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

Friday, April 15, 2016

787 production up to 12 per month. Boeing delivers 30 787s in 1st quarter, set to deliver 400th Dreamliner this month. 1st 787-10 wing set spotted.



Last month Boeing was able to squeeze out one more delivery and turn over 13 787s to customers and end the quarter with 30 deliveries which is par given the production rate.  In reality it could have been 32 if it were not for the two British Airways 787-9s that are delayed due to continuing production issues at Zodiac.  Still Boeing turned in a very respectable quarter and it will be interesting to hear how they did with the deferred production costs over the past three months when they have the earnings call in next week. Air Canada saw their fleet of 787s increase measurably as they took ownership of 3 787-9s.  Virgin took 2 -9s including one that was damaged by an engine fire some months ago and Air Europa received their first 787-8.

For April, Boeing is planning 10 deliveries which will include the 100th 787-9 which is going to Air Canada and the 400th 787 which should be delivered to Etihad Airways.  However, it seems that Boeing will be breaking rate and going to 12 787 per month this month based on the load dates for both North Charleston and Everett.  For this month it appears that Everett will start final assembly on 7 787s and Charleston will start work on 5.  Interestingly enough the assembly build time at Everett looks to decrease to 18 to 19 days from about 22 to 24 days.  At Charleston build time has decreased to 25 to 26 days from 30 to 31 days.

Boeing is also now phasing out positions 5 and 6 inside the Charleston final assembly building and using it to park 787s that have completed final assembly.  The North Charleston line now mimicks the Everett line.

Boeing continues work on the early build 787s as they have now moved one more aircraft from runway storage to the EMC.  ZD003 (LN10) was moved this month to the EMC to start the re-work and rebuild process before being delivered to Ethiopian Airlines next year.  Boeing still has three more 787s that they need to start re-work and change incorporation work on including two test flight aircraft but most of the early builds are now well into the change incorporation process.  ZD004 (LN12) also for Ethiopian has completed the change incorporation work and will making its first flight soon in preparation for delivery tentatively in June.  however, the ongoing issue with the US Export-Import Bank may delay delivery.


787-9 & 787-10 Wings
The wing set for the first 787-10 behind a set of wings for a 787-9.  Photo by Chris Edwards of Woody's Aeroimages.
On the brighter side, photographer Chris Edwards of Woody's Aeroimages caught a picture of the wing set for the first 787-10 sitting at the Dreamlifter Operations Center in Everett.  Apparently there is no storage space at Charleston so the wings are staying in Everett until production on ZC001 (LN528) starts final assembly later this year.

Orders have been slow in coming. I am anticipating that we'll see a few 787 orders at Farnborough including the much anticipated Emirates order for 100 787s (split between the -9 and -10).

At Risk Orders

Given the large backlog of 787 orders, are there orders that are "at risk" of being cancelled.  I take a look at what orders may be at risk for Boeing by model.  I'm not looking at potential conversions but those orders that may be cancelled outright.

Let's start with the 787-8.

Boeing has reduced this backlog to about 140 -8s that have to be delivered.

Customer NameCustomer CodeModelOrderedDeliveredUndeliveredScheduled for Final Assembly
AerCapILF787-8262330
AeroflotARO787-8180180
Air AstanaAKZ787-83030
Air AustralAUX787-82022
Air EuropaARE787-88175
Air IndiaAIN787-8272162
Air NiuginiNIU787-81010
ALAFCOFCO787-88080
All Nippon AirwaysANA787-8363511
American AirlinesAAL787-8201554
AviancaAVI787-815784
Biman Bangladesh AirlinesBNG787-84040
British AirwaysBAB787-89810
Business Jet / VIP Customer(s)BBJ787-88440
Delta Air LinesDAL787-8180180
Ethiopian AirlinesETH787-8161066
IcelandairICE787-81010
Japan AirlinesJAL787-8252322
LAN AirlinesLAN787-8141040
LOT Polish AirlinesLOT787-88620
Oman AirOMR787-86240
PrivatAirPTS787-82110
Qatar AirwaysQTR787-8302733
Republic of IraqIRG787-8100100
Royal Air MarocRAM787-85233
Royal Brunei AirlinesRBA787-85410
Royal JordanianRJA787-87162
Scoot Pte LtdNPD787-810462
Uzbekistan AirwaysUZB787-82022
14038

