Monday, August 24, 2015

Prospective 787 customers and August production and delivery review

On the heels of QANTAS' return to the 787 order book, I thought it would be good to review other potential 787 orders that may firm up by year end.  This is by no means an exhaustive list but the more visible ones.

QANTAS – They still have 15 options (delivery slots with a delivery date) and 30 purchase rights (no specific delivery date).  QANTAS exercised the 5 options for delivery from 2017 to 2019.  The remaining 15 options are for 787-9 delivery slots from 2020 to 2021 while the 30 rights are for delivery from 2021 to 2025.  As I had mentioned previously, I expect that QANTAS will take a piecemeal approach to exercising these options and rights as they come due depending on business conditions and new route development plans.

Emirates - This order has been rumored to be going Boeing's way though Tim Clark has poured called water on these rumors by saying that he 787 doesn't have enough thrust to operate without payload restriction in Dubai hot and arrid environment.  Still I do expect that Emirates will pull the trigger on an order comprising of 787-9 and 787-10 at the Dubai Air Show during November 8th through 12th.

Qatar Airways - Qatar has taken delivery of 22 out of 30 787-8s that they had ordered.  They will receive the remainder of their order of 8 aircraft by the end of the second quarter of 2016.  They still do have 30 options left and I do believe that they will exercise them also for a combination of 787-9s.  I'm not sure if they will be in for the 787-10 given Qatar's 787-8 experience with the Charleston team and the 787-10 will be built exclusively in Charleston.

El-Al - The Israeli airline announced that they will be taking on 15 787-8 and 787-9 through a mixture of direct purchases from Boeing as well as leases.  They also will have 13 787 options for future growth.  This order should be firmed up in the next few weeks.

Hainan Airlines – They have said that they are committing to ordering 30 787-9s with deliveries starting in 2021 but this order has yet to appear on Boeing’s order and delivery web site. They may be the unidentified customer that had ordered 30 787-9 in two separate tranches (24 and 6).  Interestingly, there are 2 787-9 on the 787 firing order that are being leased to Hainan.  These airplanes should be delivered next year.

Phillipine Airlines – They’re looking to increase their widebody fleet and are looking at an order of 6 A350s or 787s.  Word is that the A350 has the edge in this contest.

Turkish Airlines – Turkish Airlines has been saying that they are evaluating the 787 for years but have yet to announce a decision.  The airline has bought form both Boeing and Airbus so this order, when it does come, can go either way.

If any readers have any other information on potential orders that are coming up or that would be announced, please feel free to add it to the comments section.

Production and Deliveries

As we’re getting closer to the end of August, the delivery schedule for the remainder of the month is becoming clearer.  Boeing has delivered 6 787s thus far but expects to deliver 8 aircraft in the next one week.  Four of these airplanes still have yet to conduct their C-1 customer acceptance flights which all should be flown tomorrow, August 25th

LN332-C1-8/25, Del-8/31
LN333-C1-8/25, Del-8/31
LN334-C1-8/25, Del-8/31
LN335-C1-8/25, Del-8/28

At the end of the month I expect that Boeing would have delivered 14 787; 6 787-8 and 8 787-9, 2 787-8 for American, 2 787-9 each for Vietnam Airlines and AerCap (leased to LAN), 1 787-9 each for Air Canada, Air New Zealand, ANA, and United.  Finally 1 787-8 will be delivered each to AerCap (leased to Thai), BBJ (Sultan of Brunei), Scoot, and CIT (leased to Aeromexico).

If the remaining 8 deliveries occur then Boeing would have 14 for August, 90 for 2015 and 318 program deliveries.  That would mean that Boeing would need to deliver an average of 7.5 787s per month for the remainder of the year in order to meet its 2015 delivery goal of at least 120 787s.  I believe they can deliver 135 by year end surpassing their goal by 12.5%.

