 production has hit the promised goal of 10/month.  December was a slower month due to the Holiday season but I do expect that they will start to pick up the production pace this month at the 10/month rate.  I do expect that Charleston will be at 2/month while Everett will split the 8/month between the main line in 40-26 and the surge line in 40-24.

787-10

Now that the 787-10 has launched, Boeing will be pouring engineering resources into the design of the aircraft this year.  I expect the firm configuration to be completed next year with detailed design in 2016, final assembly of first flight of the first 787-10 in 2017 and delivery in 2018.  I do expect more order for the 787-10 but I think many of them will come in the form of conversions or exercising options and purchase rights.

Deliveries

Now that Boeing is hitting a rate of 10/month, this begs the questions of how many can they deliver in 2014.  In terms of new builds, I can see Boeing delivering around 100 to 110 aircraft. Remember, the production rate is vastly different from the delivery rate which is still not stable.  In terms of the aircraft working their way through change incorporation, I do believe Boeing can deliver around 7 to 9 aircraft.  This is a huge year over yer increase in deliveries but Boeing needs to execute if they want to regain integrity in the program.

There will be some new customers for the 787 this year.  Many are publicly known but there are some operators who will be receiving the aircraft on a lease basis.  Here is a list of airlines that will be taking their first 787s this year, though it is not a comprehensive list.

Carrier
Air Canada
Air New Zealand
American Airlines
Avianca
Azerbaijan Airlines
BBJ-Saudi Ministry of Finance
Etihad Airways
Kenya Airways
Royal Air Maroc
Royal Jordanian Airlines
Scoot Pte Ltd
Virgin Atlantic Airways
Xiamen Airlines


There are some current customers who will take their first 787-9 this year including ANA and JAL



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Boeing details 787 progress during 1st quarter earnings call

Yesterday Boeing released its 1s quarter earnings which topped analyst expectations.  The 787 deliveries has contributed significantly to the improved bottom line and Boeing was more than happy to share the progress on the 787 program.

Boeing noted that they hit the 10/month production rate fully during the quarter but also have completed the preliminary design review on the 787-10.  Boeing will now proceed with the detail design of the 787-10 which is expected to enter production around 2016.

The production rate has stabilized at both Charleston and Everett which will also help them stabilize the delivery rate.  Boeing did note that there will be continued variance in the delivery rate as they are there are 18 customers receiving their first 787 this year and typically those customers have different requirements and testing that need to be done as well as differences in financing the final payment.  They did reiterate that they will deliver 110 787s this year. So far through today (April 24, 2014) they have delivered 21 787s.  I believe they can deliver at least 2 more, possibly 3 this month for a total of 23 to 24 for the year and 5 to 6 for the month of April.  Obviously they will need to pick it up in the later months going forward.  The lack of deliveries to Air Canada, I believe, hurt their April delivery number which could have added at least 2 more to that monthly total.  IT is rumored that the delays are attributable to issues with the IFE though it is not confirmed.

As mentioned earlier, Boeing said that the production system has stabilized.  The two issues that have also contributed to slower deliveries was the wing issue by Mitsubishi and the increase in travelled work on the mid body fuselage.  With regards to the former, Boeing said that there are only 3 more aircraft that need to be inspected and fixed thus that issue is largely behind them.  On the later, there has been a great improvement in the reduction of the number of open jobs.  Sources have confirmed this to me to be true but that there is still some improvement needed with regards to the travelled work.  It does appear that there are fewer aircraft going to the EMC and are actually going to the ramp to finish off the minor jobs still opened and then proceeding to the paint hangar.

The 787-9 testing is also going really well and Boeing is still maintaining first delivery in the middle of the year.  The 6th 787-9 to be built just rolled out of final assembly.  This is ZB167 that will be delivered to United Airlines in July.  This aircraft will participate in the flight testing program as well and I anticipate that it should start flying around the middle of next month.  It will undertake F&R/ETOPs testing with the GE GEnx-1B engines.  Boeing also said that unit cost for the 787-9 have improved 30% between the first and 6th 787-9 which is tremendous.  It should continue to drop as more aircraft are introduced into the production system and the assembly has stabilized.  However Boeing is expecting that most of the production over the next couple of years will be 787-8 vs. 787-9.

Lastly, dispatch reliability is continuing to trend above 98% but Boeing still is not satisfied and will be looking to get that above 99% which is not expected to happen until later this summer when improved software is introduced to the 787 fleet.

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All Things 787: Projected 787 Deliveries


 

Boeing delivers 4 787 in January but still plauged with problems in Charleston

Boeing delivered a total of 4 787s in January a decrease of 7 month over month from December's 11 deliveries.  I expected that the number was going to be lower due to the holidays in December which is a time that production usually takes a break company wide.  However, I was forecasting 8 deliveries some of which were just recently delivered aircraft in early February.  I was expecting that Qatar would have taken deliveries last month but apparently they are not ready to take possession.  Qatar has been notoriously picky in their inspections of the aircraft.  There are 4 that are complete at Charleston and outside on the flightline. 

