Boeing reports 2011 earnings, estimates for 2012: just 35-44 787 deliveries

Boeing reported its earnings for 2011 and its estimates for 2012, including delivery estimates for the 787–which were surprisingly low.

Boeing forecast 70-85 787/747 deliveries this year, with half (35-44) being 787s. This is will below Wall Street consensus, though David Strauss at UBS predicted 40. We find this a stunningly low number that doesn’t reflect well on either production ramp up or fixing the rework necessary for the more than three dozen 787s at Everett.

Boeing’s own Z24 production plan for this year had a production rate of 45 787s.

We are, as the Brits say, gobsmacked by this information. (Update, 0800 PST: In Q&A, McNerney says 787 deliveries affected by large number of change incorporation required.)

From the conference call:

Jim McNerney (JM)

Greg Smith, CFO (GS)

JM: Now at 2.5 rate on 787, going to 3.5 in 2Q, sticks with 10/mo late 2013. First non-change line number in mid-60s.

  • First GEnx powered 787 delivery later this quarter.

GS: Will consider rates about 10/mo on 787.

  • Majority of 787s delivered in 2012 will require change incorporation.
  • Airplanes coming off 787 line in first half will require change incorporation; second half will go directly to customers.

JM: In 2011 Boeing improved on every financial metric.

JM: We’re confident in the amount of 787/747 projected deliveries. A little more than half of 787s will come out of change incorporation, rest straight off the line. A little more than half in work now.

GS: A lot of cash generated in 2012 is directly related to commercial delivery profile, including 787 and 747. Inventory will continue to grow but will taper off when hitting peak production on 787.

JM: A lot of our challenge has been change incorporation due to flight test discoveries. Rate ramp has stayed [consistent] last year, year-and-a-half. Engineering changes bigger affect on delivery rate than ramp rate. (Editor: see our previous post [linked above] on Z24 ramp up rate reduction, however.)

JM: Open items on 747-8F: production is going well. We have a pretty decent pipeline of airplanes we’re working now, most of which are decision-able for orders in 2012. The economic cycle has not been friendly to VLA. These freighters are very productive machines. We have a decent Intercontinental pipeline. On 767F, FDX was important for a very important customer and provides a nice bridge to tanker. Negotiating with other potential 767F customers. Linchpin was FDX. We’re in active discussions on the Atlas 748s. The flutter issue on 748 is not “out of bounds” on issues for new airplane and we will work through it.

JM: Orders will exceed book-to-bill with MAX commitment-to-order conversions. We also see robust orders in other product lines.

26 Comments on “Boeing reports 2011 earnings, estimates for 2012: just 35-44 787 deliveries

  1. You are Right we BRIT’S are gobsmacked with all those 787/747 just sitting at Boeing field (see google maps) there must be at least 10/12 billion$ of stock half started these aircraft must have been counted as sold or put some where else by fancy accounting to come to this conclusion.

    • 10/12 billion$

      probably more.
      Did Boeing divulge the _inventory value_ of the three delivered 787 frames ?

      • Sorry about my maths let’s make another conclusion $30 billon+ right off of all the white tails sat at Boeing field it remind’s me of the old grave yard sorry Boeing did not divulge the value of the three 787 frames but probley free in place of compo for the DELAYLINER

  2. I don’t understand why Boeing insists on grouping the 787 and 748 in their delivery estimates, rather than providing a clear target of x number of 787 aircraft.

    Are there any estimates on how long it will take Boeing to work their way through and clear the backlog of 787s parked throughout KPAE? It’s amazing to think how long some of those birds will have spent sitting around on the ramp before entering service.

    • grouping: flexibility and reducing potential loss of face.

      grouped worst case only one target is not met while ungrouped two targets are missed
      additionally the balance can be shifted.
      Getting 747 deliveries up should be much easier to achieve than detangling 787 production.

      • @Uwe: Yes, I realize this. As do the analysts and anyone else with a shred of common sense. And yet they still insist on providing their estimates in such a fashion… it’s rather silly.

  3. I will be surprised if Boeing reaches 37 787 deliveries for the year. Boeing is not even starting the 2.5 per month that they have claimed for the last 4 months. I checked back. I have unfortunately not noted the start of every line #, but LN 31 began production about December 22, 2010. LN 32 started about January 13, 2011; LN 33 on January 25, 2011. LN 57 is scheduled to start in Everett before the end of January. That is exactly 24 starts in 12 months, and this despite the 2 started in Charleston which should have increased the total, and the theoretical additional 2 planes that should have started in Everett, unless the 2.5 rate is the Charleston included rate. Either way, Boeing has not started the number of 787s that they claim for a monthly production rate. If it is LN 65+ that is the first to roll out directly, it won’t begin production before the end of May and look for delivery in September at the earliest. What if we are talking LN 67 or 68 or 69. The delays get longer.

