Feb. 9, 2017: Requests for order deferrals are at an historic low but there are still challenges in bridging the production gap between the 777 Classic and 777X, Boeing CEO Dennis Muilenburg said during a Cowen & Co. presentation today.
Deferral requests are at only 2% of the backlog of nearly 6,000 airplanes, compared with an historic rate of about 6%, Muilenburg said.
“There are no particular regional trends,” he said during a phone-in appearance; weather prevented Muilenburg from flying in for the event. “Deferrals remain very low. We have skyline flexibility to move things around.”
At the same time, Muilenburg acknowledged Boeing still faces a challenge of filling the bridge between the 777 Classic and 777X, even at the reduced production rates in place. The rate is now 7/mo, down from 8.3/mo. It goes to 5/mo in August. Actual delivery rate beginning next year through 2019 is 3.5/mo as production of the 777X is feathered in.
Muilenburg identified filling the bridge as a “risk.”
“We still have work to do to fill out the bridge,” he said. The line is virtually sold out this year, but only 90% sold out at the reduce rate next year and in 2019.
The 80-airplane order from Iran for its national airline hasn’t been booked yet. This includes 15 777-300ERs, 15 777-9s and 50 737-8s. Muilenburg said the -300ERs are in the production stream beginning in 2018 and stretch over several years.
But the order is still subject to contingencies and remains in doubt over what President Trump will do. He’s threatened to abrogate the Iran nuclear development agreement, reached between Iran, the US and six other countries. The Boeing deal was tied to this agreement, as was a 100-airplane order from Airbus. Airbus booked its deal last year and delivered the first airplane in December.
Muilenburg said Boeing is working closely with the Administration to complete the deal. Although Trump threatened to pull out of the nuclear deal, he hasn’t done so. New sanctions were imposed by the Administration after Iran test fired a missile, however.
Demand for narrow-body airplanes remains strong, he said, but wide-body demand—which softened in the last couple of years—won’t recover until starting in 2020, he said.
Muilenburg said Boeing remains confident in wide-body demand. The company is evaluating taking 787 production from 12/mo to 14/mo. He doesn’t see any scenario in which production would be reduced from 12/mo, as some aerospace analysts (and LNC) suggest after 2020.
The order announced today from Singapore Airlines for 19 more 787-10s, supplement those already on order, is evidence of a strong future for the program, Muilenburg said.
The CEO said Boeing continues to study the Middle of the Market solution. The prospective 737-10, a straight-forward stretch of the MAX 9, hasn’t yet been given the green light. If it is approved, there will be little cost to Boeing.
A brand-new design, assumed to be a 767-sized aircraft, won’t infringe on the 787 family, he said. If this program gets the go-ahead, the entry in service is targeted for 2024-25, a timeline Muilenburg has long spoken of. Program launch would have to come no later than next year, given the recent history of seven years from launch-to-EIS.
Muilenburg said the New Middle market Airplane (NMA) would have new, innovative features—but he didn’t say what these would be.
Discussions on the MAX 10 and NMA continue with customers, he said.
Why anyone would want a 737-10 as configured and offered is beyond me. A complete waste of engineering resources that could be dedicated to an NMA
In Boeing’s current efforts to slash costs, something which Muilenburg is known for, a new MoM aircraft would be the perfect tool to bludgeon it’s unionized workforce into more concessions.
Extensions to current contracts have worked for Boeing, and against the unions twice now. I expect Muilenburg to go for the hat trick, and score again.
Seems to me that any airline that bought the 737-900ER (with all its flaws) is a good target for a 737-10 campaign. 12 more seats, a little more range, and a similar or slightly lower trip cost — even assuming a higher capital cost. Key targets: United, Delta, Alaska, and Lion Air. Competing the MAX 9 straight up against the A321neo is a dangerous proposition and Boeing knows it.
737-10 could be ready at least 4 years earlier than the NMA. And it seems increasingly likely that if Boeing goes ahead with the NMA, it would be a good deal larger than the 737-10/A321neo.
Actually I think that the current MAX-10 proposal clearly hints that a NMA will soon be announced. Is has been explained in different sources that the MAX-10 will be a quick and cheap project. The resulting plane might be no match for the A321neo specs, it’s low price tag, however, will put pressure on Airbus’ profit margin of the A2Xneos. Or, simply put, if you can’t beat ’em, hurt ’em.
The announced MAX-10 will hardly consume vast financial or engineering resources, which leaves room for the NMA. Personally, I think it should be a single aisle design with a base version offering slightly more seats than the A321neo, a stretch version to compete with the roumored A322, and a shorter version with longer range capabilities.
I agree with you. I hear a lot of noise about MoM and I won’t be surprised if an announcement will be made before the end of the year. I also believe, the MoM will enter service well before 2024.
The trouble with being first mover on the MoM project, is that the opposition gets to adjust its response ‘just so’ to give its brochures some marketing advantages. The ideal situation for this awkward segment is for Airbus and Boeing to ‘co-produce’ this project or make it a 3 way with a new geared turbo fan producer as well. Competition laws would likey prevent this happening ( far more likely is an Embraer and Irkut tie up for the MC-21 co production) and the europeans with long memories havent forgotten how Douglas got inside information of the Caravelle but went on to make their own DC-9 and Boeing did much the same with the DH Trident.
while they are at it, maybe they can get some unicorns to JV on the project
Nice to see that the sun is shinning in Lalaland…
@CBL: Actually, they are in San Francisco….
Off topic… In regards of the Singapore order. Have noticed the 777-9 has only 8 exits instead of the regular 10? Any information on that?
http://www.boeing.com/commercial/customers/singapore-airlines/singapore-dreamliner-order.page?cm_re=Feb2017-_-Hero+rotator-_-Singapore+Airlines+Commitment+to+purchase+20+777-9+and+19+787-10+Dreamliners
wow that’s a huge deal . . . i am guessing if Airbus had won the deal it would have been the day’s lead above the fold
It seems 90% of the market doesn’t know the difference between an LOI, order or “commitment”. Or doesn’t want to know. I think this site usually reports orders.
Singapore Airlines describes it at as firm order so you will have to come up with another hypothesis.
http://www.singaporeair.com/en_UK/us/media-centre/press-release/article/?q=en_UK/2017/January-March/ne0117-170209
The standard configuration on the 777X is four door pairs, one less than the 777-300ER. Each door pair takes a lot of place in the cabin and both the 777X and A350 have four door pairs as standard. This limits the cabin to a maximum of 440 seats. The 777X offers to install an additional fifth door pair for high density configurations.
Can these BA folks dispense with the goofy “skyline” term? It really grates, in my opinion. What’s wrong with the solid, down to earth “production line”, or “forward, planned production”? I mean, that’s where theyre really built, right? (It rivals that equally annoying, at least previously overused “in the space”–e.g. “in the airliner space”. A few years ago, when I’d hear it on a business cable channel, I’d just wanted to reach through the tv and throttle the speaker–male or female!)
totally agree . . . boeing and wall street love dumb terms like “skyline” and “bridge” . . . buzzwords are easier than substance
We use the term skyline becuase as you load the production slots and generate resource chart, the chart looks like a city skyline.
Thanks, sincerely, for the explanation, Alex. However, it’s still annoying. grating, corporate-speak in my book
Well done, Boeing ! Let’s be fair, selling more isn’t what matters, just selling is enough. We want this Industry to thrive and prosper. Let’s rejoice when it does !