Boeing to decide this year 787 production rate of 14/mo

Dennis Muilenburg, Boeing CEO

Jan. 25, 2017: Boeing today reported slightly lower revenues for 2016 vs. 2015.

Revenues were down 2% to $94.6bn vs $96.1bn.

Net profit was down 5% year-over-year, reflecting the lower revenues and after charges on the KC-46A tanker and 747-8 programs. Operating profit was $5.8bn vs $7.4bn.

Net profit under GAAP accounting was $4.4bn vs $5.2bn.

Boeing took a pre-tax $312m charge on the KC-46A in the fourth quarter. Charges are now approaching $2bn.

The full press release is here.

Note that officials will make a decision this year whether to increase 787 production to 14/mo by the end of the decade (see Highlights).

Highlights
  • CFO Greg Smith said the next block on the 787 occurs this summer, when profit margins should edge up. Setting the accounting block on the 777X won’t occur until closer to entry-into-service.
  • CEO Dennis Muilenburg would not say there won’t be any more charges on the tanker, but believed most of the risk is behind the program. The first of the tankers will begin this year. “This is a great long-term franchise program,” he said. Muilenburg expects a total of 400 tankers to be sold over the life of the program.
  • Muilenburg said Kevin McAllister, the new CEO of Boeing Commercial Airplanes, is providing new eyes, fresh ideas and new views will “make us better.”
  • The new Global Services unit, a new integrated services operation combining Commercial and Defense, will be fully operational in the third quarter. “We expect that to be one of the faster growing” business segments in Boeing.
  • “Our confidence at being able to operate at 12/mo is high,” on the 787, said Muilenburg. There is a significant wide-body replacement cycle coming in the next decade. There is a 20-year demand for 9,000 wide-bodies. The 787 and 777 lines are well-positioned. Muilenburg would not forecast when 787 sales, which were 50 last year, would recover. The backlog of 700 aircraft is four years’ worth of production. (Note: The delivery rate begins to fall off from 2020, however—)
  • Boeing will be cash-flow positive on the tanker next year.
  • The key focus on 777 now is on filling the bridge between the Classic and the X, said Muilenburg. This includes firming up the 15 -300ERs with Iran Air. “we’re about 90% sold out in 2018 and 19” at a lower production rate of 5/mo, said Muilenburg.
  • “We expect that toward the end of the decade we will deliver well north of 900 airplanes a year,” said Smith.
  • “We’re assuming at this point that we go to 14/mo [on 787],” said Smith; a decision will be made this month, and based on market demand.
  • Muilenburg said that “healthy trade relations” between the US and China is important and he thinks President Trump, a critic of China, understands this. Boeing’s relationship with China continues to be “very important.” About 6,800 of 39,000 airplanes in demand over the next 20 years are in China. Boeing’s China finishing center remains important. He emphasized that airplanes are built in the US.
Response from analysts

The initial response from analysts, before the earnings call, was positive.

Bernstein Research (Outperform)

Deferred production on the 787 program declined for its second consecutive quarter, to $27.31bn, from $27.52bn in Q3, a reduction of $215m, or approximately $6m per airplane produced in the quarter (i.e., unit margins are now approximately five percentage points higher than program margin). Boeing thus slightly beat its start-of-year goal of ending the year with the same deferred production balance it had at the start ($27.64bn, accounting for the $1.011bn write-down in Q2).

We rate Boeing outperform, target $191. We expect strong cash flow growth, driven by the production ramp on the 737 program and by the 787. Narrow body demand remains strong, but with some weakness on mature widebodies, which is well-known.

Buckingham Research (Neutral)

We maintain our NEUTRAL rating, $100 price target, and negative bias after BA reported 4Q16 results and issued its 2017 guide. Overall 4Q16 results were only slightly better than consensus expectations, adjusted EPS (for tax and other items) beat consensus by a penny. While BA’s 2017 core EPS guide of $9.10-$9.30 was $0.05 below consensus, the central focus for investors will be on the 2017 CFO guide – $10.75B. We expect BA shares to trade higher today, largely due to BA’s 2017 CFO guide coming in ~$550M above consensus expectations (~$250bn above expectations excluding outliers in consensus) and consistent with BA’s guide that it can raise FCF under any production rate scenario outlined. After today, however, we think BA has few (if any) actions remaining that could act as a positive catalyst for the stock. We continue to see downside risk and believe that sustained market pressures will continue to drive lower pricing and the potential for even lower widebody production rates.

