787 Media Briefing Preview

April 7th, 2008

While the first quarter of 2008 has drawn to a close, airlines, investors and the wider aerospace industry keenly awaits the updated Boeing 787 Dreamliner timetable in a media briefing that is scheduled for April 9, 2008. (A new update will be posted after the media call.)

A program update was already on the cards as outlined by Boeing Commercial Airplanes President & CEO Scott Carson at the last media briefing back in January.

Many Wall Street analysts have already made known their thoughts of a revised delivery and production schedule, most notably the initial target of 109 787’s will not be reached by the end of 2009.

Bank of America got the ball rolling, slashing its forecast from 100 airplanes down to 50. Predicted here was 30 airplanes by the end of 2009, followed by Goldman Sachs who concurred with that analysis - Merrill Lynch stated that deliveries of the revolutionary airplane would not commence until the fourth quarter of 2009.

But it may not be all bad news.

Image courtesy of Boeing

On speaking with Teal Group’s Richard Aboulafia, he envisaged that just ten 787’s would be delivered by the end of next year.

So what can we expect to hear?

One area that has already undergone some change is that of the 787’s supply chain - some quarters have been critical of the supplier base and logistical network and highlighted those areas as being primarily responsible for the travel work issues that have thus far prevented both power on and first flight targets from being met.

The decision late March by Boeing to acquire Vought Aircraft Industries’ interest in Global Aeronautica means that any revised schedule will not only be under its watchful eye via Scott Strode, but also will set the wheels in motion to adjust the supply chain for any possible ramp up in production and will allow for greater monitoring of sub-assemblies to prevent sending incomplete structures to the Everett final assembly line.

By far, the biggest concern is that of a further delay to service entry. Having already seen two major slippages in the program, a third push back will not be a surprise. A third delay does provide one huge benefit-it will allow for a greater window of flight tests should anomalies occur. Fears of inadequate cold weather soak testing will also be allayed given that Boeing will have the winter of late 2008/early 2009 to conduct such trials - a first for any airplane using largely composite materials for its fuselage.

Investors and analysts have already by and large factored in a delay to their research ranging from six to nine months - although the biggest two concerns relate to how much compensation Boeing will pay customers for a new round of delivery delays and what will airlines do in the interim?

Image courtesy of Newairplane.com

First Choice Airways has already scrapped its 2009 plans that had incorporated the 787, and British Airways has privately revealed that its summer 2010 schedule featuring the 787 will also have to be re-evaluated. Royal Air Maroc has already conceded that it is unlikely to get its first 787’s until the end of 2009.

As Boeing reveals its plans for the 787 during 2009, of critical significance will be the milestone it sets for anticipated deliveries during 2010. We could expect that the company announce a target slightly more than 50 airframes, but markedly less than 100. Even 50 787’s delivered would represent just over four being produced each month commencing January 2010.

While demand for the 787 Dreamliner remains buoyant, customer pressure to increase production will rank high, while the company will surely look to evade the supply bottlenecks that ground production to a halt in the late 1990’s. More importantly, with so much of the 787 fabricated by partners, the risks to ramp up production all too soon are a clear and present danger - already we have witnessed how fasteners have been in short supply and how these can drastically impact upon targets.

It may be an unpleasant situation for Boeing, but already noted here, the surprise element is how the company stands to gain with increased orders for the 777 family.

The 777 is sporting a healthy backlog yet in the near term is probably the only suitable solution to delays in the 787 deliveries. Like the Airbus A330 family, demand over the last three years has been high and a ramp up in production is on the cards, thus easing near to mid team delivery and demand requirements.

Aboulafia went on to state that “the A330-200 is very popular for its size class. The 777 is more popular for its range. Since the A340-500/600 is basically dead and the A350XWB won’t arrive until 2013 at the very earliest, the 777-200LR is the best choice for airlines starting medium size long-range routes.“

Given the 777’s wider market appeal for versatility and lower cost of operation, the 777 family certainly stands in good stead to benefit from the 787 if it is delayed for a third time.

All eyes will be on Boeing’s bottom line and just how much outlay will be required for compensation in lieu of the delays already announced.

In an interview with analyst Howard Wheeldon, he stated that “the pressure to get this plane [the 787] into production was not so much directed by airlines and competition but by investors“.

Those same investors must now look to ease up the pressure on the company in order to move forward with positive news for the world’s most advanced airplane.

Entry Filed under: Air Transport, Air Travel, Airlines, Airplane, Boeing, Boeing 777, Boeing 787, Dreamliner, Dreamliner First Flight