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MIflyer12 wrote:How is a change in the accounting block bigger news that a change in the production rate?For those who might not use the 'Seattle Times' link, here's what may be the bigger news:
'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'
MIflyer12 wrote:For those who might not use the 'Seattle Times' link, here's what may be the bigger news:
'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'
Momo1435 wrote:Making a quick calculation with the 700 in the backlog and a mid 2019 date for the raise to 14 per month the 787 production line is still completely filled until the end of 2021.
So far this year Boeing booked / announced just over 100 firm orders / MoUs & Commitments. With a bit of luck this could be much higher at the end of year. Boeing of course knows who they are talking to, all the buzz from Indian carriers wanting to start long haul routes will be very interesting to watch. And it's not likely that the Chinese order rush is going to slow down anytime soon. Even without reaching 168 orders the next couple of years the rate of 14 per year could easily be continued into 2024 before it might become a problem.
Varsity1 wrote:AA has 58 options that could become firm if they drop the A350 order.
jbs2886 wrote:Momo1435 wrote:Making a quick calculation with the 700 in the backlog and a mid 2019 date for the raise to 14 per month the 787 production line is still completely filled until the end of 2021.
I suspect a fair number of those aircraft won't be delivered by 2021 so there is likely positions available.
Momo1435 wrote:jbs2886 wrote:Momo1435 wrote:Making a quick calculation with the 700 in the backlog and a mid 2019 date for the raise to 14 per month the 787 production line is still completely filled until the end of 2021.
I suspect a fair number of those aircraft won't be delivered by 2021 so there is likely positions available.
We already see this happening, most orders that were firmed up last year and even some from this year have 1st deliveries in 2018. The new orders are filling up already available slots and also slots freed up by deferrals. This is good for the number of orders as airlines can get them fairly quickly, even with such a large backlog. With the rate increase now decided it will even create more early slots in 2019. This might actually explain in part the fairly high number of orders so far this year.
BN727227Ultra wrote:Working on clearing out the backlog so Boeing can get cracking on the 787MAX?
cledaybuck wrote:MIflyer12 wrote:How is a change in the accounting block bigger news that a change in the production rate?For those who might not use the 'Seattle Times' link, here's what may be the bigger news:
'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'
cledaybuck wrote:How is a change in the accounting block bigger news that a change in the production rate?
jbs2886 wrote:We haven't heard of too many 787 deferrals, some yes. I meant that the backlog, without deferrals, still stretched beyond 2021.
MIflyer12 wrote:It's an explicit acknowledgement by Boeing that a run of 1,300 wasn't going to cover $30 Billion in deferred costs. There has been extensive discussion about this on a.net.
par13del wrote:.....wait for it, the experts on the loss making aspects of the 787 program will chime in soon.
par13del wrote:cledaybuck wrote:How is a change in the accounting block bigger news that a change in the production rate?
.....wait for it, the experts on the loss making aspects of the 787 program will chime in soon.
I agree the increase is smaller than I expected, Boeing must not have the anticipated number of orders to have a greater increase in the block size.
Strato2 wrote:Why should Boeing get a free "get out of jail" card for a financial disaster that is the 787 program when Airbus has been shred to pieces here on A380 and A400 problems.
Stitch wrote:Kind of surprised it was only to 1400 (I expected 1500-1600), but a conservative boost won't raise the attention of the market as much and they can always raise it later should they close in on 1400 firm orders.
Strato2 wrote:Why should Boeing get a free "get out of jail" card for a financial disaster that is the 787 program when Airbus has been shred to pieces here on A380 and A400 problems.
Ruscoe wrote:IMO Boeing is just preparing for the next round of widebody orders.
Increasing the production run allows Boeing to offer bigger discounts on future sales.
This is because Boeing divides the total deferred production costs by the production run and adds it to the cost of sales of each 787.
Thus there is no "get out of jail" in the increased production numbers.
Boeing has already financed the deferred costs, and their balance sheet looks good.
Another contributing reason may be that the 777 production rate is going down and they want to maintain skilled staff and Revenue by compensating with increased 787 production until the next cycle of sales.
Ruscoe
Boosting the rate, however, will throw off cash, helping Boeing meet its free cash flow targets at a time when the company is transitioning from the 777 Classic to the 777X. The higher rate, from 12/mo, is worth a half point on the profit margin, one analyst told LNC.
Planesmart wrote:Perhaps the increase in monthly production rates is short-term, and reflects that customers who had deep discounts and flexible launch-style contract T&C's, have now all been rolled for the last time, capped to the early 20's. Presumably, the majority will lock in those prices.
