Leeham News and Analysis
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Leeham News and Analysis
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Pontifications: A good week for Boeing wide-bodies
By Scott Hamilton
Oct. 17, 2016, © Leeham Co.: Boeing had a very good week for wide-body orders last week. It recorded 42 orders for the 787 and 10 for the 777-300ER.
Thirty of the former and all of the latter came from Qatar Airways. There were 12 787 orders from “Unidentified,” which in this case was from China Southern Airlines. These were announced Wednesday but too late to show up on the weekly orders update posted Thursday.
787 Book:Bill
For the year, Boeing has 61 net orders for the 787, a healthy increase since the end of June, when the book-to-bill was a paltry 0.25 YTD. Even at 61, this is still a book:bill of just 0.42 for the 787, which has not had a book:bill of more than one since 2013. This means Boeing continues to burn off the backlog faster than it is booking new orders.
But it’s welcome news nevertheless in a year when there has been a dearth of wide-body orders.
777 Classic Order
The Qatar 777-300ER orders were also welcome, bringing the YTD net orders to 16—well short of this year’s target of 40-50.
The lack of Classic orders continues to prompt aerospace analysts to predict that Boeing will have to announce a further rate reduction for the 777 line in advance of 777X production, which begins in 2018. Boeing previously announced a rate of 7/mo (from 8.3) but with an actual delivery rate in 2018 of 5.5. The difference comes from starting production on the 777X and “shooting blanks” as part of the transition from the Classic to the X.
But aerospace analysts seem to have a consensus that rate 4/mo is likely. Morgan Stanley is more pessimistic, at just 3.5/mo.
Bombardier Struggles On
Bombardier struggles on as deliveries of the CSeries are delayed due to slow engine deliveries from Pratt & Whitney.
The regional jet program, which was neglected during the development of the CSeries, has been eclipsed by the Embraer E-Jet and will be challenged by the Mitsubishi MRJ. BBD plans to throw some money at the CRJ to upgrade it.
But Mitsubishi plans to launch its 70-seat MRJ70 service in 2019, followed by the prospect of an MRJ100.
Or so it says. Delays with the MRJ90 may slip EIS to 2019 from mid-2018. This remains to be seen.
Airbus: Focus on execution
Barry Eccleston, the president of Airbus Americas, told the British American Business Council Pacific Northwest conference in Seattle Oct. 4 that the focus at the company for the rest of this year (all 2 ½ months of it) is on execution.
Airbus still has only delivered about two dozen A350s against a target of 50. The A320neo remains well behind delivery schedule, principally because of late deliveries by Pratt & Whitney of the GTF.
“The key here,” said Eccleston, “is not to sell any more A350s, though we’re happy to do that. The key is to execute.”
Eccleston also said that conclusions the A380 is “going into a retirement home or even a hospice” is wrong.
“It’s going to be very difficult to make the case to airlines that don’t fly it because you have to fill it every day,” he said. But there is a future for it, Eccleston said.
I suspect there’s a typo in the sentence about A350 deliveries. Airbus have delivered 28 so far this year – did you mean to say “about two dozen” instead of “about a dozen”?
I think the 787 backlog shrinking back to 4-5 years opens up new opportunities for sales and is a natural development.
I agree completely. I would say a 3 to 5 year backlog is optimum. Not too large so there is no near term slots available, and not too small so there is uncertainty about filling near term production slots.
However, even with the large backlog of today I think Boeing should be able to offer delivery slots for new orders in the 2018 and beyond timeframe. Boeing had planned an increase to 14/month production rate, but it seems like this rate is not supported by orders as Boeing have said that this rate is dependent on new orders.
It should read: “,but it seems like this rate is not supprted by the current order book,”
Boeing simply needs to consider ramp down to rate 10 or even 8 as the backlog shrinks.
It makes the business case worse but better that than sudden disruptions. You don’t dither till too late.
