Article basis from AINOnline in bold font: LiftnDrag Observations in Blue font:
Boeing CEO Jim McNerney seized the chance to impress upon securities analysts on Wednesday his confidence in his company’s ability to execute a smooth transition between production of the current 777 line and the 777X around the turn of the decade. Now delivering 8.3 of its flagship widebodies a month, Boeing expects some “feathering” of production once it approaches the point at which it fully integrates the 777X, said McNerney.
Speaking during his company’s first quarter earning conference call, he also conceded the potential for some “pricing pressure” resulting from the introduction of the Airbus A350. Nevertheless, he stressed that the existence of a strong “pipeline” of what he called some of the biggest and most loyal customers in the Boeing stable will ensure that the manufacturer’s plan for the 777 will proceed with little or no interruption in the flow of deliveries.
Key statement, is the loyalty statement, that is what Boeing is building on relationships not just aircraft. Many customers have found ways for making money with its family of 777. Those grasping at straws have sold some 777-200, (Air India), and will buy Airbus A320's. The "Flow" of Aircraft will show no breaks in the continuous stream of the 777's when the X plane meets, McNerney's talking-flight -line. Second word of the day is "confidence". Boeing has learned a one-off lesson from its 787 hubris days when being overly giddy with statements like delivery to flight line during the 7-7-7, 787 festive speaches, that the 787 will fly in 9/30/2007. Then came the three year wait. If the 777x even becomes one year late, both confidence and loyalty are on the line.
“Where do we get that confidence?” asked McNerney rhetorically. “It’s in airplanes sold to date, it’s in proposals accepted, it’s in campaigns that are ongoing today where, as in the case with [Japanese 777 customer] ANA, we’re selling both 777-300ERs as well as 777Xs. The requirement versus the alternatives still is favorable…There will be some pricing pressure associated with that…which is why the most aggressive productivity program we have right now in our factory is in the 777 model.”
Boeing customers have found a very lucrative way of making money for its family of Boeing aircraft. The ANA's of the world, and others have seen a jump on its bottom lines when introducing the latest Boeing products to its fleets. The customers are addicted to money, and will continue to order more aircraft even if they don't have cash ready money. Results equals Loyalty. Pleased customers are a secondary issue, but important, when airlines today, affix 11 across and craming 600+ onto the Airbus A380 (Russia). It is interesting to note that Airbus DEMANDS an 18" width standard when Boeing has a 17.75" width on most aircraft. Then they gladly go for 10 seats across or eleven. That's gamemanship. McNerney recognizes the frailty of market sentiment and is hoping customers stay loyal to the bigger picture of better operations, performance and over-all airplane quality. McNerney hints at pricing will have casualties in the Airplane Wars. However, Boeing's better, "Waking Shoe", will win the war as passengers travel the world.
McNerney added that Boeing won’t begin delivering the airplane that directly replaces the 777-300ER, namely the 777-8X, until some two years after it introduces the larger 777-9X in 2020. “There is plenty of running room where [customers] can reap the economics of the base 777 in conjunction with buying 777Xs,” he said. “So it looks good as we talk to our customers…
Smart market shaping on McNerney's part. Because Boeing introduced the 787-8 first due to unknown risks, it had a big enough and great enough introductory model for a carry-forward to the 787-9. They hit the market in stride. The 787-8 had no competitor and still remains without a true competitor. However, in the 777-8's case, Boeing has recognized that the 777-300ER is its best seller and customers still hold value for that model. It is the 777 transition model. Going from a 777-200 to an 777-8 at this time would not make sense since the 777-300ER is the best seller. The 777-9 is the logical transition model. All other 777 models will template off this one, where they could service the tweener markets. Those are niche markets that specialize in distance and numbers that are scattered through out the world, I'll call tweeners as represented through the 777-8 is that champion for far reaching destinations where the 787-10 won't be flying. The 787-9 would have a larger capacity compared with the follow-on 777-8. Having a later 777-8 build and testing schedule will assure the 787-9 will be well established with its intrinsic values well into a strong customer following.
“The pipeline gives us comfort…These are not discussions that are happening in a vacuum. These are with people that have both additional 777 needs in the medium term and then longer term would need the new model to significantly increase performance and productivity for themselves.”
McNerney further emphasized the existence of a large “overhang” of order options and other forms of commitments, quite apart from a firm order backlog that fills virtually all delivery slots into 2017.