787 Full Production Table

Wednesday, August 19, 2015

QANTAS finally commits to 787, Boeing set to deliver 13 787s by end of August

QANTAS 787-9

After years of struggling to return to profitability, Australian carrier, QANTAS, has returned to the black and has started ordering the 787.  Actually QANTAS had the 787-9 on order but cancelled an order for 35 aircraft in 2012 when their financial situation was bleak.  They retained the 787-8 order for Jetstar (14 aircraft) as well as retained the 20 options and 30 purchase rights at the time of the cancellation.  The purcahse rights have no production slots assigned to them whereas the options do.  QANTAS will exercise the options first as the expiration dates come due.

The carrier ordered 8 787-9, 3 of which are conversion of 3 Jetstar 787-8 to 787-9, and exercised 5 options.  The first four are to arrive between July 1, 2017 and June 30, 2018 while the second set of four will arrive between July 1, 2018 and June 30, 2019.  These 8 aircraft will replace 5 747-400.  QANTAS is not reducing overall fleet capacity but the use of the smaller 787-9 will give the airline more flexibility to down-gauge routes that are currently using the 747-400.  Jetstar's 11th 787 is already on the flightline and should be delivered next month.

QANTAS still retains 15 options and 30 rights for any model 787, thus I do see that the 787-10 can very well be in QANTAS' future.  The replacement strategy seems to be to only exercise the rights/options just before they are about to expire thus taking advantage of long term fleet and route planning at QANTAS as they replace the 747s.

ANA 787-9 ZB411 (LN329, JA872A)
In other 787 news, Boeing is looking to deliver 13 total 787s in August (I was predicting 15 earlier but 2 were pushed to early September).  3 aircraft (one each for ANA (787-9), CIT/Aeromexico (787-8), and Air New Zealand (787-9) have had their customer flights and should be delivered in the next week.  Air New Zealand will be receiving ZB001, the first 787-9 produced, after the aircraft had undergone a complete refurbishment at the conclusion of the 787-9 test program.  5 more 787s are awaiting their customer flights including one each for Air Canada (787-9), American Airlines (787-8), Scoot (787-8), United Airlines (787-9) and Vietnam Airlines (787-9).  If all the deliveries are made this month, Boeing would have delivered 13 in August, 89 through the first 8 months of 2015 and 317 since program deliveries began almost 4 years ago.

Lastly, ZB412 (LN345, JA873A) otherwise known as the "Star Wars" jet has been completed.  According to plans, this aircraft should have it's first flight on August 26th and then flown to Everett on August 31st where it will be painted in the special Star Wars scheme.  There is to be a special ceremony at the Future of Flight by ANA (I wonder if any of the cast of the new Star Wars movie will be there) around September 12th/13th.  The airplane will return to Charleston on September 14th to continue delivery preparations which should take place around September 29th.  The aircraft will be pressed into ANA service around October 16th.

787 Full Production Table

Wednesday, August 12, 2015

Planned first flight, customer flight and delivery dates for 787 deliveries in August

Here are the planned B1, C1 and delivery dates for the 787s that are projected to be handed over to customers this month.  This list, obviously, is subject to change and some deliveries may be pushed into September depending on flight testing progress and the need for additional engineering or customer flights.

LN126-C1-8/18, Del-8/25 
LN329-C1-8/19, Del-8/26 
LN330-C1-8/17, Del-8/24 
LN332-B1-8/12, C1-8/25, Del-8/31 
LN333-B1-8/14, C1-8/25, Del-8/31 
LN334-B1-8/13, C1-8/25, Del-8/31 
LN335-C1-8/21, Del-8/28 
LN336-B1-8/13, C1-8/21, Del-8/28 

787 Full Production Table

Friday, July 31, 2015

Boeing 787 deliveries reach over 300; posts 12 deliveries in July

Over 4 years ago the 787 program was starting to emerge from most of the issues that had plagued the program since 2007. The first delivery was right around the corner to ANA. A little less than 4 years after program deliveries began, a time when Boeing was barely reducing 2 787s each month. Now Boeing has reached 300 deliveries coming from 2 different production facilities running at 10 per month for 2 different models of the 787.  Boeing announced #300 though Randy's Journal, but they won't name the carrier.  It's possible that it was ANA but that is speculation on my part.

