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Introduction
Boeing’s ability—or inability—to bridge the production gap for the 777 Classic to the 777X entry-into-service in 2020 was a top concern of a series of Wall Street types during a recent series of meetings we had across the USA.

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There is a great deal of skepticism over whether Boeing can successfully maintain the current production rate of 100/yr (8.3/mo). People we talked with look at the number of orders Boeing needs to bridge the gap, the Boeing claims that it can obtain 40-50 or 40-60 a year, and, in a more recent development, the falling oil prices depressing the need for a new, more efficient 777-300ER compared with the 2004 model and the even older 777-200ER series.

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We have been telling our clients since March that Boeing will have to reduce the production rate of the 777 because of the large production gap. Aerospace analysts began waking up to this possibility by May and the broad consensus today is that Boeing will have to reduce the rate—the only questions remaining is by how much and how soon.

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As recently as the 3Q2014 earnings call, Boeing continues to assert it will be able to maintain rates with new sales. Boeing has booked 43 firm orders through October for the 777 Classic—39 for the 300ER and four for the freighter. This is as the low-end of the range Boeing says it needs.

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However, our Market Intelligences gathered over the summer and into the fall indicates sales efforts are struggling.

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Summary

• Boeing clearly hasn’t been persuasive in its claims it will bridge the production gap at current rates;
• Boeing has open delivery slots in the second half of 2016;
• The big drop off in backlog begins in 2017 and gets worse going forward;
• Key airlines that have been pitched have said “no;”
• Emirates sends the industry’s first operational 777-300ER to scrap;
• Bow wave of 777s coming to 12 years and off lease begins soon, creating cheap alternatives to new sales; and
• Lessors will be compelled to offer -300ERs for low prices, depressing opportunities for Boeing.