Obviously its who is thinking of ordering, do slots make a difference etc. at what point you trigger rate decrease. 8 is a very good number, 12 is nuts, 14 was insane.
I never did buy Delta availability nonsense, they wanted A330 and NEO and they used Boeing as a foil.
Yes, rate 14 for a wide body is at least unprecedented. I would say that Boeing shall struggle to keep rate 12 after 2018 and be quite happy to maintain rate 10 long term. however the finance department at Boeing will certainly not be too happy to see rate 10 in a few years if significantly more sales don’t materialize.
Even 4 years seems long in a volatile industry.
A good week for Boeing wide-bodies, but a bad year for commercial aviation in general. And I don’t see how the situation would improve in 2017, which is fast approaching like a thunderstorm. The world economy continues to deteriorate, fuel prices remain low, and traffic is slowing down. This does not yet pose a big threat for the Big Two because their backlogs are so huge. But perhaps it’s time to put money aside for rainy days, especially in the Asian market where the monsoon may last several years…
Funny how you would think fuel prices would be bolstering growth.
Funny world.
Backlogs don’t mean anything unless things are at least status quo, airlines will defer or cancel in worst case to stay alive.
Some of those orders like Air Asia are going to be lease not internal ops and the cat and dog fight starts.
Don’t forget the low interest rates. What is going on right now is incomprehensible, and governments around the world don’t know what to do to reboot their economies. They are simply running out of options.
Anybody seen the Flight Global forcast. Nearly 8000 new widebodies over 20 years with Boeing coming out on top.
The interesting number is the 777, approx 1670 sales over 20 years. So this suggests Airbus should stretch the a350-1000, otherwise Boeing get an uncontested run. But, the number for the a350, approx 2150 sales, does mean Airbus are at maximum production for 20 years at 10/month. So Airbus will need to increase the monthly rate to take advantage of a further stretch
A stretched A350-8000 may not be in the offing as the range would have to drop and it could need to be rewinged. I think they should do it though, for the future A350 NEO.
It still wouldnt compete with the 777-9X even if stretched/under powered but it would eat into a thin slice of the 777-9X market. A 777-10X (which could be a reponse to a hypothetical A350-8000) is more technologically feasible than an A350-8000 unfortunately.
The A35K already looks set to replace the 777-200 and even the 772 ER on many routes.
And also I think its hard for Airbus to set production much higher as they have less capacity than Boeing to do so.
“”It [350-8000] would have similar capacity and range (as the 777-9) and substantially lower seat-mile costs,” Airbus sales chief John Leahy said.”
Under powered ? I dont think so, for the same reason the 737 is ‘underpowered’ compared to the A320- its lighter. That goes someway to getting the range as well, critically they only have to give the range for major customers not go for some headline figure that no one uses.
How many A320neo, A350, or 737 MAX do they have racked up prior to delivery starting? If Boeing build 1.5 a month 777x for two years before delivery, 2018 and 2019, that’s 36 large aircraft parked somewhere.
Boeing’s not actually building 1.5 777X per month. At least at first, I think there are supposed to be “blanks” (empty slots) ahead and behind of each 777X. So essentially Boeing is building 0.5 777X per month even though it is losing 1.5 777 deliveries per month compared to the baseline rate.
At that rate, there would only be a dozen 777Xs built before first delivery. It’s possible that the 777X production rate will tick up in 2019, but I don’t think Boeing wants to have 36 widebodies taking up space and driving up its inventory.
Also reduces the number of frames (potentially) needing rework. Much more hurt available in that domain than in just having inventory pile up.
Boeing again is compounding a new airplane design with a new manufacturing setup.
I disagree, mixing apples and oranges.
This is a derivative, so its not the tech move of the 787.
Also keep in mind, its based on and is using the existing 777 infratsuru8e (with slow changes) and in the same place not scattered all over the globe (and what is remote has been supply for years to the 777. No where near the two massive changes of production type and tech the 787 was.
Biggest move is the wing, that is being done next door not off in never never lands.