    I don’t expect the GE-engined 87s to ready this quarter. Based on the final RR-engined tests, the remaining GE tests should take nearly 2 months and we have only 2 months left in the quarter. The slow progress at Paine Field indicates that there likely will be no more deliveries in the last 6 days of January, and probably only 2 in February. In fairmess to Boeing the snow put a crimp in everything at Paine Field and probably delayed everything by about a week. It is possible that there will be no deliveries in March. April looks like a catch-up month if the GE engine is approved. Maybe 4 or 5 in April. Then what? If my guess is correct we are talking about 9 deliveries in the first 4 months of the year, and a slight progress improvement after that. Lets say 3 a month delivered in the last 8 months; I think even that number is optimistic. But that will translate to 33 deliveries in 2012 if nothing else goes wrong. To appearances looking at planes at Paine Field, several that were designated now appear to have become “whitetails”. This may indicate that some airlines are taking the “Atlas Air” route. LN 7 in particular, which was originally to have been the first 787 delivered to ANA, looks forlorn.

    Every estimate that has come from the Boeing Company, regarding the 787 program, has been inaccurate and too optimistic for the last 5 years. Do we have reason to believe that has changed?

    • Since 2004 i have been watching this soap saga DREAMLINER/747-8 it reminds me of that tv soap Dalass BOEING looks like they have been copying old slipery J.R for there statements.(don’t you belive him).

    • My guess is about 2 per month over the year – 1 per month at the start of the year; 3 at the end. Say, 25 planes

  4. pdxlight :
    @Uwe: Yes, I realize this. As do the analysts and anyone else with a shred of common sense. And yet they still insist on providing their estimates in such a fashion… it’s rather silly.

    Going by FG they will be start LN57 at en of january. They currently expect LN63 to be the first sample that will have no planned postprocessing.
    Everything will turn around that being true or not.

  5. Yes, Boeing is having problems, but so do you, a380 and Uwe. How do you get $30B + of inventory out of 35 airplanes that have to be reworked?

    Then again, have you guys been just as critical of the A-380 [continung[ production problems? In the 52 months since the first WhaleJet delivery, Airbus has delivered only about 75 airplanes. Are you just as critical about delays to the A-350 as you are about the B-787?

    The fact is BOTH OEMs are having trouble with their latest and greatest. Then we all just like to point out the faults of one and ignor the other’s similar problems.

    The fact is for the B-787 is it is such a step in advanced materials and way to produce airplanes, it was doomed to continous delays from the day it was launched. No one has ever built anything like it, and even the A-350 is a step back from the advanced material and building techniques. The A-380 is an advanced design built on building a bigger airplane than the B-747. It is an ego airplane. Airlines are slowly moving away from mega jets like tha A-380 and B-747-8, the so called VLAs. It is difficult for an airline to continously fill a 550, or even a 470 seater with profit making load factors, everyday for 20 + years. LH may have a better idea by using their B-747-830I only in a premium seating of about 370 seats, while making their A-380-800 the 525 seat cattle car. KE is trying their permium service A-380s with only 405 seats, I have heard their B-747-8Is will have about 350 seats

    Perhaps they are on to something, either fly these mega-jets as full premium service, or just as charter jets crammed full to the gills, with cattle (you and I on vacation).

    • “The fact is for the B-787 is it is such a step in advanced materials and way to produce airplanes, it was doomed to continous delays from the day it was launched. ”

      Obviously the Dreamliner is anything but revolutionary as Boeing stumbled over completely pedestrian issues. Lack of planning rigor and unable to copy Airbus production model and integrate mostly Airbus introduced features.

      If you step back from that fata morgana “step” things get into better perspective.

      2011Q2? Boeing announced Dreamliner related inventory to the tune of $19b.
      With production continuing this must have grown further as undeliverables are stored on runways.

      Contrast:
      Airbus tier 2 supplier issues seem to be predominantly linked to Dreamliner fallout.
      i.e. lots of liquidity has been bound in preparation for production of 787 parts
      that after years still don’t show any real demand. How big is the production versus planning lag these days ? 250..300 frames ?

    • Inventory Production
      Dreamliner-relateted inventory rose to $20 billion
      Deferred production was 10.8 billion including almost 50 aircraft are been worked on and that figure will peak at more then $20 billion before declining once manufacturing reaches the full rate said chief financial officer-elect Greg Smith at that does not include the 747/8i so i was not far of the mark just from looking at the Boeing field on google maps.

