Thursday, May 23, 2013

China Figures Out The 787 Is Ready, Is No Coincidence

Finally China Southern, Hainan and The Aviation branch, are extremely positioned for receiving the 787.  Boeing company has another linchpin fall into place to remove its backlog. Is this all coincidence or something more expedient for all players.  I believe the Chinese did a very wise thing in waiting for everything to play out, before validating and accepting the 787 airline rather than pushing for an earlier delivery date.

China Issues Type Certification for Boeing 787

I am far from the first, about posting this news. but I enjoyed thinking what's in play for both partners, with the here and now. Here are few of those thoughts. Now is the time to post thoughts about China, Southern and Hainan.

  • China has had extensive time to examine this model and note how it can be done.
  • Boeing lets no secrets out and uses advance aeronautical expertise flow through the 787.
  • China has extra money "time banked" and fluffed for spending.
  • Boeing delivers its most complete and fixed version after the great 787 fire is out.
  • China is smart to have waited for all pieces to come to them, and now they need to hand out those pieces.
  • Boeing is in a good position now to move a lot of 787 product.
  • China needs a lot of product while it certified the 787- because its JIT (Just In Time).

Chinese aviation is getting off the pot and cutting bait on its certification, they had already completed its extensive review, but held Boeing at bay until they could maximize the moment.  Boeing understands this kind of decision making and it has prepared a way for these airlines to really seek out big numbers in sales over the next decade. It will take Boeing the next few years to work through the order-book with standing orders. The next rush of orders from its committed following, will come when financial numbers start trickling in from airline customers using this product. When that happens you may see others currently not committed, hurry in for its first time orders before they get pushed back the end of the Boeing Order Queue. Spring of 2014 will test Boeing's production strategy. If at the end of 2013 they deliver 75 787 during 2013, this will tear down resistance from having an uncertain new aircraft, and emphasizes the importance of "getting on board the order train", sooner rather than later.

China Southern and Hainan make two of those customers seeing 787's market value intersecting with its ordering queue regarding the 787. They can take on another 100 orders each, once crunching some early operational numbers. It would be perfect for them to get into that order queue, as the balance of its own first group is delivered in 2014.

So here comes some numbers, Order Queue currently at about 800, 787-8-9's

  • At the end of 2013 Order Queue will be about 725 with the current 787 order book
  • At the end of 2014 Order Queue of about 630 with the current order book, and  then the order demand will increase the second half of 2014 because there is a push to get in line.

In 2015 Boeing will have 500 or less aircraft unfilled on Boeing's current book,  if no other aircraft are ordered until then, but I would think (dangerous thing), that the 787 Boeing order book log jam will break-up, and then gain some hefty sales numbers on both the -8.-9. Maybe throw in a launch customers for the " -10"(Singapore orders 30, -10 update Paris 7//13)! However, Boeing should add to the order book another 300, putting Boeing back to a number of  about 800 by 2015. Boeing will work hard to keep a 7-8 year backlog on the 787 from that point forward, and it can be done with the 787-10.