That statement is hinged on customer confidence. The key point of the day. Customer's and Boeing's confidence is in partnership, or all else is lost. McNerney is doing some production smoothing not to excite investors on overly optimistic promise, but pointing out Boeing's lessons learned will not be repeated once again on the 777X program. McNerney has changed the Boeing motto from; "We're reaching the stars just this afternoon" (so 2007), and where it has metamorphised in 2014, "Boeing says what it means and means what it says going forward."
These statements in 2014 are all doable promises for its testing and production line-up. No more paper airplane promises of three years late. In fact I was so giddy in 2007, I believed in the 787 promise of a September 2007 787-8 delivery for its testing without checking into the Reality Motel.
McNerney’s comments came as Boeing announced what it termed strong first quarter results for its Commercial Airplanes division, which posted $12.7 billion in revenue on higher 787 and 737 deliveries. First-quarter operating margin improved to 11.8 percent, reflecting the delivery volume and mix and lower period costs partially offset by higher research and development costs.
Once again, McNerney reaches from the 787 lessons learned play book by avoiding saying, Boeing has achieved its original 787 like it promised three years late. The first quarter is a change as a result of corrective corporate actions for all its airplane building programs. Boeing has finally awaken, as if it were some sleeping giant. It woke-up after Airbus has been pounding Boeing senseless for the last twenty years. Airbus has been producing and selling 40 A320 a month. Then Boeing woke-up. After many years of just doing 32-34 737's a month the accounting office figured out that sales is not revenue and Boeing needed revenue from production delivery, and they then needed more sales. Boeing needed to get with if it wanted to survive. They watched Airbus come out with the NEO, they watched Airbus revenue grow and then sales grow. Everybody at Boeing got off their butts, and started to move. Here comes the Max, there went the 787, and now the 777X family is pinning down the A350 family to mediocrity. Nothing is more loyal than the fat bottom line in corporate world and its customer's. Boeing is going for it and is no longer a sleeping giant with only 32 NG's a month flying out from Renton. It has 42 a month just in these last few years and will go for more in the near future. Now they are 10 a month for the 787 which contains Space Shuttle like complexity. Airbus worries too, but can't match Boeing's executed plan.
During the quarter, the 787 program reached a 10 per month production rate and completed preliminary design review on the 787-10. The company selected the Everett, Washington site as the location for a new composite wing center for the 777X. In April, the 737 program reached a production rate of 42 per month.
The awaken giant cannot stop for even investors, so they better get on the train before it leaves the station. Boeing has a thirst for capacity as it becomes more centered on the United States participation. More specifically the Northwest and West coast at this time. A new wing plant at the Paine field arena. Offices moved to Southern California and a continuous renovation at Renton, WA. Everett is gearing up for a two types of 777 production. The old backlog with 777-300's and the New Orders of 777-9's. A new wing plant built adjacent to Boeing's giant factory, means Boeing is done shopping and experimenting with production. Boeing senses a kill shot is needed now, so they call all hands on deck at Everett, Wa. This by no means they are gong to slight its suppliers. Those who exceed expectations will continue and expand with Boeing. However Boeing will put its arms around those things that are critical potential show stoppers, such as the folding wing that they are the best in the world at doing. They also build fantastic 777's.
To conclude this thought, Boeing isn't messing around this time since its a kill shot on Airbus' aspirations.
Commercial Airplanes booked net orders for 235 airplanes during the quarter. The division’s total backlog stands at 5,100 airplanes valued at $374 billion.
I actually expected a greater number booked, but because of paper work, dickering and sales time taken through building aircraft relationships for forming a real partnership, it takes months if not years to book aircraft. Boeing has many outstanding promises not yet booked. It just sold another 50, 16 NG's and 34 MAX to Shandong Airlines that will not appear on the books until the customer is ready. ANA has not booked its 777 orders as of late April. Some other customer promises exist and are without turning out any other WIP work orders. Boeing has a continuous momentum in both the sales and production arm of the corporation. Production turns directly to revenue. Sales are like pawns on the chess board that blocks an opponents move. The more pawns in play the less the competitor has to play with reducing its own eventual revenue.
If you were playing basketball in a corporate sense, Boeing has successfully put players in better position around the basket for a rebound. They have better offensive scoring from the guards. They are in a better position to win it all than its competitors. They are once again exceeding expectations.