As we expected, advances were a $500m FCF headwind in 2016 and were a headwind for the first time since 2009. While 4Q16 advances were a $1.2B tailwind, we expect advances to continue to slow and not be the meaningful cash tailwind that it has been in the past. The 787 deferred production balance decreased $215m in 4Q16, from $150m in 3Q16, to $27.3B – slightly above our expectations for $27.2bn. As previously announced, BA bought back $500m of stock in 4Q16 bringing full year buybacks to $7.0bn.

BA ended the year with $473bn in backlog, down $16.4bn from the year ended 2015. As orders remain weak (specifically widebody orders) we expect backlog to continue to erode.

Goldman Sachs (Sell)

Revenue was in-line with consensus and our estimate. Adjusted segment EBIT margin was 60bp ahead of our estimate, with BCA 30bp above and BDS 150bp above. Free cash flow in the quarter was $2.23bn compared to $2.50bn in the year-ago period and our estimate of $2.25bn. 787 deferred production declined $215mn vs. our estimate of a $125mn decline. BA repurchased $500mn of stock in the quarter compared to $1.0bn last quarter, and $750mn in the year ago period.

JP Morgan (Neutral)

We expect a positive stock reaction to the 2017 financial guidance released this morning. Cash flow is the focus here, as the forecast for cash from ops of $10.75bn next year is +$250m y/y and +$350m vs our forecast. Boeing had already guided to higher cash from ops, so this is not a complete surprise, but the increase comes off a higher-than-expected 2016 base, and, combined with lower capex, it yields 2017 free cash flow (FCF) guidance of ~$8.5bn, or ~5% above consensus. In 4Q16, headline EPS beat, but segment results were OK and cash flow was strong.

Targeting ~$8.5bn of FCF in 2017. BA has long maintained it would grow cash flow in 2017, and the company appears on track to do so. Cash from ops guidance of $10.75bn is better than our estimate of $10.4bn, and $2.3bn of expected capex drives their FCF guidance $500m above consensus. In Q4, Boeing generated $2.2bn of cash, $500m above our forecast.

BA burned down the 787 deferred balance by $215m. This shows continuing momentum for over a year now and puts BA at an $860m full-year run rate if management can maintain this pace through 2017. Lowering 787 unit costs is clearly the most important cash flow growth driver for Boeing going forward.

 

 

51 Comments on “Boeing to decide this year 787 production rate of 14/mo

  1. Good to see the 787 deferred production balance decrease slightly more than expected. I wonder how much the production start-up of the 787-10 affected these numbers for 2016. There was also the little detail of the rate increase from 10 to 12 earlier last year.

      • Jimmy,

        It was obviously the 787-8 that dug the enormous hole the program is in right now, but I don’t completely buy into the notion that they are currently hugely more costly to produce than the 787-9. Somewhat more costly yes, but so much more that Boeing wants to kill the model? Again, not sure I buy it. I agree though, that Boeing would love to kill the customer friendly deals they gave on the -8 if they can.

        • The 788 dug the hole as the Mk1 specimen not as the -8 one 🙂
          789 is the Mk2, a massive rework to fix the Mk1 issues.
          That it also is a beefed up enlarged version probably wasn’t all that instrumental in accumulating further cost.
          “Beifang” 🙂

          • It was not the 787-8 that dug the hole.

            It was an all time high of totally management induced screwed up production scheme and total failure of management to handle it as well as the stupid decision in the first place to outhouse (yes intended ) production on an all new technology program.

            If the 787-9 had been the initial version it would have suffered all the issues attributed to the -8.

            The Boeing decision was to address all the issues on the -9 and leave the -8 to its fate. Probably the right one, but to blame the -8 is to mis-understand what went wrong.

          • “It was not the 787-8 that dug the hole.”

