July 24, 2015: Interior supplier B/E Aerospace sees Boeing 777 Classic and Airbus A330ceo production rates coming down because Airbus and Boeing aren’t filling the “bridge” between the old and new airplane derivatives.
In its second quarter earnings call this week, company officials said that demand in the short term for interiors isn’t materializing for the 777 Classic and A330ceo as B/E had hoped. This means production rates for these wide-body airplanes will have to come down.
“When you look at wide body, when you look platform per platform, we [see] A330 coming down, 777 coming down, 747-8 coming down,” said Werner Lieberherr, president and CEO of B/E.
“There is increasing uncertainty with regard to the A330 and B777 short flow programs as a meaningful number of opportunities that we anticipated have thus far not materialized,” said Amin Khoury, executive chairman.
Airbus previously announced a rate cut of the A330ceo, first to nine from 10 per month and then to six per month. Airbus announced an order on June 30 for 70 ceos from China, but these haven’t shown up as a firm order yet so delivery dates haven’t been factored into production outside of internal information. During the Paris Air Show, Airbus officials expressed confidence they will have the production gap filled this year.
Boeing said this week on its earnings call that the 2016 777 Classic production is filled, 2017 is half-filled and some slots in 2018 are taken. Production of the 777X begins in 2018, but it will be at a slow pace. First delivery is scheduled for 2020, though Boeing would like to advance this to late 2019.
Boeing can also fill the 777 Classic production gap with sales of the 777F. Airbus also offers the A330F, but sales of the latter have significantly lagged the former in comparison. Boeing said on its earnings call it has, through last week, orders and commitments for 44 Classics. Through June, using the Boeing User Defined website feature, we identified 29 777-300ER and 777F firm orders. Last week, EVA of Taiwan firmed up an order for five 777Fs; this makes 34 firm orders YTD. This suggests 10 commitments, which we believe to be FedEx for the 777F. On July 8 we reported that FedEx was likely to order 50 767-300ERFs and perhaps 10 777Fs. The 767 order was announced Tuesday this week, but not the 777Fs. Market intelligence indicates this order is still to come this year, contingent on a number of factors, which are why this order wasn’t announced with the 767 deal.
Boeing also said on its earnings call Wednesday that it will decide next year whether to adjust 777 production rates. This is the first firm statement Boeing will consider this move. Previous statements vowed to maintain Classic production rates at the current 100 and that the Classic rate would come down by 1/mo when the 777X production began in 2018. Most Wall Street aerospace analysts believe the rates have to come down before then, some to as low as 5/mo, others to 6/mo.
Complicating Boeing’s task of selling new 777-300ERs is the fact that Aeroflot and Kenya Airways decided to dispose of late-model -300ERs in a fleet down-sizing.