China: Boom, Sleep, and Dreamliners

China's economic boom has successfully come to rest without a complete global airline expansion. It lags behind what happened in China during its last decade of business. The Chinese market place is in a deep slumber soon to awaken. It has sweet dreams of buying the 787 Dreamliner as the new wealth left behind during its current nap are still traveling everywhere. Plans are in place for global expansion via the Dreamliner. It dreams of wide bodies filling the Chinese sky with 787-9's. There are a bevy of subsidiary airlines in hot pursuit before the next economic expansion arrives. 

CAPA report:

"Hainan Airlines Group reported (18-Sep-2016) the following traffic* highlights in Aug-2016:

• Passenger numbers: 4.3 million, +28.7% year-on-year;·        

• Domestic: 4.0 million, +27.9%;
• International: 256,530, +46.8%;
• Regional: 25,260, +4.5%;
• Passenger load factor: 89.8%, -0.9 ppt;·     

• Domestic: 91.2%, -0.3 ppt;
• International: 85.9%, -2.7 ppts;
• Regional: 77.0%, -8.6 ppts;
• Cargo volume: 31,070 tonnes, +6.0% 

• Domestic: 25,800 tonnes, +1.0%;
• International: 5220 tonnes, +39.8%;
• Regional: 50 tonnes, +18.8%. [more - original PR]

*Includes traffic for Hainan Airlines, China , Xinhua Airlines, Chang’an Airlines, Shanxi Airlines, Lucky Air Company Limited, Fuzhou Airlines and Urumqi Airlines."

Hainan is the test bed for Lucky Air’s march forward in the wide body market with its 787's currently moving passengers to and fro across continents. The plethora of airlines above is just scratching the Chinese commercial aviation surface and only coming from just one airline group! Boeing currently leads the Hainan pack.

Then of course there is a Chinese rebuttal to Hainan's aggressive 787 behavior.

Aviation Week:

Sources: Ruili, Donghai Sticking With 787 Plans

Even though Boeing is bemoaning a difficult 787 sales year showing only nineteen 787 yet booked for 2016, it will announce many more sales before year's end, principally coming from China. The potential for Boeing is a strong upside as players are lining up for a market move towards the 787. The pilot hole is exampled by the above statistic is from the Hainan "Airline Group".

The group is but a smaller player for China's wide body aspirations. The question before them at this time is to go wide or narrow as the above link will indicate. The airlines, Ruili and Donghai are actively pursuing Boeing 787's over the 737. This has been a back and forth debate for those airlines and it sounds like they have settled in on wide body aircraft for its final decision as reported in the link above.

Boeing should make forty 787 orders by year's end, judging by the on-the-surface Sales-in-progress currently reported since the first of the year.

Common Customers Boeing 787 Beats the A-350 Soundly

Have you ever wondered why airlines split its fleet between makers within the same types? Winging It has, and a startling realization emerges where Boeing 787's common customers with the Airbus A-350 reveals an interesting image. The Boeing 787 beats the A-350 with over 100 more 787's ordered since both offered its wide body aircraft. Below is a "Winging It" unofficial chart demonstrating where the battle is being fought between the two aircraft framing giants.

Fig. 1

Above is a list of the mid-wide bodied aircraft serving customers in common. The pink shows an Airbus advantage over Boeing with that particular customer.  Boeing has a 2-1 customer advantage over Airbus common customers where they have documented fifteen customer having a greater fleet order than Airbus. The inverse for Airbus shows an advantage over Boeing having only seven customers with larger A-350 orders.

The actual count for the makers show Boeing with 652-787 orders in common with Airbus showing a total of 550-A350's. The market is divided by a 54% 46% split with customers in common. Boeing sold 102 more wide bodies than Airbus having customers in common. The gap with common customers for both giants may increase for Boeing if Emirates splits its order currently under consideration.

Is Boeing Leaning Out Operations For The MOM announcement??