            TransWorld,

            I would say the financial numbers don’t agree with you regardless of the “real” reason. The lions share of the deferred production balance is in the 787-8 column.

          • Any number around on cost associated to the 788 to 789 design delta? ( not the production, just development cost
            probably a bit difficult to separate from 777X outlay?)

      • In 2016 35 788 were delivered. 26% of FAL output.
        I’d expect this to decrease further.
        4..5 years to go? ( then Boeing seems to go for keeping a ~3 year “managed” backlog .)

  2. I can’t for the life of me understand the Buckingham Research people. “We think the stock is worth 40% less than its current price. But we’re not sure if you should buy or sell it. Let’s give it a neutral rating!”

    Sarcasm aside, I think BA’s results and 2017 guidance were pretty good. 2018 seems like a more challenging year, as the combination of dropping 777 production rate to 5/month (actual deliveries of just 3.5/month) and starting 777X production will be a huge cash flow headwind. Not sure if rising 737 and 787 cash flow will be enough to offset that and drive another FCF increase.

    • Yes, by my hasty calculation they accepted 4 in 2016 against a planned 12. This is not all seats and toilets, the Qatar take up of A350s has fallen to a crawl. Based on the length of time their completed/part completed A350s are sitting on parking stands this comes from Qatar and is not a production issue.

  3. Deferred cost in 2016 decreased by ~750 Million USD. Great.
    At this pace it needs another 35 years to pay off the dept.
    B787 selling prices will probably peak in the next two years due to
    – large share of -9 delivered
    – impact of A350 and A330neo as competition not fully developed
    – B777X not in the market
    – cost reductions take effect
    From 2019 onwards a substantial drop in selling prices can be expected. Further cost reductions will happen, but they will be small (learning curve).

    Hence, I would assume that Boeing will at one point write off a substantial amount of the “deferred cost” to get its balance sheet straight.

    Such things usually happen in the 2nd quarter reporting …

    • Let me see, Airbus need to sell A330s for delivery 2019. They will have paid off the NEO program with existing orders by then and historically have sold A330s for 90 million USD/60 million Euro +/-. Allowing for USD suppliers and assuming EU/UK content is made as much as possible that means $75 million USD now?

      Boeing are still selling slots for 2018 and 2019:

      https://www.flightglobal.com/news/articles/juneyao-set-to-order-up-to-10-boeing-787-9s-433489/

      Probably and unidentified order before? But both airframers need to sell aircraft for delivery in just over two years, ie lead time for parts. Boeing probably sold current 789 deliveries at about $140 million and are making perhaps 10 million each, so it looks like the aircraft cost $130 million each to build, forgeting about the deferred and ROI. $130 vs $75 million is a lot, unless T-7000 is very expensive to manufacture (pound is cheap) or Airbus can’t ramp up A330 production again for some reason I see Boeing having problems keeping 10 leave alone 12. They can’t afford a price war.

      • If that’s true, why has the A330neo sold so poorly? After the small spurt of launch orders in late 2014-early 2015, the A330neo has sold less than the 787 despite having a shorter backlog. Also, I don’t think the development costs (while modest) will be paid off by 2019. (Remember that a third of the orders are for AirAsia X, and who knows when it will be able to take them!)

        I would guess that 789 production costs are more like $115-$120 million now, but nobody really knows other than the folks at Boeing. By mid-2020, cumulative 787 production will have doubled, so if you assume an 85% cost curve, the unit cost would be down around $100 million (and still falling). I think Boeing should be able to find plenty of takers for the 789 beyond 2020 at $120 million or more.

        Even if Airbus offers the A330-900neo at $80-$90 million, it’s got less range with higher fuel consumption. Plus there are plenty of airlines that want to keep their fleets simple and have already committed to the 787.

        Anyway, that’s my two cents.

        • is “85% learning curve” still valid?
          It was easy at the beginning to get away from all the extremely costly major errors and showing exceptional learning ( haha ). I don’t think this has continued or be seen in the future.
          Scale effects should be consumed already.

          Are you sure the A333 has decisively worse fuel economy inside its payload range capability than the 789?

          The recent write off ( from the deferred cost basket) has shown what value some of the prototypes were accounted for.

