Saturday, April 25, 2015

787 production cost still increasing but at a slower rate as deliveries become more streamlined.



There was a little drama as I work up Thursday morning to an email from Google Blogger saying that they had deleted my blog.  A number of readers emailed me about it and a forum topic on airliners.net was created.  Here's the story.  Bloggers automated systems accidentally flagged the blog a TOS (Terms of Service) violator for phishing.  Well nothing can be further from the truth about this blog or my intentions.  I appealed to Blogger to restore the blog which they had thankfully done but for a few hours I was faced with the disheartening possibility of loosing my archived blog posts though the 787 tables were unaffected and are still accessible if you had the URL.  Lesson learned - I'm going to back up my blog posts.  Now back to our regularly scheduled programming!

The 787 program made progress on the delivery front but it continues to be a drag on Boeing’s financial results.  Notably, deferred production cost increased during the 1st quarter by $793mm to $26.9bn and increased 787 deliveries dragged down operating margins for BCA from 11.8% to 10.5% (because of the continued high cost of producing each 787 vs. the actual cash they have bought in is negative).  While Boeing is still struggling to drive down 787 production cost, they expect to see a net profit on each unit produced sometime late this year and also reported that 787-8 unit costs over the last 190 787-8 deliveries declined 30% while 787-9 unit cost declines 25% over the first 20 deliveries.  Boeing says that they expect deferred costs to start declining soon after they achieve rate break to 12/month which is expected to take place in late 2016.  Greg Smith, Boeing's CFO said:
When you look over that time frame (fourth quarter 2014 to 1st quarter 20015), we have seen improved performance. In particular, I noted on the 787-9, is they're coming down the learning curve in a very aggressive manner. And I think that goes to the lessons learned off the 787-8 in getting those into the production system. So that introduction of that airplane is going very well. And as you know, that will be close to half of our deliveries this year. So that smooth introduction is important.
Looking at 787 production at Everett and Charleston, it does appear that Boeing is making a drive to reduce assembly times as well as time to delivery.  In reviewing the 787 tables we can see that the time in final assembly in Charleston is about 42 to 46 days while in 40-24 the assembly times is around 37 to 39 days.  In 40-26 the final assembly times is much shorter..around 30 days.  Post assembly times are also improving with Charleston airplanes taking about 40 to 50 days from the end of final assembly to delivery.  At Everett the time is now ranging from 45 to about 75 but the more realistic time frame is about 60 days. Overall both locations are taking about 90 to 110 days to assembly, test, fly and deliver 787s though it appears that the numbers are trending down, particularly in North Charleston.  Of course, delivery times is also driven by customer needs so while Boeing may be ready to deliver, the customer may not be.

A silver lining is that 787 deliveries thus far are more evenly spread out this month rather than being bunched up at the end of the month as is generally the case with 787 deliveries.  This can only help reduce cost in the program as Boeing doesn't have to spend more money in overtime at month end trying to make deliveries to customers thus bunching up the aircraft deliveries in the last few days of the month.  I do expect at least 5 more deliveries this month including 2 to American Airlines.  To date Boeing has delivered 266 787s, 38 787s in 2015, and 8 in April.  22 787-9s were delivered thus far and I expect that the number of 787-9 delivered, which are higher margin aircraft, should increase dramatically this year.  

Obviously Boeing deliveries numbers have been impacted by the production issues at Zodiac especially deliveries to American and Etihad.  No doubt 787 delivery numbers would have been stronger without the Zodiac issue.  Boeing doesn't expect the Zodiac problem to impact their delivery numbers for this year but the issue will persistent until the end of the 2nd quarter after which it is assumed that Zodiac would have its act together.

Lastly, Boeing's order book took a temporary hit when United Airlines, as expect, converted 10 787-9 to 777-300ER.  Additionally, American Airlines deferred 5 787s that were to be delivered in 2016 to 2017(4) and 2018(1).  American will now take 13 787s this year (3 already delivered), 8 in 2016, 13 in 2017 and 8 in 2018.  United is expected to take 11 more 787-9s by the end of the 1st quarter of 2016.