Boeing's 300th 787 delivery come amidst a drive to increase the delivery rate in the third quarter.  I'm not sure which airline accepted delivery of number 300 but it is either ANA, United Airlines, Etihad or Air Canada.  Through July 31st Boeing has delivered 304 787s, 76 in 2015 and 12 in the month of July.  The aircraft maker also rolled out 11 787s from its factories; 7 from Everett (including the surge line in 40-24) and 4 from Charleston.  11 787s starting final assembly in July with 5 on the main Everett line in 40-26, 1 going to the surge line in 40-24 and 5 in Charleston.

Production efficiency improved this month, particularly at Everett as 9 Everett 787s were delivered vs, 7 rollouts.  Charleston was hurt because of the delayed delivery of the two Kenya Airways jets.  Their efficiency number was not as good given the 3 deliveries vs. 4 roll outs.  Overall the 787 efficiency was .92 a good number but could have been better if Kenya was ready to take its 2 remaining 787s.

July deliveries would have been higher but for Kenya Airways and PrivatAir deferring the delivery of  3 787-8 which are ready to be handed over.  PrivatAir's delivery now looks to be in August and the two Kenya Airways may be handed over in September.

Looking forward, Boeing is planning for 15 deliveries including the PrivatAir delivery.  6 airplanes slated for August delivery have yet to take their B-1 flights including 2 787s at Charleston.  Only 4 are ready for the August delivery but that will, of course, change over the next couple of weeks.

787 Full Production Table

Wednesday, July 22, 2015

787 results from Boeing's 2nd quarter 2015 earnings call

Boeing released its 2nd quarter 2015 earnings this morning.  In it they revealed that cumulative deferred production cost increased by $790 million over the quarter (compared to $793 million during Q1' 2015).  Total 787 program deferred production cost now stands at $27.7 billion, a number which is not expected to decrease meaningfully until production hits 12/month sometime next year (a goal toward which they are tracking well).  They should see a drop in the growth of deferred production cost in the 4th quarter of this year.

As I reported earlier, Boeing had delivered 64 787 up to June 30th, 2015 and over 290 since program deliveries started.  Production is now balanced between both the 787-8 and the 787-9.   The 787-8 saw production cost decline 35% over the first 210 deliveries but more impressive is the -9 cost reduction of 30% over the first 34 deliveries.  The -9 should be more profitable for Boeing than the -8.  This is significant as Boeing has more 787-9 and -10 (assuming that the largest 787 derivative also follows a similar cost reduction curve as the -9) to deliver than the -8s.  This means that higher margin potential for the remaining deliveries is greater.  Boeing sees that the -9 has higher level of  profitability next year.  This is all attributable to lessons learned in the 787 program as well as smoother entry into service  for the -9.

In addressing 787 deliveries for the second half of 2015, CFO Greg Smith said:

"On deliveries, certainly we expect the back half to be healthy on 787 deliveries. But as you know, quarter to quarter, Cai, purely from customer ability to take the aircraft, that moves around a little bit. But we're comfortable about where we are on our guide. If we have the opportunity to change that, we'll do that. But I'd say we're well on track to hit that, our objective on about 120. So I think we're in pretty good shape there. But again, the back half will be important for us."

Thus Boeing is hinting that the third quarter 787 deliveries may be big and I'll be watching that very carefully.

Tuesday, July 21, 2015

Boeing looking to deliver large number of 787s in 3rd quarter.

As we get closer to the end of July, Boeing is starting a drive to deliver as many as 135 787s this year and key to that will be deliveries for the third quarter. To that end it appears that Boeing will try to deliver a total of 13 787s in July. Most of the aircraft to be delivered this month already have their customer flights (2 have yet to fly a customer acceptance flight). The 300th 787 to be delivered will be amongst this group of 13 airplanes and currently it appears that ZB079 (LN286, A6-BLC) for Etihad will have the honors but that may change. The delivery drive won’t end there as Boeing is planning to deliver around 18 to 20 787s in August (some of which were deferred deliveries from earlier months) and 12 to 14 in September. If all the 787s projected for delivery are actually delivered in the 3rd quarter, we can see 45 787s going into customer hands in the quarter which is a huge number. Deliveries are expected to tail off in the fourth quarter, particularly in the last month and a half of 2015 with no more than 27 possible 787 deliveries.

