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.