Boeing conference call with 787 update

Boeing held its 2012 earnings call, and with it officials offered an update on the 787 situation.

Jim McNerney (CEO) (JM)

Greg Smith (CFO) (GS)

JM: 787 Update–

Job one on 787 is supporting the investigation on the 787 battery incidents. We rigorously support the process. We do believe good progress is being made in narrowing down the cause. Assigned hundreds of experts within Boeing, brought in outside experts, supporting NTSB, JTSB. We will get to the bottom of this and in so doing restore confidence in the 787. Thanks engineers and all others in investigation. We’ve seen the airplane in service for 15 months and it delivers on promises.

  • Progress continues on 787-9, with assembly beginning in mid-2013. First customer delivery on schedule in early 2014.
  • The case for the 787-10 has strengthened with a potential launch this year.
  • We have more work to do on 777X and this is a big part of the focus this year.

GS:

  • Our 2013 guidance assumes no significant financial impact due to 787 issues.
  • Expect 635-645 deliveries this year, including 60 787s via rate hike and the reworked airplanes. Deliveries from Everett Mod center will decline.

Q&A

  • JM: 787 issue is not impacting engineering resources on other programs. This is a highly compartmentalized issue, using teams from supply chain and from elsewhere in Boeing. Not drawing from critical resources from any other programs.
  • JM: The drain on resources is not significant. I cannot talk about specific paths of investigation, but there is a comprehensive effort of root cause. I am confident we will identify root cause. When we know the answer, we will know the answer and act on it.
  • GS: We’re going to continue to produce and do rate breaks on 787 this year. There will be fewer Everett Mod Center deliveries this year as rework airplanes descend toward aircraft with greatest work requirements. Introducing 787-9 will somewhat offset delivery stream. Reaffirms plans for rate of 10 per month by year end.
  • JM: Our assumption is that we will understand root cause side-by-side with regulatory agencies. I don’t want to prejudge what form entry into service will be acceptable to them. Two incidents were very different. It doesn’t lead me to prejudge exactly what will happen.
  • GS: Plan is to have all EMC airplanes completed by 2015.
  • JM: MAX development is going very well. Hitting all benchmarks at or slightly in advance of schedule. Engine partners are hitting their benchmarks. Confident the airplane will be delivered on time and at promises. 787-10–we’ve been conditionally offering the airplane and the response has been very well. The airplane will be a winner at a price and value equation that makes sense for Boeing and customers. Won’t prejudge a launch date. 777X: 777 is 20 years old. We are focused on offering technical solutions on an already market-leading airplane. Most likely design in some increased capacity, composite wings, new engines, some other work. We’re trying to put some final touches on the final touches. Trying to get business plan where it needs to be and then will conditionally offer it to customers.
  • JM: As derivatives go, 777X will be a significant amount of work. This will be third or fourth generation of composite wing, on a scale not done before, and has significant challenges. This will be an advantage to press in different ways.
  • JM: Pipeline of 747-8 is pretty good. We are mindful of softness in the cargo market. We are getting volume in the old fashioned way and that is finding customers and working with them. We will be taking a look at it every quarter.
  • JM: Replaced batteries occur every day on all types of airplanes. Replacement cycle on 787 has been for maintenance reasons. We’re not aware of any replacement for safety concerns. Replacement rate is “slightly higher” than predicted.
  • JM: A possible strike by SPEEA and impact on 787 is highly hypothetical. I think we will have enough experts available if it goes that far. Hopeful for settlement. This hasn’t presented itself as a real issue yet.
  • JM: 787-9 has a lot of unique parts when compared with the 787-8.
  • JM: Nothing we’ve learned yet that we made the wrong choice on the battery technology. We have to get to the root cause. There’s nothing we’ve learned yet to question our choice.
  • JM: We have done a lot to increase the visibility down into the supply chain, to identify bottlenecks and quality issues. My view is we want to work more efficiently with suppliers to increase quality, reduce time. It is not a cost squeeze initiative, it is an improved process initiative. Costs will be reduced in the process.
  • JM: We do of course rely on our partners for quality control but if we missed something we will fix it.
  • JM: Charleston is doing a hell of a job and keep charging. Confident will hit target of three a year by end 2013.

21 comments on “Boeing conference call with 787 update

  1. I would think that Boeing would be better off working full time on getting the B-787-8 safely back into the air than worrying about the B-787-9 and B-787-10 for now. After all “a bird in the hand is worth two in the bush”.

