Wall Street aerospace analysts are becoming increasingly concerned that Boeing will fall short of its goal to maintain 777 production rates at the current 8.3/mo through the introduction of the 777X, planned for entry-into-service in 2020.
One analyst predicts a rate reduction from 8.3/mo to seven and then to five as 2020 gets closer. Others are beginning to hint that they won’t be far behind in lowering expectations. But don’t tell this to Randy Tinseth, VP Marketing for Boeing.
“We have things in the pipeline and we’re working on those,” he told us July 1. “We’re confident the sales will come home and we’re confident we’ll bridge the gap.”
Boeing’s firm order backlog of nearly 300 777 Classics (our term—Tinseth objects to its use) shows shortfalls in scheduled deliveries-to-production of 100 airplanes a year. But Boeing CEO Jim McNerney said on an earnings call that including expected conversions of options and letters of intent, plus those sales campaigns Tinseth says are in the pipeline, Boeing will be able to maintain production.
Boeing also has about 120 firm orders, options, letters of intents and LOIs for Options for which delivery timelines haven’t been allocated in the Ascend data base.
“We’re confident we’re going to fill the back half of 2016,” Tinseth says. “We’re adding to the customer base. There’s no question it will be a challenge- we have three years of production [to fill] and we have six years to do it.”
The data in the Chart clearly illustrates the challenge Boeing has. Tinseth says Boeing “needs to sell 40-50 airplanes a year to make that happen,” but the gap appears larger than this, and it assumes 100% conversion of the Options and LOIs.
If the 124 TBD airplanes were allocated for delivery over the 2015-2020 period evenly (with 2015 getting only seven to top off), our math shows Boeing needs to 40-57 airplanes a year to maintain the current production rate. But this assumes everything goes right: 100% conversions, no global events to suppress sales, etc.
Boeing plans to bundle 777 Classic orders with 777Xs, but the sole example this year so far–All Nippon Airways–produced a sale of just six Classics. Boeing has booked only seven Classics YTD and announced sales of a total of 10.
Tinseth said Boeing believes the long-suffering cargo market will make a comeback in 2016/17, supporting 777F and 747-8F sales.
“Both 777F and 748F both are important,” he says. “There is a broad customer base for the freight market. Traffic in that market has been a challenge, but there has been strong growth rate over the past four months. We think there will be a supply-demand balance 2016/17.” He says that Boeing expects to produce two-three freighters a month split between both airplanes. But, he adds, the cargo “market has to deliver, no question.”