This is a large number of deliveries and this is a plan as of now but it is something that Boeing is attempting to accomplish over the next two and half months. The key will be production flights to prepare for the onslaught of 787 deliveries in August. So far only a few 787s that are slated for delivery in August have flown but I do believe that will change over the next couple of weeks. 18 deliveries in one month are possible for the 787 program and it is something they had accomplished during Dec. 2014. Again a good indicator is the number of B-1 flights that take place between now and around August 20th.

For July, Boeing has delivered 5 787s so far with an additional 8 scheduled for delivery over the next 10 days. Air New Zealand will receive one of the 787-9 test aircraft that had under gone re-work and rebuilt to production standards. This aircraft, ZB002 (LN133, ZK-NZD) will be the 298th 787 delivered. After that there are 4 787s that are tentatively scheduled to deliver on July 27th. They are ZB079 (LN286, A6-BLC) for Etihad, ZB536 (LN303, VN-A861) for Vietnam Airlines, ZB410 (LN319, JA871A) for ANA and ZB173 (LN324, N45956) for United Airlines. Note that all these deliveries are 787-9s. As I mentioned, I believe that ZB536 will probably be the 300th but we’ll have to see. Boeing should close out 787 deliveries for July 2015 with ZB558 (LN323, C-FNOE) for Air Canada on July 29th which is also its first 787-9 and ZA142 (LN322, JA840A) a 787-8 for ANA. There were two 787-8 that were scheduled for delivery to Kenya Airways (ZA662 (LN307, 5Y-KZH) and ZA663 (LN317, 5Y-KZJ)) which are now scheduled for a late August delivery.

Finally it looks like Crystal Cruises is picking up some 787s according to this article in USA Today. My sources say that they may be picking up 3 787-8s from the terrible teens (they have a variable number that starts with ZD). The only ones that make logical choice are LN 5, LN17, and LN19 which are all GE equipped 787s. Also on the possible new order front, EVA Airways is saying that they plane on buying 24-26 787s for delivery between 2018 and 2019 according to a report by Reuters. We’ll see when these do in fact materialize.

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

Wednesday, July 15, 2015

787 July 2015 Mid Month Update

Now that the second half of the year is underway, we should expect to see some changes in the 787 program the most visible of which is the production taper of 787 temporary surge line in Everett.  Last month there were 3 787s loaded into the Surge position 1 to start final assembly.  Starting this month Boeing will load only one 787 into the surge line in building 40-24 and that will come at the end of the month for the next four months.  40-24 is going to be a very lonely place until 777X production get started in three years.

The 2 787s from surge production are being allocated one each to the main lines in Everett 40-26 and North Charleston 88-30.  In fact North Charleston production is already very busy with 8 airplanes on the final assembly floor and another 6 on the flightline.

Boeing can deliver a total of 12 787s this month,  8 787-8 and 4 787-9.  I expect that there can be up to 6 deliveries in July from North Charleston including one 787-8 for PrivatAir that was assembled At Everett but ferried to South Carolina.  One 787-8 for Kenya Airways was supposed to be delivered in June but was held up at the request of the customer for unknown reasons.  Sources say that this airplane should be delivered this month which would be the 6th delivery out of North Charleston.  Some notable deliveries would include the first 787-8 for Scoot and Vietnam's first 787-9 as well as the aforementioned first 787-8 for PrivatAir.  Boeing has already delivered 2 787, both to Jetstar.

Thus far through today, July 15, 2015, Boeing has delivered 2 787s this month, 66 in 2015 and 294 total since deliveries began in September 2011.

There was some good news and some potentially not so good news for the 787 program.  First the not so good news.  Zodiac Aerospace has more trouble again when an explosion occurred (a possible chemical explosion) at its interior fabrication plant in Newport, Washington.  Both Boeing and Airbus are reviewing the impact to their production lines but I do believe that this will impact Boeing more than Airbus.  It is unclear if it will impact 787 deliveries at this point.

The good news for the 787 program is that the 787-10 has completed its CDR (critical design review) and is on its way to having 90% of detailed engineering drawings completed by the end of the year.

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