          • That is one way to look at it. Another, equally valid, way to look at it is that correcting the major errors was the primary focus in the beginning so almost no resources at that time were left for improving efficiency. It’s only after the major errors were corrected that typical “learning” efficiency gains could occur.

            Indeed, the early 787 unit cost data that I’ve seen does not at all fit the typical power law learning curve. The four data points I’ve seen reported (at least when I was closely following this) are:
            LN-7: $400M
            LN-66: $220M
            LN-75: $200M
            LN-100: $160M
            If we use LN-7 as the start point, a 19% curve fits the other data points the best in the least squares sense. However if one uses LN-66 as the start point, ignoring LN-7, a 41% curve fits LN-75 and LN-100 almost exactly! The early learning definitely came in “surges”.

            So, once the early errors and problems all got sorted out, I can’t really see a reason why typical efficiency gains wouldn’t be attained.

          • 787 learning curve fodder:
            https://theblogbyjavier.com/2014/03/05/learning-curves-boeing-787-case-in-2013/
            https://theblogbyjavier.com/2015/02/12/learning-curves-boeing-787-case-from-dec-2012-to-dec-2014/
            IMU shows the slacking off of lerarning effects.
            Future for the 787 probably is nearer 90%.
            ( a side issue but process disturbing factor should be that 788 to 789 transition due to so much changed dumps a lot of things learned for the 788 over board.. (wonder if this will be visible.)

        • @Adam,

          I got a hard time believing that Boeing has the capability to lower the 787s production cost on some hypothetical 85% curve. I mean, can you tell me anything – just anything – that Boeing has in store for the 787-9 airframe or its production line that’s going to bring costs down that fast? And if they do, then please tell me how Boeing is going to implement such an engineering change amongsts itself and its suppliers – who will meet Boeing’s request for engineering changes with a phalanx of Lawyers and MBAs who are going to bargain hard (Partnering for Success, ya’ know) to make sure their company doesn’t get financially bitten by the Boeing change. Or…in the words of the old Aerospace Engineering types, “Bid low and get right on changes”.

          In the environment that Boeing has created, there is every reason for suppliers to dig in their heels and resist change (unless they get paid big time) and, in doing so, severely limit the ability of Boeing to reduce overall costs. Now…compare this situation with the amount of engineering and management control that Airbus excercises over the A350. The difference is stunning. For example, a better wing developed and built for the A350-1000 – that improves performance and reduces manufacturing costs – is already in the process of being rolled into the A350-900 assembly line and will be a part of the A330 (the design shape) from day one. And all this done without an Army of Lawyers and MBAs at each other’s throats.

          Now think beyond wings….to center wing-box improvements, door-structure improvements, bilge-area improvements, etc…. – all of them rolled over from the A350-1000 to the A350-900 without the fuss and stress of two companies fighting it out to protect their financial interests. You think the Boeing 787 is gonna match that? How? When has ever Boeing demonstrated that they work nice with their suppliers?

          And where you you got the idea that the A330-900 NEO is going to have a higher fuel burn rate than the 787-9 is beyond me. Seeing that the A330-900 will be using the same engines, but have an overall lower cross-section and be a couple of tonnes lighter than the 787-9, and have an arguably more efficient wing than the 787-9 – well I would think that would be the formula for better fuel efficiency, wouldn’t you? If not, please enlighten me.

          Last, your insistence that the A330neo is not selling well is somewhat baffling. Considering that the first thing Airbus has got to do is sell an adequate production bridge to the A330neo, then the numbers really make sense. Last year, a net of 83 A330s, with 42 of them being A330neos. That sounds like pretty good number during a slower sales year when the 787 on racked up 58 net sales. In fact, considering that the Carbon-Fiber Wunderplane known as the 787 was supposed to “wipe the floor” with the A330, I think it’s downright funny! Especially when you consider that more A330s than 787s have been sold since the 787 was introduced. (And I wasn’t going to mention it, but…and $30 Billion in deferred production costs for the 787!)