Of these I highlighted in red the ones that I view as orders that are at risk of being cancelled.  Aeroflot, Delta and Iraqi Airways are the obvious candidates.  Aeroflot has stated that they intend to cancel their 787 order but then surprisingly converted 4 787-8 into the 787-9.  Despite this conversion I still view them as at risk to be cancelled due to the political and economic instability that exists in Russia today.  Delta took over Northwest's 787 order and has repeatedly pushed back first delivery.  This order is even more in doubt when the airline committed to the A350 last year.  This order is certainly a candidate to be cancelled or to be converted into another aircraft type.  With the political instability as well as the low price of oil, the order by Iraqi Airways (through the government of Iraq) is certainly at risk of being cancelled even though years of war, sanctions and neglect has hurt their fleet and their operations.  They do need new aircraft but I don't see how this order can be filled given the political and economic distress of the country. PrivatAir had trouble taking delivery of their first 787-8 and apparently this aircraft is on the market to be sold.  Biman Bangladesh placed their 787-8 order in 2008 for delivery in 2017 but I have not seen the airline pop up on the assembly firing order as of yet.  LOT Polish already has 6 787s but has not determined when or if they will take the remaining 2 on order.

Customer NameCustomer CodeModelOrderedDeliveredUndeliveredScheduled for Final Assembly
AerCapILF787-94811379
AeroflotARO787-94040
AeromexicoAMX787-96064
Air CanadaACN787-92992010
Air ChinaBEJ787-9150158
Air EuropaARE787-9140140
Air France-KLM GroupFXN787-9190192
Air New ZealandANZ787-912663
Air Tahiti NuiTHT787-92020
ALCHAZ787-9160163
All Nippon AirwaysANA787-944113312
American AirlinesAAL787-9220226
Arik AirAKD787-97070
Aviation Capital GroupCGP787-95050
AvolonVLN787-96060
British AirwaysBAB787-92171411
Business Jet / VIP Customer(s)BBJ787-92112
CIT Leasing CorporationTCI787-9160163
El AlELY787-93030
Etihad AirwaysETI787-9415368
Gulf AirGUL787-9160160
Hainan AirlinesHNA787-9240248
Japan AirlinesJAL787-9203175
Jet AirwaysJPL787-9100100
Korean AirKAL787-9100102
LAN AirlinesLAN787-912572
MG AviationNKA787-94222
Norwegian Air International LtdNSB787-9190190
QANTASQAN787-98080
Saudi Arabian AirlinesSVA787-98355
Scoot Pte LtdNPD787-910640
TUI Travel PLCBRI/TTP787-93032
Unidentified Customer(s)UNK787-9130130
Unidentified Customer(s)UNK787-94040
Unidentified Customer(s)UNK787-92021
Unidentified Customer(s)UNK787-92021
United Air LinesUAL/CAL787-9231674
Vietnam AirlinesVIE787-98444
Virgin Atlantic AirwaysVAA787-9171163
Xiamen AirlinesXIA787-96063
Total451123

The 787-9 is proving to be the most popular 787 variant accounting for almost half the 787 order book.  over the past few years there have been a few conversions to the -9 from the -8 thus I see very few at risk orders on this book.  Still Aeroflot which converted 4 -8 into -9s around the time that they said that the carrier was cancelling the 787 order is certainly at risk for the same reasons that the -8 order is at risk. Arik Air placed their order for the -9 in 2007...9 years ago and the most latest information is that they were to be delivered this year.  Given that Arik had also ordered the 747-8 (2) and several 737 (10), they've only taken delivery of 2 737s.

787 Full Production Table