Tuesday, April 1, 2014

3MM average (corrected/updated)

Goal +/-                         01/2014 02/2014  *03/2014  *Projected Mo
Month Deliveries              4             4              10 8
3 M-M-avg                         8.0            6.3          6.0 7
Production Goal               10             10           10 10
Production Trend (+/- )   2.0             -3.7        -4.             -3

Wow, what a month. The moving average absorbs the FAA audits, factory configuration changes in Charleston, and the wing crack issue by putting out 10 787's. Further development on the 787-9 has offered another copy for preparation for flight, as Boeing begins to back fill 787-9's for its customers. Once it has completed testing by this June the moving average will climb easily to 10.

End of April will show Boeing slowly climbing out its hole of about 8 units delivered and gradually rising Moving average towards 10. Boeing will reach the 3MM of 10 by the end of June. All current problems will be resolved on the factory floor by then, baring any new reported issues.

As one can speculate Boeing is overly ambitious about hitting the 10 a month pace. Moving ten units a month out the factory door doesn't necessarily translate to 10 a month moved off its property, when cash is exchanged with its customers. A broader scope is for a financial impact from delivery, and the narrower scope goes out from the factory an efficiency standard for production managers. The ten a month goal is factory production only. The 10 a month moving average goal is an expectation of complete 787 sold to its customers, which is a proper way to look at the revenue stream from each facility.

Looking above at the chart, the Moving Average at the end of March shows an increase to a seven average, since it moved 9 units in March. The traded aircraft hits the bank as a revenue value entered into the accounting books. Boeing would like to average 10 paydays a month on the 787 program and will reach that goal by end of June. Investors should heed this revenue stream. If Boeing continues its advance on its aircraft through production and actual delivery then investors can monitor more closely the financial health of this project. I would expect that an average of ten units will enable Boeing a projection of Break-even in a more accurate manner. At break-even, Boeing will have the high ground for its investors as well as with its marketing team.