I'd guess those credits for late deliveries aren't going to be as significant, the release specifically noted this was done after discussion with customers - no airline wants the expense of hundreds of millions per aircraft when they are just trying to stay afloat (look at those with large orders - Cathay wants delayed deliveries, ANA likely does as its retiring half of its 777 fleet, etc.). Heck, Emirates isn't even planning to return all A380 to service until 2022 and you can bet they won't be flying a full schedule. In my mind, this is a win-win for Boeing and its customers as Boeing gets to slow development costs a bit and take its time on certification, while customers get to delay orders to better match supply with demand.
The problem is Boeing has now made a several billion dollar bet on airlines not needing their wide-body replacements for quite some time yet. BA, EK, SQ, and QR have all either retired, or are in the process of retiring, wide-body aircraft with the anticipation that they won't need them in the interim until demand recovers, at which point they'll have new 777Xs arriving to match demand. I'm not sure I've seen or read anything convincing enough to tell me that the level of supply (both for passenger and cargo) that these now retired wide-bodies provided, won't be needed until 2023+. Time will tell on this one.
I see a lot of what strike me as assumptions that the schedule is being driven by Boeing at this point. Unless and until some credible information comes out to support that premise, it is my assumption to the contrary that the schedule is now being driven by the airlines.
First flight to first delivery usually takes around 18 months. A year after first flight, without any rumors that I've caught of serious problems in flight test, the current forecast is a total 42+ months between first flight and delivery.
It looks like Calhoun thinks the 777X will do just fine in the long run, and I am 100% sure he has far more data/information than anyone else on the planet. Even more than the basement keyboard surfers on Anet. Over the longer term, “we think it’s going to be one of the real money-makers for our company,” Calhoun told CNBC.https://www.cnbc.com/video/2021/01/27/b ... idity.html
The accountants at Boeing, and their auditors, think otherwise. If that were true, they wouldn't have concluded the 6.5bn write-off was necessary.
Be it changing market conditions or whatever excuse, this announcement says is that Boeing anticipates producing/delivering far fewer 777Xs than what was originally anticipated.
It is possible for both to be true - much lower than planned demand now that requires a write-off, but healthy profits later. They were originally anticipating seeing close to the same demand as the legacy 777. Now they've got an accounting block that if restricted to a 10 year time frame, would have been based on 1/3 the average production rate of the legacy 777. Clearly much lower than originally expected. That makes sense from the standpoint of needing to use conservative numbers to justify your decisions to investors, especially in the current environment.
Long term, however, the expectation is still that the aviation industry will experience strong growth, slowing down to a long term average of "only" 4% annual traffic growth - perhaps as many as 7500 widebody deliveries over 20 years, if Boeing's market outlook is on-target. It's 8400 widebodies if we include new-build freighters.
They could fall quite a ways short of that forecast and still see a lot of improvement in the 777X's prospects. That forecast is an average of 35 widebodies per month. Current total production plans are only 17 per month (5x787 + 2x777/777X + 3x767 + 5xA350 + 2xA330 NEO). 2019 widebody deliveries peaked at 30 per month including the freighters. We won't be returning to that rate for years, increasing the backloaded nature of the forecast.
2019 production was too high for the existing market, and certainly for the next couple of years, but eventually we'll be back to that demand and continue growth. If the 787 and A350 reached a new production rate record, it would still be only 2/3 of the delivery rate that the Boeing forecast suggests.
For what it's worth, I have a perpetually skeptical view of both Boeing's and Airbus's market forecasts, and I have been consistently wrong. I think a 20 year average of 35 widebodies per month average won't happen, and the present situation makes me more confident I will finally be right this time. However, while to do this properly I should model some market growth and fleet retirement rates in a spreadsheet, what I expect to happen based on back of the napkin math is for the 787 and A350 to continue to dominate the widebody market, yet travel growth to gradually re-open the opportunity for healthy 777X demand. If airlines are taking 5-6 of them a month 10 years from now while the 787 and A350 each deliver over twice as many, I think Boeing will be glad they sustained the program.
Last edited by iamlucky13
on Thu Jan 28, 2021 3:14 am, edited 1 time in total.