This is how the 787 should have been done. You want to participate, you bring your operative to Everett or close by.
“This is a derivative, so its not the tech move of the 787.”
Aha.
Uwe, your “aha” made me laugh, but you’r actually touching an important point. The 777X is indeed a derivative and therefore does not benefit to a full extent from all the new technologies that would be possible to implement with a clean-sheet design. In short the 777X is half new/half obsolete. So it could therefore become only half of a success.
He, I really do wonder what beyond the certification stays untouched on the 777X.
( The A340-5600 was less of a makeover and has afaik its own certification.)
With fast evaporation of know how via hire and fire it is not quite clear to me how Boeing can successfully fall back into historic processes.
Not that I think Boeing could not cope.
Intel versus Motorola shew that you can out compete a well thought out road map (Motorola) with an endlessly pimped design based on a 4 bit processor (Intel).
Fuselage (we still don’t know what material), most systems, interiors just expanded.
Don’t get me wrong, its a major upgrade, pretty much a 747-8 re-fit (with composite not metal wing)
But that said, they are adding the tech into the current 777 production and it is likely it will be proven by the time 777-X.
You will note that the 747-8 has had almost zero issues and its the same re-d0 short of the wing which has been done on 787.
Keeping it in the same plant, all parties involved in close touch and proximity to each other, established supply train makes huge difference.
787 was all new tech, they scattered the production across the world and they had not oversight to start with on the primes and sub primes (which they would have been in close touch with if done in Everett).
I am not saying trouble free, but I am saying the 787 had unique screw ups with the program structure and outsourcing/partners that the 777 does not face.
I believe the 777 was the first one that did all CAD. Note though the rest was stock production process, they did not try to do both.
That is a given in manufacturing, don’t do more than one major change unless you have to. They literally blew open the whole thing and threw it to the winds.
What people disregard though is they through the 787 tech into that, the tech was incredibly trouble free, it was the rest that went South (well East and West and places in between)
I think Boeing is possibly less confident about the 777-A350 situation than some here on this site.
http://i191.photobucket.com/albums/z160/keesje_pics/A350-1000_MSN059_rolls_out%20colors_zpsjg4hl3pl.jpg
The 777 situation is different for the 777-8 and 777-9. The latter does not have any direct competitor at the moment, while the former’s business case is being seriously compromised by the A350-1000. It’s too bad because the 777-8 is in my opinion the right-size aircraft. And I believe this was the main reason why the 777-300ER was so successful. I we were at the beginning of an up cycle I would be more confident that the 777-9 will succeed. But exactly the opposite is happening. Like the Global 7000, the 777X is coming late to the market. Perhaps too late to make a lasting impression.
On the other hand they are in for the long haul, they don’t have to throttle up to high rates, keep it purring along and ramp up when the demand picks up.
While it hurts the stock buy back, its better to have it start slow and go up than ramp way up and then have to throttle way back.
It will be interesting to see how it all plays out, the A330 worked out well for upsizing from the A300, the 777 may or may not.
Here is the situation:
MAX: small investment, huge backlog.
777X: huge investment, small backlog.
You don’t need to be a chartered accountant to figure out that the MAX will contribute massively to Boing’s cashflow, while the 777X will be a drain on its finances, well into the next decade. I think it was Gundolf who said in a previous thread that the 777X programme will not be cashflow positive before 2030. I tend to agree with that assessment, but I will add one caveat. If the widebody market deteriorates further and does not recover before the end of the current decade Boeing might never see its money back.
If the 777-9 is in a class of its own, at the end of the day it’s the 777-8, 777-300ER and 787-10 that have to cover the center of the long haul twin segment served by the A350s’. Time will tell if those aircraft types are all that’s needed.
http://i191.photobucket.com/albums/z160/keesje_pics/Boeing%20Airbus%20Widebody%20family%20keesje_zpsh0ffp31i.jpg
I see bigger (wing) / more capable 787s on the horizon to do the job.
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