Boeing's, Dennis Muilenburg, has surveyed the airplane making business and states, it has taken necessary steps towards any economic downturn within the markets before it happens, and Boeing continues with a robust production schedule for its aircraft. Central to this, is managing its backlog while using market pricing for its order stimulation.
“The decisions we’ve made to ramp up 737 to 47 a month, 52 a month, and then 57 a month and the ramp-ups we have planned for 787 all take into context these historical factors,” Muilenburg said. “If we were to see deferrals and cancellations begin to creep up, we wouldn’t change our plans. We’ve in fact designed our plans to envelope those historical averages.”
Central to this quote is the many years prior to this pronouncement Boeing realized its backlog was the key to managing not only its cash position, but its market position as well, and it then at the time Boeing demanded a backlog reduction to achieve its long range goals. Boeing has positioned itself for managing cash flow through its production output and it is affecting the market through a more flexible backlog, motivating customers to place orders. The A350 is being anxiously watched on the production floor by its customers.
Having a flexible backlog with a robust capacity allows Boeing some power brokering its ways forward. The Boeing five year plan has completed pushing Boeing ahead of Airbus' through its own 787 family of aircraft. If you order an Airbus class aircraft from its single aisle to duo aisle there is a longer wait for the majority of its aircraft. Boeing established a flexible backlog during the last five years where Boeing is producing forty-two 737 a month and another twelve 787 a month, surpassing the Airbus A350 production capability. Eventually, Boeing will produce fifty-seven 737 a month and up to fourteen 787 a month in the next four years. Having a backlog supporting that productivity is what Muilenburg is seeking. A stable Boeing cash flow also offers accommodations for its customers own five year plans.
The past Boeing problem was the expensive start-up for so few 787's a month coupled with a huge backlog of over 1,100 787's in 2011. They had an inflexible backlog as potential customers sought out the A350's having easy delivery slots clear back in 2011. Having a production condition which accommodates any customer's financial plans within a five year buying program, sell airplanes. Boeing was out there with a 7-10 year window for its potential customers and that condition hurt Boeing’s market plan.
Boeing needed cash, and production was the means for that cash. It began ramping up the 737 production rate matching the Airbus single aisle production rates five years ago. Boeing’s production commitment has finally paid-off as the 787 program has reached a maturation point of making its worth of twelve 787's a month and another forty-two 737's a month. The wild card was the 777 program as it made about nine 777 a month. The 747 production became a value added to Boeing's portfolio. The 767 has transitioned to freighter and military mode with a combined backlog of fifty freight and 179 KC-46 totaling about 229, 767.
The long range production planning allows for some seasonality within its marketing program. The seasonality factors refine projections using history and making fairly accurate outcomes by assuming where and when the orders will come.
Muilenburg has those projection in hand and sees if Boeing maintains its due diligence producing aircraft it will expand its sales over time. This is where prognosticators and Bloggers earn their keep. The industry sense is that Airbus will have its moments as well as Boeing will too. The latest example is the split order with China Eastern for 15 787 and then 20 more A350's. Splitting the order is an historic leverage of both Boeing and Airbus as both have needs for more orders from its respective programs. China Eastern had no bias only to the best dollar value and how it would fit into its plans.
In the above example it is not who has the better airplane moreover who made the best deal, and it seems that China Eastern did that when not knowing how it will turn out in the long run. Boeing has entered into a new 787 age. All those buying the 787 are now measuring how well its decisions were for buying the first aircraft. As it now stands there are new margins on balance sheets point towards a 20% better margin with its 787's in operation. Even Air India has found room for a recovery with its government and the use of the 787's even though they advertise their own incompetence operating the 787. They are beginning to get its arms around the 787 with improved operational execution for its 787. They can't live with it or without the 787 at this time and that time is changing finally.