          • 85% is just the average cost curve seen in the aerospace industry. It’s a basic principle of manufacturing that costs come down as you build more of the same thing. Given the problems with early Dreamliner production, I wouldn’t be surprised if Boeing could drive even bigger cost reductions going forward. In any case, the bulk of the cost savings is already locked in through supplier step-downs in pricing. So the “risk” of not meeting the 85% curve (or whatever the goal is) isn’t fully on Boeing.

            I’ve seen conflicting data on the 787 vs. A330 weights. It’s close either way, but this story definitely gives the 787-9 an advantage. http://www.aspireaviation.com/2014/12/16/delta-loss-shows-availability-key-to-boeings-widebody-strategy/

            I don’t know of any airlines that have said the A330-900 is more fuel efficient than the 787-9. As I recall, Hawaiian Airlines described the A330neo as 75% of the fuel efficiency benefits of moving to next-gen aircraft with a much lower capital cost.

            I assume you would at least agree that the A330-800 isn’t selling well?

            As for the -900, the two biggest orders account for 94 out of 204 orders. AirAsiaX has 66 on order (plus 10 A350s) despite operating just 22 A330s right now, having an inconsistent history of profitability, and having deferred aircraft deliveries not too long ago. A rising dollar and rising oil prices (both strong possibilities for the next few years) won’t do it any favors, either. So I’m skeptical about its ability to take that many aircraft. As for the 28 A330neos destined for Iran Air, that order could be undermined by the U.S. gov’t at any moment. Even if the U.S. cooperates, Iran Air may realize it doesn’t actually need 80+ widebodies anytime in the near future.

            Bottom line: even with orders from these shaky customers, the A330neo isn’t sold out for a single full production year! (According to today’s LNC article synopsis, A330neo delivery schedule “falls off in 2019”, which is the first year that the neo was going to be the majority of deliveries.)

            Look, I thought the A330neo would sell better than it has. But it really has been quite disappointing so far. Maybe it’ll have more luck in a few years, after airlines digest their current order books.

          • @Adam Levine-Weinberg
            “Boeing sees A330neo 9-10% more fuel efficient than A330”

            The long term Boeing analyst Aspire Aviation has some twists in its analysis of 2014.
            “787-9 OEW 277,000lbs is 11,000lbs lighter than A330-900neo’s 288,000lbs”
            The official Boeing OEW in November 2014 was “TBD”
            http://www.boeing.com/assets/pdf/commercial/airports/acaps/787.pdf
            I’m not aware Airbus did publish any OEW about the A330-900neo so far.
            Wiki says 787,9 OEW is at 284 k lbs but without any source given.

            “787-8 is 9% more fuel efficient per seat than -800neo on 6,000nm missions” – We knew today that this is comparing milk yield of two dead cows.

            “The Trent 1000-TEN will only bring the engine close to Boeing’s original specification from Package C production standard which still misses the original SFC target by around 3%, […]”
            Remember the article is from 2014 and the first A330-900neo is still without engines (2017-01-02: http://www.flugrevue.de/zivilluftfahrt/flugzeuge/airbus-zeigt-die-erste-a330neo/710132).

            Seating:
            “Boeing, in contrast, shows that its 2-class 787-9 is able to accommodate a total of 360 passengers, comprising 30 business and 330 economy seats, or 8.33% and 91.7% of the total.
            […]
            The 787-9 is able to accommodate 346 passengers in a 2-class arrangement at the same seat ratio of 11.61% business and 88.4% economy, Aspire Aviation calculates.”

            The simple math behind this calculation is Boeing transforms 3 rows of economy class in 2 rows of business class!

            AirAsia X is coming to the US at 12 flat beds + 365 economy seat (9-abreast). http://www.travelweekly.com/Travel-News/Airline-News/AirAsia-X-gets-permission-to-operate-US-flights

            “Virgin Atlantic 787-9 has 9-abreast economy seats at 18.9-inch width” – as a single aisle aircraft?

            “787-9 carries 13 tonnes more revenue cargo than A330-900neo” – According to which MTOW? The old 232 t?
            Airbus is looking to enhance A330’s MTOW by further 3 t to 245 t.

            “[…] this story definitely gives the 787-9 an advantage.”
            Boeing payed for it. What would you expect?