So far in February, Boeing has delivered 3 .  Almost midway through the month of February, Boeing hasn't conducted too many B-1 flights of the aircraft that have rolled out of the final assembly buildings.  In fact Boeing has conducted only 3 first flights of production 787s.  Many of the 787s coming out of 40-24 or 40-26 went to the flightline or the EMC without paint.  This is to finish any traveled work that was left un done due to the issues in Charleston's mid-body assembly building.  While those tasks that went uncompleted in Charleston were probably finished during final assembly, that meant pushing other final assembly tasks to a time after the aircraft rolled out.  This is probably the work that went on the flightline and at the EMC.  Some of those planes have finished the traveled work and have been or are currently being painted.  So far it looks like the 787s that are rolling out needs to spend one more week to finish the traveled work at the EMC before releasing the aircraft to go to paint and subsequent pre-delivery ground and flight tests.  Boeing is continuing to move the mid-body fuselages through each of the assembly cells in 88-20 and then deliver them to Everett of Charleston's 88-30 building for final assembly regardless of the shape that they're in and the amount of work that is left to be done.  Boeing is more intent on maintaining rate of 10/month and the traveled work will be done after the airplanes have moved out of final assembly.  While this may be all well and good in the short term it could have long lasting impacts if the issues in 88-20 are not corrected quickly.  Deliveries could certainly fall behind and the FAA may inquire as to what exactly in going on in Charleston and why. 

The key things to watch for is if Boeing is still sending airplanes that had just been rolled out to paint, the flightline or the EMC.  If it is the later, then we need to see how long they spend at the EMC before going to paint and then on to the flightline.

Boeing is attributing the flow issues in Charleston's 88-20 mid-body assembly building to the introduction of the 787-9 as well as the increase in rate to 10/month. However, Boeing should have also attributed the chaos in 88-20 to the laying off of the contract workers in Charleston months earlier.  Workers that they are now hiring back to get the mid-body assembly back on track. 

Given Boeing's plans for Charleston especially with the planned rate increases in the coming years and if the rumors of the plant taking on all 787-10 assembly is true, then Boeing will need to have these contract workers around for a very long time to come.

Given the unpredictability of the issues that Boeing with the program especially with regards to the mid-body fuselage and the knock on effects that the traveled work has caused to downstream planning of testing and delivery activities, it is hard to predict how many 787s will be eventually delivered this month...and we're already near mid-month. 

This may crimp Boeing's plan to deliver 110 aircraft this year though it is still yet too early to arrive at that conclusion definitively.  Boeing is struggling to get dispatch reliability to over 99% and currently they are at over 98% which is good but not satisfactory to Boeing or the 787 operators.

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Boeing ends April with strong 787 deliveries but still behind planned delivery pace

What was appearing to be an anemic month for 787 deliveries was actually a strong one for the aircraft program.  I was expecting about 5 to  deliveries but Boeing finished strong with 8 deliveries, 5 on the last day of the month.  That is the good news, the bad news is that to keep pace for 110 deliveries in 2014, Boeing needed to have delivered 37 787s in the first 4 months of the year.  They have delivered 26 through April 30th. In order to hit the 110 delivery mark, Boeing will have to average 10.5 deliveries per month for the remainder of the year.  Certainly this is an attainable goal but the pace thus far hasn't really looked promising. There are a number of 787s at both Everett and Charleston that have been waiting, patiently for their B-1 flight.  Thus far there has been only 2 B-1 flights though it is early in the month.  However to keep pace with 10.5 deliveries per month, Boeing does need to conduct far more B-1 flights and get these aircraft into production flight testing.


A bit of good news is that it appears that build quality is improving as there are far fewer test flights that need to be conducted (including customer flights) before the planes are formally delivered.  In April, of the 8 planes that were delivered 6 airplanes required an average of 3.5 flights before they were delivered.  I purposely excluded the two Qatar deliveries as they are considered outliers compared to the rest of the customer base.  This certainly bodes well for the 787 delivery rate if Boeing can keep the build quality high and thus get the aircraft into customer's hands faster.


For deliveries in May, Boeing has already delivered one 787 to Ethiopian, the airlines' 6th Dreamliner.  I can see the deliveries shaking out as follows:




Air Canada - 2
Air India - 2
ANA - 1
British Airways - 2
Ethiopian - 2 (1 delivered already)
Hainan - 1
ILFC/Norwegian - 1
QANTAS (Jetstar) - 1




Of course, many of there deliveries are predicated on several of these aircraft starting the flight test program soon (there's only 23 days left in this month).  Already, a British Airways' 787 (ZA454, LN 173, G-ZBJE) has conducted (or is conducting at press time) its C-1 flight. The next one week will help further understand what delivery rate Boeing will achieve this month.