787 Full Production Table
787 Build Location By Operator 
787 Build Location By Customer

Tuesday, April 14, 2015

787 April 2015 Mid Month report


For quite some time most 787 deliveries have been concentrated at the end of the month but thus far in April Boeing has delivered 3 787s and will probably deliver one more at the end of this week.  Having deliveries more spread out during the month would help Boeing reduce cost that comes when deliveries are “bunched up” at the end of month and the need for overtime to prepare these airplanes for delivery.

It’s no secret that Boeing’s first quarter deliver numbers were probably hurt by the Zodiac seat fiasco that delayed delivery of several 787s most notably to American Airlines.  Currently there are 4 787s for AA that appear to be ready for delivery (all four have had their first flights).  One is still stored in Victorville, Ca (contrary to press reports) and 3 others are in Everett with 2 having had their first flights this past weekend.  We should see two more 787-9s delivered by the end of April as well as 9 more 787s handed over to customers in addition to the 3 already delivered but that includes the 4 for American Airlines and 1 for Jetstar which has yet to make its first flight.  The total number of deliveries could be as low as 7 for the month of April if Boeing fails to deliver to AA and Jetstar. 787-8 make up the deliveries thus far and I expect Boeing to deliver 10 787-8 and only 2 787-9s in April.

Production continues at the 10/month pace.  As I reported earlier, Boeing rolled out the 300th 787 built (a 787-9 for Vietnam Airlines) which is an important milestone (#400 should roll out around February of next year and #500 around Dec. 2016/Jan. 2017). A 787-8 for PrivatAir should start final assembly later on this month.  Boeing will (or has started) final assembly on 4 787-9 and 6 787-8.

During the past year or so I also have highlighted the efficiency of the 787 production system (or lack thereof at times).  During the first quarter, both the Everett and Charleston plants had an efficiency ratio of 1 with Charleston rolling out 9 and delivering 9 airplanes.  Everett rolled out 21 and delivered 21 787s.  Everett had delivered only 4 787 in January but made up the slow delivery rate in February and March. Thus far in April, Boeing has rolled out a total of 5 787s while delivering 3 for an efficiency ratio of 1.67.

One programming note: I will not make this into a paysite (yay) but I will publicly call out those who will use the information that is on my blog and not give proper credit.  I hope that such public shaming will force these people to change their behavior.  Thank you all for the support and encouraging messages.

787 Full Production Table
787 Build Location By Operator 
787 Build Location By Customer

Wednesday, April 8, 2015

Boeing to roll out 300th 787 built tonight

Very late tonight (around 9PM local) in Everett, Boeing will roll out the 300th 787 built since the production of the 787 began in 2007.  The aircraft is ZB536 (LN 303, VN-A861) a 787-9 for Vietnam Airlines.  Boeing started final assembly of this aircraft on March 6th and it took 33 days for it to go through final assembly.  It will be parked for a week or so on the 40-51 ramp undergoing minor assembly tasks after which it should go to the flightline or paint.  This is an important milestone to have reached for Boeing.

787 Full Production Table
787 Build Location By Operator 
787 Build Location By Customer

Friday, April 3, 2015

1st Quarter 2015 787 Report



UPDATE: Ok so moments after posting this Boeing put out it's O & D numbers for the 1st quarter.  There were 2 unidentified orders for 787-9 one for 6 (probably Oman Air) and one for 24 (wide open on the customer but could be Hainan plus 6 additional 787-9 taken on lease from ALC).  Boeing did deliver 30 787s per my earlier comments below.  Boeing total 787 order book is now over 1,100 and for the first time the total number of 787-9 orders (496) exceeds the total number of 787-8 orders (467).  This is trend I expect to continue as future orders will tend towards the 787-9 and 787-10 as well as conversions of some existing 787-8 orders to the 787-9 or 787-10.

The 1st quarter has come to an end during which Boeing has delivered 30 787s.  This pace keeps them on track for 120 deliveries by the end of the year.  In March, Boeing delivered 11 787s including the first aircraft from a lot of early production aircraft known as the "terrible teens."  This aircraft is ZA841 (LN 11, N507BJ) was sold to Korean Air to be used as a VIP transport for the South Korean government.  This aircraft was flown to Grant County International Airport for some unidentified purpose.  I can only speculate that it is there for storage, pilot and ground crew training, or interior installation.  Boeing has now delivered a total of 258 787s of which are 238 are 787-8 and 20 are 787-9.