Stitch wrote:Planesmart wrote:Perhaps the increase in monthly production rates is short-term, and reflects that customers who had deep discounts and flexible launch-style contract T&C's, have now all been rolled for the last time, capped to the early 20's. Presumably, the majority will lock in those prices.
Could be. Boeing's suppliers seem to be able to adjust quickly (they went from 5 to 7 per month in 2011 on the 777 than 8.3 in 2013 then back to 5 in 2017) so this could be a short-term increase (Leeham says it can't hold past 2020 with the current Book-to-Bill Ratio) to make availability for RFPs that may not yet be public knowledge.
jbs2886 wrote:I wouldn't take Leeham's pessimism as gospel - not to get into the Leeham debate again though.
Stitch wrote:jbs2886 wrote:I wouldn't take Leeham's pessimism as gospel - not to get into the Leeham debate again though.
And even with all the pessimism we have been hearing about widebody orders, the 787 is already 70% of the way to matching 2016's and 2015's orders with 25% of the year remaining so a slight rate increase doesn't seem to be out of place.
Newbiepilot wrote:Stitch wrote:jbs2886 wrote:I wouldn't take Leeham's pessimism as gospel - not to get into the Leeham debate again though.
And even with all the pessimism we have been hearing about widebody orders, the 787 is already 70% of the way to matching 2016's and 2015's orders with 25% of the year remaining so a slight rate increase doesn't seem to be out of place.
I think Boeing probably has some leads on potential orders driving the decision. Leeham has been pessimistic regarding the 787 for a while, but I think that is just Scott Hamilton's overall pessimism coming out.
BN727227Ultra wrote:Working on clearing out the backlog so Boeing can get cracking on the 787MAX?
gwrudolph wrote:BN727227Ultra wrote:Working on clearing out the backlog so Boeing can get cracking on the 787MAX?
I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?
jbs2886 wrote:gwrudolph wrote:BN727227Ultra wrote:Working on clearing out the backlog so Boeing can get cracking on the 787MAX?
I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?
Highly unlikely. The MOM will either take over 767/747 lines or will be an entirely new line. There is no way Boeing will stop production of the 787 in early-mid 2020s.
gwrudolph wrote:jbs2886 wrote:gwrudolph wrote:
I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?
Highly unlikely. The MOM will either take over 767/747 lines or will be an entirely new line. There is no way Boeing will stop production of the 787 in early-mid 2020s.
Good point. Just for clarifications I wasn't suggesting they would stop the 787 line by then as much as I was suggesting they might be accelerating 787 production so as to have fewer 787 lines by then freeing up space for new MOM line(s). However, knowing what we all know about the nearing end of the 747 and 767 lines, that was quite the oversight on my behalf. Those, of course, would be the likely lines to free up space for MOM lines.
jbs2886 wrote:I don't expect the 767 to end soon. Between FedEx and potentially other F orders as well as the tankers, its got a while left. But, it shares a line with the 747 so I expect that to be rejigged.
Strato2 wrote:[quote="Stitch]
Happened right before you posted. I don't know if it's deliberate obtuseness or just trolling now.[/quote]
Why should Boeing get a free "get out of jail" card for a financial disaster that is the 787 program when Airbus has been shred to pieces here on A380 and A400 problems.[/quote]
gwrudolph wrote:BN727227Ultra wrote:Working on clearing out the backlog so Boeing can get cracking on the 787MAX?
I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?
flee wrote:The increase in accounting block has been predicted by many because it is evident that Boeing is not going to be able to cover all the deferred costs without making the 787 selling price uncompetitive.
Ronaldo747 wrote:BN727227Ultra wrote:Working on clearing out the backlog so Boeing can get cracking on the 787MAX?
Similar thoughts, too. I don't think about entirely new engines but I think we will see a revised 787 down the line, with an much lighter 787-8 and a bit lighter 787-9. Maybe with some updates incorporated from the MOM-project.
flee wrote:The increase in accounting block has been predicted by many because it is evident that Boeing is not going to be able to cover all the deferred costs without making the 787 selling price uncompetitive.
kitplane01 wrote:flee wrote:My gawd I'm sick of seeing this on airliners.net.The increase in accounting block has been predicted by many because it is evident that Boeing is not going to be able to cover all the deferred costs without making the 787 selling price uncompetitive.
The price that maximizes Boeing profit (or minimizes Boeing losses) is independent of the accounting block, and independent of changes to the accounting block. This has been discussed many times on airliners.net. Please see https://en.wikipedia.org/wiki/Sunk_cost
cledaybuck wrote:MIflyer12 wrote:How is a change in the accounting block bigger news that a change in the production rate?For those who might not use the 'Seattle Times' link, here's what may be the bigger news:
'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'