A Word About the 787-9


Boeing continues to execute well on the 787-9 flight test and certification program.  Last month Boeing started F&R and ETOPs testing on a production 787-9 eventually destined for ANA.  ZB197 has been flying regularly in order to have certification ready by next month and delivery of Air New Zealand's for 787-9 to be made around mid July.  Word is that because of Boeing strict disciplined approach to designing and testing this aircraft, that delivery should be made on time.  Boeing will also probably fly ZB167 (LN 181, N19951) which will conduct the same F&R/ETOPs testing though on the GE engines.  This aircraft is currently in paint and should fly by the end of this month to support 1st delivery of the GEnx-1B powered 787-9 later this year.  It is rumored that ZB167 should deliver to United in July as well.




Production


As stated in my previous post, Boeing looks to be putting the Mitsubishi wing issues behind it as at this point should not be a show stopper for deliveries.  Great progress was also made on reducing the travelled work from the Charleston mid-body fuselage plant (88-20) to point that there are no more than 150 minor JBS (jobs behind schedule) that need to be completed on the 787s coming out of final assembly.  To underscore this point, Boeing is doesn't appear to be sending 787s coming off the two lines in Everett to the EMC but instead are going to the 40-51 ramp where the remaining JBS are completed and then the aircraft is taken to paint and then to the flightline where it will be prepared to enter the flight testing program.  This is huge news and it appears the hard work has figuratively and literally paid off as the Boeing workers in Charleston will be paid a nice bonus in a few days for bringing down the JBS from about 8,000.  It will now be up to Boeing's managers to make sure that the JBS doesn't become unmanageable while the production rate steadies at 10/month.


Lastly, some of you have noticed that ZA436 (LN 151, B-2738) for Hainan has been flying a lot out of Boeing Field in Seattle.  While I do not have confirmation, I suspect that this aircraft is performing flight and certification tests on the revised software for the 787 in order to reduce the number of false warnings and improve flight dispatch reliability through out the 787 fleet.  Some earlier testing was done on the 787-9 but it does appear that Boeing is doing these tests on a production standard aircraft.  The fact that the airplane is flying out of Boeing Field where Boeing Test Flight is based lends some more credence to my theory.




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787 Program 2013 Year in Review: The Good, The Bad and The Ugly

2013 for the 787 program was a mixed bag for Boeing.  The program is on a firmer footing compared to a year ago but issues certainly has hit the program hard.  Boeing did deliver 63 (by my count, this may increase as Boeing may have made contractual delivery prior to New Years but fly away may occur after New Years Day) 787s in 2013.  Currently there are 17 operators and 16 customers of the 787.  The delivered fleet count is now 112 aircraft delivered to the 16 customers.  Here's my take on the past year:

The Good

Boeing executed the planned increases in production rate to 10/month as promised and they had also launched the 787-10 which promises to be a big seller and has 132 firm orders 6 months after the formal program launch.  Boeing's guidance for deliveries in 2013 was more than 60.  Boeing has delivered 63 787 but this number may grow as contractual deliveries may have been made prior to January 1, 2014.  Lastly, Boeing has started flight testing the 787-9 the larger iteration of the 787-8.  There has been no apparent hiccups and flight testing looks to be going very smoothly for this aircraft.  Certification testing has begun for both the GE and Rolls Royce powered aircraft.  First delivery is still slated for mid 2014.

The Bad

The 787 continues to suffer from teething issues which has impacted customer on time dispatch rates. Numerous customer complaints, some of which were very public (Norwegian). The issues, many of which are traced the software, are expected to be fixed by summertime but it do damage to the 787 brand.  The continued teething issues will continue to be a sore point between Boeing and its customers but when the aircraft is flying revenue flights, it is making money for its owners.

The Ugly

The ugly certainly is the lithium ion battery short circuit that caused a fire on a JAL 787 in Boston and a smoke condition on an ANA aircraft that was airborne.  The subsequent grounding raised a lot of the certification of the aircraft and the electrical architecture which became the subject of Congressional hearings.

Boeing did devote a tremendous amount of resources to develop a new containment and venting system that would ensure that a fire couldn't go beyond the battery itself.  This focus on finding a way to contain a fire without knowing the root cause of the battery overheating was very controversial but not without precedent. Boeing was able to convince the FAA, customers and other international aviation regulators of the effectiveness of the new system that flights resumed in late April and deliveries restarted in May.

In July, Boeing got another fire scare as an Ethiopian 787 that had just completed a flight to London's Heathrow Airport experienced a fire in the rear crown area of the aircraft. British investigators traced the fire to the aircraft's emergency locator transmitter (ELT) but the investigation is still not final.  Boeing repaired the aircraft in a closely watched process.  There have always been questions as to large composite sections can be repaired.  Boeing got this first opportunity and they were apparently successful as the aircraft has returned to service with Ethiopian last month.

Coming Soon: Look ahead to 2014 for the 787 program and my predictions.

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