Boeing Positive On Raising 787 Rate Before 2020

Boeing is pressing forward with plans to raise 787 monthly output to 14 aircraft per month by the end of the decade, but still has dozens of order slots to fill as company executives begin a final evaluation of the ramp-up decision.

After raising the monthly production rate to from 10 to 12 aircraft last May, Boeing is already delivering 787s at a faster clip than any widebody aircraft in history. Raising the rate even higher would help Boeing offset declining cash-flow from the 777 programme and claw back savings from a $30 billion stockpile of deferred production and unamortised tooling costs still hanging over the programme.

Raising monthly output by 16.7% by the end of the decade carries some risk that Boeing’s once mighty order backlog for the 787 can’t keep up with an annual delivery rate of 168 aircraft. As of 25 January, Boeing has 691 remaining orders for the 787, which is equivalent to 4.8 years of production at current production rates.

“That is a very strong position to be in,” argues Boeing chairman, president and chief executive Dennis Muilenburg, addressing market analysts on a fourth quarter earnings call.

There is some evidence to back up Muilenburg’s confidence. Since 2009, Boeing’s sales teams have added about 68 orders on average each year for 787s. In a purely hypothetical scenario, Boeing maintains that average over the next three years and delivers 787s at the existing production rate, leading to a backlog of 472 aircraft by the end of 2019. If output increases to 14 aircraft per month afterward and the same yearly order average holds, Boeing could sustain deliveries at the higher rate for four years before the backlog is fully depleted.

“We’re assuming at this point that we go to 14 [per month production rate],” says Boeing chief financial officer Greg Smith. “The market supports that — going to 14. But we don’t have to make the formal decision yet. So as we get close to that we’ll continue to monitor the marketplace.”

Elaborating on Boeing’s long-term outlook, Muilenburg notes that Boeing forecasts sales of more than 9,000 widebodies over the next 20 years. Early in the next decade, Boeing also anticipates a wave of replacement orders for widebody aircraft, Muilenburg says.

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