Monday, June 27, 2016

The 787 Delivery-Order Gap

Recently, it’s been noted that both Airbus and Boeing have dwindling wide body sales in the recent months. Even though on the eve of Farnborough Air Show during July, this could all change or be confirmed as a reality. So in an educational form Winging It has made a bar graph trending towards the exhaustion for the 787 backlog during the next five years. The explanation is below: 

Notice no forecasting line is included, only 2015 and 2016 YTD numbers. It also assumes projected production for each year going into the future at twelve 787 a month, where it may go to fourteen units a month if Boeing can sell more 787 during the next two years.

The Gold standard for the 787 is its backlog in total, where the blue is the number delivered actually in year one and during year two is represented as a YTD total. The grey colored bar is the Gap or shrinking backlog during the five year period. 

Year two is 2016 where only sixteen 787 are ordered and a projected 138 will be delivered after which 2016 is over, one hundred and forty-four 787's will be delivered each year per Boeing guidance. Partial year number during 2016 show sixty-two 787 delivered. 

Since no orders can be estimated going forward through the fifth year (6), Boeing has five years to maintain its backlog. Farnborough will add some 787 orders in 2016 (see bar graph 2), helping rise the orange bar and shrink the Grey for this year. The goal is to minimize the grey impact as found in 2015 or noted as year (1). Boeing can get into year (7) or 2021 with a backlog with no orders until 2021. 

The year 2016 currently is showing few orders to date indicating a slow wide body order year at the halfway point. There are about 10 747 not yet reported and could be added to the show. The 767 freight business is gaining altitude and the 777 remains a mystery at this time. I would expect the 787 will jump up another 30 units at Farnborough making the orange grow and the Grey bar shrinks. The Year 2020 will exhaust the Boeing 787 backlog if another is not taken, but that is not conceivable at all. Boeing will sell the 787 at a slower pace for the next 12 months. 

Once the backlog shrinks with a five year backlog number (BL-12 units a month) it will cause openings for orders during the early part of 2017 as the 787 Backlog falls below five hundred units on order, even if only no orders are booked between now and March 2017. The opportunity factor and airlines five year plans will then merge into orders during the early part of 2017. Any rising fuel prices will proportionally increase wide body demand. Boeing can and will maintain a five year backlog for the 787.