            The near future, United 2017-01-23:
            https://www.flightglobal.com/news/articles/united-eyeing-767-replacement-in-fleet-review-433417/

            “The Airbus A330neo, which will be more efficient than the 767 yet have lower capital costs than either the Airbus A350 or 787, is another replacement possibility. For example, Delta Air Lines has ordered 25 A330-900neos to replace some of its 767-300ERs.”

            The twist for Airbus:
            “United executives have said that they are reviewing its order for 35 A350-1000s, raising the possibility that it could convert some or all of the order to the smaller A330neo.”

            Bad for Airbus? I doubt it. If Airbus can sell even more aircraft with more profit on each aircraft why not go for such deal?

        • Hi Adam, Airbus have been pushing CEOs to fill the gap, they will have been reluctant to discount the NEO too much for fear of canibalizing the CEO market. Now the CEO/NEO gap is apparently filled they will be more willing to discount NEOs. Even without an A330NEO sales push there wasn’t a lot of difference between the two, now Airbus have to sell some to keep the line going in 2019, so I think Boeing will find a lot more competition now for orders in this catagory of aircraft.

          Leeham did an analysis of the A330NEO vs 787s and there isn’t much difference in CASM, just slightly less range.

          I don’t see how 787-9s can be built at $115 million, even if half the cost of the first “10” was in the numbers it is similar to the “9”, I would think $300 million tops should cover the first “10”, so add $150 million during the quater, ie about $4 million per delivered airframe. In the end a 787-9 can’t have been much below $130 million after over 500 aircraft delivered, call that $105 million an aircraft after another 500 more aircraft, ie 2020. Still a lot more than an A330NEO, esp once Airbus need to sell them.

          • Stupid comment on my part, I forgot that Boeing will book early 787-10s as inventory until they are sold, so that makes production costs of 787-9s closer to $135 million each and as I forgot we are in 2017 and not ’16 tehn it will be 2121 before that reaches $105-$110 million each.

          • Not sure how you’re getting your 787 cost numbers. Are you assuming the average selling price is $135 million-$140 million?

            Boeing has said that it expects a significant part of the improvement in 787 profitability to come from better pricing over the rest of the block. The highest estimate I’ve seen for a 787-9 ordered in recent years was $135 million. (As I recall, LNC said last year that the then-current going rate was about $125 million.) Since Boeing is expecting significant pricing improvements going forward, I think the ASP on units delivered last quarter is $125 million max. Maybe even less.

            Remember that Boeing sold >800 Dreamliners by 2007, at which point the 787-9 list price was still less than $200 million. Plus Boeing has had to compensate customers for delays on these early deliveries. A lot of the planes being delivered right now are still from this early chunk of sales, which has to be holding down the ASP on delivered aircraft. Also, my baseline assumption is that the 787-8s are breakeven at best right now and probably losing a bit of money. So a $215 million declined in the deferred balance with 24 787-9 deliveries last quarter implies a contribution of around $10 million per plane. Taking all this into account, I see $115 million-$120 million as a pretty conservative estimate of current cost.

            @MHalbaub: I don’t buy all the assertions in that Aspire report, I was just referring to the OEW comparison. My understanding is that the new engines will add ~5 tons to the A330neo, offset by about 800kg of weight savings.

            I do think there’s a good chance United will switch to the A330neo, at least partially. Airbus needs A330neo sales a lot more than it needs A350 sales right now, while United has plenty of routes that don’t need 787/A350 range. That said, an A330-900neo is WAY bigger than a 767-300. Delta and United are faced with the prospect of flooding the transatlantic market with too much capacity if they switch most or all of their 767s to A330-900s. Sizewise, the 787-8 and A330-800 are a bit better, but not nearly as cost efficient. I see this as part of the key potential addressable market for a Boeing MoM concept.

          • hi Adam, there was a lot of talk that 787-9 pricing was around 140 million, launch pricing for “8”s was around $130 million so $10 million for the stretched and much improved version makes sense. So I see B787-9s costing $130-135 million to build. Steve U-H said that A330NEO was a steal at $125 million, so that’s what I’m assuming. A330 outselling B787 by 60% says something as both OEMs need the sales now and neither can afford to hold out for better prices. Anyway the main point is Airbus can probably knock a lot more off A330NEO pricing than Boeing can now that they have to, esp as Euro is low and pound is lower. Two years ago B787 orders didn’t matter so much, but there are too many holes opening up now. I see rate 12 as safe until 2020, after that I think both OEMs have a fight on to keep current rates and I think Airbus might be in a position to take back some market share, as they can discount more.

