There is a sense of relief that Boeing finally delivered the first 787 this week, after a 3 1/2 year delay and the most painful gestation period in Boeing Commercial Airplane history.
In addition to the actual rain storm on Monday that could not dampen the spirits of the moment, there were many others who nonetheless tried to rain on Boeing’s parade. They pointed out, correctly, that challenges remain for the ramp up in production and Boeing spent billions of dollars on the troubled program.
These and other points are legitimate issues. We chose to let Boeing have its moment in the sun (figuratively speaking, anyway, considering the lousy weather Monday).
Here are our thoughts:
- Boeing had a backlog of 821 aircraft prior to the ANA handover. What people forget is that there are more orders that have been announced for which contracts have not yet been signed. Then there are options, which usually get converted over time.
- When guessing what the “accounting block” (break even) on the 787 will be, most analysts are guessing between 1,000 and 1,500. With the lower end of this range, Boeing is almost there already. If at the higher end, Boeing and Airbus project a mid-size twin aisle market at something like 5,000. If Boeing and Airbus evenly split, that’s 2,500 and Boeing will easily pass its upper end accounting block–although it will be a long time getting there.
- Boeing is sticking to its guns on its previously announced production ramp up schedule but there’s not one aerospace analyst we follow on Wall Street who believes the company will hit its target of 10/mo by the end of 2013.
- Our information continues to be that Boeing may only deliver four or five 787s this year instead of the 10-12 previously suggested. Perhaps there will be better guidance on the third quarter earnings call at the end of next month.
Separately, we understand an agreement has been reached on the Cargolux 747-8F compensation but the contract hasn’t been signed. We expect delivery to slip into next month.