What was also interesting about March deliveries was the number of 787-9 (5) delivered vs. the 787-8 (6), almost half of the delivery totals for the month.  For the quarter, Boeing delivered 10 787-9s vs. 20 787-8s.  This will be an important metric to watch as production cost come down on the 787-9 (and the 787 program as a whole) the margins on these larger version will be higher vs. the 787-8.  The more of these airplanes that are delivered the better Boeing's financial results will look.  It is expected that the 787-9 (and the 787-10) should be more profitable to the company to produce than the 787-8.  This profitability will be even more pronounced as Boeing has delivered over 50% of the 787-8 ordered thus far while only delivering less than 5% of the total 787-9 ordered to date.  Boeing has delivered 24% of the total 787 orders thus far.

Boeing booked 3 unidentified orders in March and also announced the firming of ANA order for 3 787-10.  I'm not sure if the two are one in the same.  There are more potential orders on horizon as Hainan Air, Oman Air and QANTAS may add to their existing orders an in significant numbers.  Hainan is talking about ordering 30 787-9.  I believe that this order may be a mix of leased aircraft as well as direct purchase from Boeing.  There is one 787-9, ordered by Air Lease Corp., that will be leased to Hainan Air (LN 430).  Oman Air has 3 787-8 and 6 787-9 on order according to the carriers CEO while Boeing's Order and Delivery website still lists their order as 6 787-8s.  Oman Air is expectign to take delivery of the 2 787-8s this year and the 787-9s next year.  The carrier is envisioning a widebody fleet of 25 all of which may be 787s though they do plan to evaluate the A330NEO.  QANTAS is already taking 787s for its Jetstar subsidiary since 2013 but they still hold 50 purchase rights which have been moved back over the last few years due to the carrier's poor financial health.  Now that QANTAS has regained a firmer financial footing, there is serious talk of exercising those 50 rights, the first of which calls for a delivery in 2017.  That mean that QANTAS needs to start firming these rights late this year or lose them and the valuable early delivery slots that Boeing can use for new or existing customers.  Turkish Airlines may be another carrier that may order the 787 this year through their timing is nebulous as is their intentions.

In April I am projecting 14 787 deliveries including Japan Airlines' first 787-9 (the 3rd 787-9 flight test airplane), and a whole gaggle of 787-8 for American Airlines that have been delayed because of the continuing saga at Zodiac.  Norwegian's final direct purchase 787-8 should also be delivered this month as well.

As far as rollouts are concerned, look for Vietnam Airlines' first 787-9 to come out of 40-26  as well as Air India's potentially final 787-8 emerging at the end of April from 40-26.  Xiamen's penultimate 787 will emerge from Charleston's 88-30 final assembly building around the third week of April. I believe we should see 5 787-8 and 5 787-9s rolling out of Boeing's factories this month. The only notable 787 that will start final assembly this month is the first 787-8 for PrivatAir.  Boeing will start assembling 6 787-8s and 4 787-9s in April.

787 Full Production Table
787 Build Location By Operator 
787 Build Location By Customer

Thursday, March 26, 2015

Boeing Donates ZA002 to Pima Air and Space Museum

In a surprise flight, ZA002, the 2nd test 787-8 was flown to Davis Monthan Air Force Base where it will be turned over to the Pima Air and Space Museum in Tuscon, Az.

The aircraft accumulated over 960 flight hours over 300 flights in support of flight testing and certification of the 787-8.  After it had completed these tasks Boeing stored the aircraft in Palmdale, Ca. until the flight today to Arizona.

ZA002 first flew on Dec. 22, 2009, one week after the maiden flight of sistership ZA001.  It had suffered an in flight fire on November 9, 2010 due to a piece of solder in a power distribution panel had caused a short circuit.  The aircraft landed safely in Texas without any injuries but this fire and the subsequent investigation and required fixes set back the 787 deliveries by 6 months.

Check out Pima's Facebook page for details.

