787 stands down suppliers third time

Boeing has implemented its third, 30-day stand-down for its supply chain on the 787 program. Says Boeing:

As we have previously indicated, when opportunities arise we distribute flow in our production system to make the most efficient use of resources by ourselves and our global partners. We periodically align our production plans to meet adjusted customer needs, taking advantage of this flexibility in the market to further strengthen the 787 production system. This technique of balancing deliveries to most efficiently manage flow and customer requests within the production system is a common practice for our airplane programs.

Odds and Ends

A350: Development is running 6-8 months late, says a key supplier. This supplier believes there is still a chance Airbus will deliver the A350 in 2013, as promised, but it will be close.

Credit Suisse on its Boeing Field Trip

Dated September 14:

Our Adj. Delivery Forecast Has Varying Est. Impacts on OE Names: We delay 787 & 747 EIS slightly and raise 737 in 2013. Also, our 787 production ramp is now more moderate.  Consequently, for BA, 2010 declines on a 747-8 delay charge and 2011 drops on incremental pension expense.

787 Supplier Rates Show Inconsistency: At SPR, nose units 28 & 29 have been ready to ship for several weeks, perhaps > mth. Our subsequent visit to BA’s Everett, WA plant confirms little real estate for add’l units as some 23 787s are parked around the campus with 4 more on the assembly line. However, PCP (787 engine/fasteners), is awaiting add’l instructions and is operating at a near-zero rate. The big question for investors is whether the flow differential is driven by the previously-stated effort to synchronize suppliers, or is BA addressing lingering design issues before moving further.

747-8 Wing Requires More Work: News surfaced ~a week ago on another potential delay for 747. Our field research indicates possible issues related to vibration (flutter) with the wing & ailerons. While BA claims to have a fix, we sense the 6-to-12 month delay reported in the media is possible, and expect commentary from BA by the Q3 EPS call. Note the 747-8 program is in a fwd loss position, which means excess cost would likely yield a charge, which we estimate at $200M.

Further 737 Rate Hike Seems Likely: All three companies are analyzing add’l 10-15% rate increases above the already announced 35/mth in early 2012.  Interest is driven by growth in Asia as the LCC model is adopted and replacement of older aircraft in the U.S., with a bow wave of demand expected from 2012-2015.  However, production constraints and rate sustainability remain a concern for suppliers. While the market expects some add’l rate boost, we are confident enough to raise our 737 forecast to 38/mth in 2013 (from 36/mth).

Back to our reporting:

A320 NEO

We believe the A320 NEO will get the green light, with an announcement next month. Pratt & Whitney’s P1000G and CFM’s Leap-X are both expected to be put on the family, along with the incumbent CFM 56 and the V2500 from International Aero Engines. We think offering four engine choices is nuts, as we do the price premium of $7m-$8m on list pricing. We agree with appraisers that residual values of current airplanes will take a steeper hit than Airbus suggests.

Speaking of PW

In what continues to be an incredibly bizarre one-man campaign to discredit PW’s Geared Turbo Fan and the Bombardier CSeries, one pseudo-analyst totally distorted remarks by PW President and CEO David Hess to assert that PW was “not impressed” with the CSeries, according to the headline this person put on his “analysis.”

Here is what Hess actually said about the CSeries at the Farnborough Air Show:

“I think we’re all a little disappointed that we weren’t able to complete the deals to announce orders there, but I’m not concerned because it’s a great airplane offering operators great economics, which is why there’s so much interest from airline customers. And don’t be surprised to see some more major orders later this year.” (Emphasis added.)

The CSeries, equipped with the PW P1000G Geared Turbo Fan, has forced Airbus and Boeing to consider what they can do to match the superior economics of the Bombardier product. Airbus is expected to announce in October a re-engine option for its A320 family, using the P1000G and the CFM Leap-X. Boeing appears to have all but decided to forgo the re-engine option and strive for additional enhancements to the 737 family pending development of an entirely new airplane.



11 Comments on “787 stands down suppliers third time

  1. Could the $7 to $8 million premium on the NEO not also be subject to “discounts” for bigger customers, which would lead to $2 to $3 million preumiums? That would then be almost a drop in the bucket for the airlines.

  2. Airbus will give huge discounts to anyone to sell the A-32X-NEO. Airbus is not in the same position as Boeing in challenging the C-Series.

  3. Regarding the 6-8 month delay for the A350, aren’t some suppliers saying up to 12-18 months or is that possibly incorrect information?

      • Ok, thanks. I guess its just a “floating rumour” for now. That being said, as the A380 and B787 fiasco have shown, these “floating rumours” turn out to be more true than false.

        Of interest:

        “With Airbus maintaining its 2013 target, one A350 supplier source tells FlightBlogger: “Airbus is in more schedule trouble than Boeing was with the 787.” ”

        http://www.flightglobal.com/blogs/flightblogger/2010/08/three-years-before-eis-a350-fo.html

        Being dated from August 22, this is a rather current assessment of the situation…

        Also, from a link to the blog:

        “Bernstein Research forecast that A350 deliveries will slip into 2014 and that Airbus will deliver only eight of the next-generation aircraft that year, flagging a significant slippage in the program.”

        http://atwonline.com/aircraft-engines-components/news/bernstein-research-airbus-a350-first-delivery-likely-delayed-2014-0

        Only time will tell what will happen.

        Regardless, as I’ve been saying all along, the A350XWB MUST (cannot be understated) do well for Airbus in terms of performance. The A380 for Airbus is not even remotely as close to being important as the A350. We’ve seen a “failure” (using the term loosely) of the A380 and Airbus/EADS has been able to deal with it. A failure of the A350XWB however will really be detrimental to Airbus/EADS.

        That being said, even if the A350 is late, I expect it to be close, if not up to specs…..I say that quite confidently.

  4. riiight – this is common practice ?? stand down the suppliers ? who picks up the overhead cost ? Pay no attention to the post it notes on the curtain. Forget what I told you, believe what I’m telling you.

    Power point rangers strike again !

    • Haven’t most suppliers been standing “hitched to a post” for a couple of years now?

  5. The language is a bit opaque. Does “implementation” mean commencement? Is the catchup going to take place during the next 30 days? I had the impression that this was already in place and coming to an end…that is why the word implementation is confusing.

    I assume this will help some suppliers as well as decrease the amount of “traveled work”. It probably hurts some suppliers because their deliveries are postponed unless other arrangements are made.

    This may be necessary to tighten up and coordinate the flow of work and if so, will be beneficial in the longer run.

    I know there are critics of this and they do not see this as constructive but disruptive. I hope it is constructive.

  6. I seem to remember the planned 30-day float was split in two. The second part started with assembly of LN27. It is the third float overall.

  7. WITH A ONE YEAR SHELF LIFE ON THE CFRP PRE-PREG YOU CAN RUN UP MATERIAL COSTS QUICKLY (IT really isn’t the cost that bothers me it is the possibility of out of date material being used!)

    JIM HELMS

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