          • All the 787 and A330neo pricing discussed in these comments (and the 787 costs) are way too high.

    • Since 2016 was a year where a transition from loss/frame to profit per frame (rel. to average sale price over the accounting block) occurred, I wouldn’t expect the changes in deferred production balance to be large. The key is what happens in 2017 and beyond.

  4. There will be no increase in defence US defence spending. There is no need, precedent Trump just needs to spend the vast savings that he’s going to make on procurement. Why can no one else see this?

    • Trump seems to scope his actions in public private “partnerships”.
      Traditionally that is not for efficiency but for siphoning of public moneys into private coffers. ( at least that seems to invariably be the outcome.)

  5. Taking in the following Scott post on A330/350 production rates and orders both OEMs are in relatively similar positions. The fundamental risks to income and sales is not competition. It is the health of the worldwide economy and passenger/freight traffic growth. We are seeing unprecedented future suggested production rates in the WB market and there must be a question mark about them being realised.

    Looking at the historical approaches to this Boeing has been willing to push up production rates and have accepted the need for quite dramatic reductions when the market cannot sustain the production rate. Airbus have always appeared to have a more measured approach to both the up and down cycle.

    I am guessing that Boeing will push up their B789 rates as far as they can go, it fits with the FCF narrative. Cash in the hand being better than some promise of future cash flow that is always uncertain. Regarding Airbus, they have to make a big decision as there must be a very real incentive to burn down the A350 backlog. They have a fundamental advantage in juggling their A330/350 orders as there are many elements of FAL that are or may be used by either frame. Further they have the half of the A380 facility that is currently empty for any pulse line or rework.

  6. Airlines may just wait until the A330neo is up in the air and the fuel consumption is verified. Same for A350-1000.

    It was a surprise to me that Iran Air did not order the 787. No slots, not to much US aircraft, …?

  7. The great Boeing CEOs of the past would have known what to do – they would “Go for it”! A man like Boeing’s legendary Thornton Wilson wouldn’t have flinched for a second about raising 787 production rates (and he wouldn’t have needed to think it over in a stupid 10-hour-long meeting either).

    Ah…but those were the “old days”, when men were men, and they didn’t hesitate to make airplanes. As opposed to the “New Days” where instead of making aircraft, Boeing will make “Blanks” on its new 777 assembly line. Go figure.

    • No, those men of yore had a good sense of when to go for it and when to hold pat.

      Raising production and then having empty slots shoots yourself in the foot. The men of yore were not stupid. Creating an aircraft is one thing, over production is totally different.

      If sale are not there then you modulate it down ahead of time.

      You live to fight another day.

  8. I didn’t believe that it was possible. Remember the negotiation genius in die hard? All hell is about to break loose.

  9. From carrier empirical data the 789 OEW is right around 273000lb.

    • Thanks for the data. If so, it seems like the A330-900neo is likely to be 2-3 tons heavier.

      • Where did you get that data? Pls link sources. We have to be careful. Misinformation by people with agenda’s/ interests/ stock is poisoning the internet rapidly now.

        • I have operator contacts that would know. I must leave it at that!

        • Well, in the referenced 787 ACAPS it is the row tagged “OEW” ( page 17) ?

          • I believe Boeing changed what they include in OEW for the 788 and 789 by adding what were previously in the DOW calculation.
            Based on some actual frame weights that I am aware of verifies this change.

          • Up to now my understanding was that ‘OEW is a “common” definition. ( with MEW having varying definitions.)

            just looked 777 and 787 docs have the excat same OEW definition.

            so if OEW given is really a DOW value then we’d need to add a couple of tons to get the “real” OEW ?

          • No, you need to deduct weight. The DOW of a specific frame is 127226kg The DOW (catering plus crew) is 4t , thus the OEW is ~123226kg/271644lbs.

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