  6. It is a shame that one commenter here has to contually twist everything back on Airbus. Big major hint: The post is about Boeing.

    For me, it has become all but conclusive that the Dreamliner, when launched, had not been much more well thought out than the pipe dream Sonic Cruiser (economically and perhaps technologically as well, as the situation now indicates) that it had replaced.

    Seeing as Boeing has not yet met any forecast (or promise) vis a vis the 787, I suspect that they will not deliver more than 30 this year. I also suspect they don’t have the 747-8 under control yet either.

    Does anybody else not find 35 to 44 747-8 deliveries a bit on the optimistic side?

    • I thought the 747 was at 2 per month, but maybe they’re cranking it up to 3 per month. I’m sure they can build them that fast, but will the freight market absorb that or defer? I’m betting on 100 777s, 24 767s, 24 747s, and 24 787s.

    • Hi Aero Ninja
      I will twist every thing back to Boeing way Tom Enders SAID today he whould like to put a F.A.L in the states maybe in Wichita when McBoeing depart west.

  7. As this trend of airbus getting a foothold into all boeing customers goes on, boeing will loose a lot of market share as a result.

    If the NEO proves to be a better plane than the MAX, these customers may switch to Airbus and do away with boeing.

    So Boeing better meet its promises or else…..
    I am still to hear about an all Airbus customer buying a Boeing aircraft, will that ever happen?

  8. I guess we got so used to the overly optimistic Boeing forecasting, that if Boeing takes a slightly more conservative approach we find this a stunningly low number.

    The analysts, I seriously question their independency / aviation knowledge when I see them repeatedly adapting unrealistic forecasts, despite hitting the wall multiple times a yr because of it.

    Do they benefit from positive outlooks, somehow? Do they own stocks, advise on them? Is it that Can-Do mentality?

    $10-15 Billion evaporated with the 787/747-8, the 777 needs an update, the 737 has still to recover from the NEO tsunami, the 747-8 aint selling, DoD is in charge of the 767 line, the MAX was “sold” on stunning prices so far (<40 million, 60% discounts)

    Hopefully realism is finally kicking in at Boeing. It is badly needed to restore confidence & parity. Hopefully w'll see a steady stream of good 787s entering service from 2014, breaking even this decade.

    • How do you know definitively that the MAX was sold at 60% discounts? Or is this just some analysts claims? Or are you solely basing that on Southwest’s order, which is hardly indicative of what other customers would pay.

      I’m frequently amused by these claims of the death of Boeing. They have been circulating around in the Airbus fanboi community for nigh on 10 years now, yet Boeing is still here, and likely will be well into the future. Has Boeing made dumb moves, most certainly. So has Airbus. People wishing for the demise of one or the other simply don’t understand the business.

      • You are aware that Boeing hugs 50% rebates of list value ?
        ( At least what could be garnered from announcements for
        the US carriers buying NEO and MAX.)

      • Howard: I do not wish the demise the death of Boeing or Airbus as there is a lots of folks worldwide depending on both firms been strong so they can put bread&butter on the table for there kin the only thing i/we whould like to hear is the truth and not what we have heard or read in the past few years i hope it is sucessful aircraft/s so i/we can go on holiday in comfort&safely

  9. Having to announce more 787/747-8 delivery delays this year, after the 3.5+ year
    delay on the first 787, is bad enough, but for Boeing Management to have to change
    their assurances made late last year, that “we will catch up next year,” or words to
    that effect, simply does NOT enhance their credibility or their reputation among the
    relatively small number of Customer-Airline-Managers around the world!

    I remember in August of 2010, when Boeing CEO James Mc. Nerney came back
    from a world tour, after we had experienced a serious 787 wing-to-body structural
    failure, when he stated: “I am glad to report that all of the 787 customer airlines
    assured me that they would not cancel any 787 orders and that after this “little blip,”
    we will put all or troubles behind us and leave our competition (A350) far behind us!”

    Famous last words1

  10. They better start selling 748s really quick, since they will have gone through a good part of their backlog by the end of 2012 if the delivery number is achieved…

    As for 787s… Thinking back on the delivery forecasts that were announced full of confidence throughout the year, somehow the real number (2+ paperwork for a third) never figured amongst them.

    Good luck to Boeing to achieving their goals!

  11. New report on Bloomburg from ‘What are they smoking at Boeing’ and a hint at a F.A.L stateside?????

  12. The number of 787 aircraft that have completed first flight and ongoing re-work suggests 30 deliveries will be ambitious for 2012. Perhaps more A380s will be handed over to customers than 787s this year. Was there any reference on the progress of the Intercontinental and first deliveries?

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