    • You can’t suffocate this problem in human ressources.

      Thus the 787-9 and -10 will move on at the pace they were moving.
      But:
      being derivative the future subtypes (mostly -9) will feel the impact from every revocation of 787-8 derived certification items.

  2. Does the 787-9 electrical system use the same battery, components and arrangement of peripheral parts or is it an improved derivation ? If yes what distance ?

  3. Boeing need an engineer at the top of the company. An engineering driven cpany can not be manage successfully by an MBA type.

  4. Translation: “Everything is fine. Grounding is just a blip, nothing to worry about. Even if grounding extends into November, 60 frames will still be delivered this year. We are on top of the game and will remain the premier OEM, no matter what, and we will definitively deliver more aircraft than Airbus next year as well.”

    Fascinating!

  5. Why only 60 Dreamliner delivieries. I don’t get it. They would finish 60 @ 5 per month without any further rate increase. Add 10 from rework that’s 70. But Greg Smoth reiterated they are going to ramp according to plan, which means 10 er month at the end of the year. Yet they are going to extend flow time for the 787-9. But either you ramp up or you slow down flow. What do I miss?

  6. The quaterly’s are for the financial markets and (potential) stockholders. They get what they want to hear. Senior management own a lot stockrights too. Good news all around, full halftruths and hidden disclaimers, everybody happy.

  7. The 8-K statement says that 3 of the 46 787 delivered in 2012 are on operating lease. Does this mean Boeing still owns them? Air India?

    • They are owned by the leasing company but operated by Air India. The AI stops paying the lessor then the airplanes revert to their owner. They would then be modified as required for lease to a new operator

  8. Lets see now

    A few weeks ago – and found on the SPEEA site

    “Boeing rejected SPEEA’s offer after stating publicly that the company does not need SPEEA members for the FAA investigation or working the 787 issues. Last week, Mike Delaney, vice president of engineering for Boeing Commercial Airplanes, said managers and engineers from other areas of the company could do the work. Aerospace industry analysts scoffed at this assertion because the 787 engineering work is performed by SPEEA engineers and technical workers.

    And today

    • JM: A possible strike by SPEEA and impact on 787 is highly hypothetical. I think we will have enough experts available if it goes that far. Hopeful for settlement. This hasn’t presented itself as a real issue yet.

    Riiiiight – Send in the clowns

    Delaney and MCNearney reading from them same talking points.

    “Engineers ? SPEEA Engineers ? We don t need no stinking Engineers, especially SPEEA engineers

    Hmmm- And the majority of the AR (DER) types involved with the 787 are located in Long Beach and St Louis and . . . . ???

    And those troops are now willing to to hung out to dry- since it is not managements fault ??

    And in house we have enough EX-SPURTS ??

    EX- as in used to be

    Spurts as in a small drip who are now in management ??

  9. Maybe a 787-10 launch this year, maybe not. IMO there a strong drive to beef it up as a 777-200ER replacement / A350-900 competitor.

    No 777x decision this year, I don’t understand “the final touches on final touches” comment in relation to other 777X comments.

    Maybe a bigger wing for the 787 is better investment then for the 777.. both have 9 abreast economy, 6 abreast business for long flights.. why upgrade the more heavy 777?
    I can understand however hesitation putting all long haul eggs in the Dreamliner basket at this moment..

    • I’m sure we will see a flurry of colorful announcements from Boeing and a fat bunch of
      “Why wasn’t $othertype type grounded after $otherevent” threads on aviation fansites adorned with endearing posts like “The A320 had 3 fatal crashed in its first year”.
      ( probably typed in haste and should have been 727 and 4 fatal crashes in 6 month ;-)

      • There is a little difference in the B-727 and A-320 accidents in the first few years of operations.

        The pilots who flew those first B-727s beginning in 1963 and 1964 came from flying airplanes like the DC-6, DC-7, and Connie. The jet engine ‘spool-up’ time is much longer in those turbo-jets than it was in the piston engines. To those first pilots, they moved into a high performance airplane from a family station wagon, and some of them let the airplane get ahead of them.

        Almost the same could be said for the first A-320s, a FBW airplane. FBW was a system few commerical pilots ever used up until that time. Again these first few pilots let the airplane get ahead of them.

        There are a few threads like you mentioned already on a.net. They include airplanes like the A-330 and Tu-204.

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