Wednesday, March 25, 2015

787 Progress Report - March 25, 2015



Deliveries of 787s are still slow though this month but hopefully should start to pick up with 6 days left in the 1st quarter.  Thus far, Boeing has delivered 5 787s: 4 787-9s and 1 787-8 including the 1st 787-9 to be assembled at the North Charleston plant.  The latest delivery was a 787-9 delivered to AerCap on behalf of LAN who will operate it.  I expect that Boeing should be able to deliver 6 more 787s this month.

Production has been moving along without any overt signs of issues and each aircraft going through Everett still makes a stop on the 40-51 ramp to finish minor assembly tasks and for some to have their seats installed.

However flight testing activity has been noticeably thin over the last 2 to 3 weeks.  There are a couple of 787s that are scheduled to be delivered this month but have not flown their customer flights.  It maybe indicative that some customers are not yet ready to take delivery of their aircraft.

There's also been a lot of buzz about American Airlines 787 deliveries or lack thereof.  It does seem that the production issues with the Zodiac seats are persisting and are not only affecting Boeing or 787 deliveries but are impacting different aircraft and manufacturers (Airbus and Boeing).  That said, American has publicly stated that revenue flights won't start until May and the 2 airplanes that they have taken delivery are being used to train their pilots.  It doesn't make sense for AA to take delivery of more 787s if they don't intend to introduce them into revenue service within one month of taking possession.  Thus I don't see any more 787 deliveries until late April at the earliest.  The 2 AA 787s that have flown but not delivered are, I believe, fully outfitted with their seats.

Hainan Airlines announced in a public filing with the Shanghai Stock Exchange today that they intend to purchase 30 787-9s.  However, I believe that these 30 787-9s will be a mix of purchase and leased 787-9.  LN 430 (ZB763) is an aircraft earmarked for Air Lease Corp. (owned by Steven Udvar Hazy) and leased to Hainan Airlines.  ALC has 15 787-9s on order with Boeing so I wouldn't be surprised if the final order is 15 leased from ALC and 15 new 787-9 from Boeing. An article by Jon Ostrower in the Wall Street Journal says that deliveries are to start in 2021 and these slots were some of United Airlines 787-9 slots which are being given up in exchange for the 777-300ER order that UAL intends to place with Boeing.  These slots were initially offered to American Airlines which turned them down as they are focused on introducing the 787-8 into the fleet (replacing 767-200).

Air China is expecting to take delivery of its first Trent powered 787-9 (LN 419, ZB047) next year as well as part of their order of 15 aircraft.  In a bit of disappointing news, it seems that Rwandair will be buying 2 A330s instead of the 787. The carrier had options on 2 787s which were expected to be exercised for two of the "terrible teens" that are sitting on the Everett runway.  Rumor is that Ethiopian came in with a higher bid for these aircraft.  Another rumor is that EVA Air is in the final stages of buying the 787-10 as well as 777F.  The number of each is unknown.  If true it would be a huge boost for the 787-10 which hasn't received an order since early last year and a 3 plane commitment from ANA.

Lastly, a personal note from me.

I've started this blog almost 7 years ago and I've been complimented by many readers over the years and I certainly appreciate it.  The highest form of flattery is when people start to imitate you or cite the information that is in this blog, However there are certain individuals who have used the information in my posts or in the tables I have created without giving proper credit and have passed it on as if it is their own.  I have struggled to figure out want to do including communicating with the offenders but they have continued to steal my information.  I am considering making this a pay site but have not reached a definitive decision as of yet and not sure if that would solve the problem.  My intention for a long time was to just have a free blog that enthusiasts will enjoy reading but it seems that a few bad apples are intent on ruining this for their own gain.  I will keep you all apprised of my final decision regarding this blog.  Thank you for reading!

787 Full Production Table
787 Build Location By Operator 
787 Build Location By Customer

Tuesday, March 17, 2015

First 787-9 built at Boeing North Charleston flies away to Denver

Boeing Photo

Photo by Karadion

Photo by Karadion

Photo by Karadion
The first 787-9 to be built at Boeing North Charleston was formally flown away by United Airlines to it's hub in Denver.  The aircraft will go through the United process of inducting the aircraft into revenue service.

Boeing got the ok to start 787-9 deliveries after the FAA approved the 787-9 production certificate for the North Charleston plant.