Along time ago, there was the book referring to operation "Market Garden" during World War II. Boeing has learned a lesson from operation "Market Garden" turned into the classic book, "A Bridge Too Far", and then on to the silver screen using the same book title.

Operation Market Garden "In a Bridge Too Far" Nijmegen Bridge, Holland

A quick synopsis for the deeper meaning for Boeing, and a pending announcement by year's end concerning the "Middle of the Market" (MOM) aircraft. It’s plain to see the A-321 is stealing away from Boeing's 757 and 737-9 Max. Boeing must launch a counter offensive called operation "Market Garden", but first a historical perspective.

"Prior to Ryan's book, Market Garden had been a classic example of victors writing the history. Popular histories of World War II of the time usually tended to not mention the battle at all, mentioned it in passing or put Montgomery's spin on it as being a "partial success".^[1]

A Bridge Too Far was responsible for bringing to the general public's attention the full extent of this massive operation, including a catalogue of errors and miscalculations, whilst highlighting the bravery of the participants." (Wikipedia)

Boeing is keenly aware of its resources and far reaching goals and is helpless to do something about it when it failed to address a 757 replacement five years ago. However, cooler minds had to prevail over the enormous sunk costs with three different programs. The 737 Max, 777X, and 787 Dreamliner while putting away the 757 Boeing replacement MOM into a box for further considerations of its family placement. It could only watch the erosion of its MOM market while surrendering to Airbus because of its over extended supply, personnel, and other over-arching resources (Financial) after developing the above named three programs.

The key components for a “New Market Garden for the MOM” has to go through an exhaustive check list before the European invasion of a 757 replacement patches together its family of aircraft:

• Must have a design
• Must have the Resources
• Must have the analysis of the Market
• Must have early commitments
• Must have new productions plan in hand

On the other hand, Boeing has marched forward with many of the checklist items already completed.

• It has a design
• It has market analysis
• It may have production space
• It is currently sourcing (supply chain, personnel, and its production plan)
• and... Is not a "Moon Shot"

The main thing Boeing is currently over extended until all programs are in hand.

• The 737 Max
• The 777 X
• The 787 

Boeing is six months away from diverting engineering resources away from various programs as they progress forward. The 787 program has had an immense release of developing personnel with a mature supply chain and production capability. The 777X program has a new wing plant in Everett which can unleash current 777 300-ER production workers in phases while concurrently building the 777X's within the same house.

Finally, the 737 Max program is almost a slam dunk at this time as Renton, WA "got it handled". The Max is nearing the start of full production rate and having success without any engineering mishaps. Boeing is poised for a December 2016 announcement for the MOM (757 replacement) or AKA: "Operation Market Place" going past the bridge too far between the single aisle and the 787 aircraft types as it crosses over the Rhine River going over Airbus.

Technology Risk and Reward Started With The 787

A long time ago the Business class expressed the concept of risk and reward. The higher the risk the higher the reward. A great model is the 787 program. The myriad amount of technological implements on the 787 provided a breeding ground for risk from its technology. Its counterpart, Airbus, brought forward a lower risk A-350 than the 787. It did not have the Li-ion Battery nor did it replicates Boeing's core electrical technology. Who know how short Airbus came in duplicating the Boeing 787 risk model. Both are made of Carbon fiber and perhaps that is where the commonality ends when researching the technological advancements spawned by Boeing.

Back to the Risk and Reward model. Boeing has had a proportionally higher amount of risk by the exampled events such as the battery melt down, engine issues and "teething woes without a hull loss. Airbus on the other hand has had fairly respectable clear sailing with a less endowed technological machine thus side-stepping the expectation from risk  but having a significantly lower reward compared with the 787 since Boeing reaches towards 1,161 787 sold compared with Airbus' 810 sold as of 2016 sales notes. The 350 units lead Boeing has over Airbus is a significant number illustrating the risk and reward thesis.

The stage is risk reduction for Boeing ending with a superior Aircraft. Customers are inherently risk adverse so sales recently for both makers are slumping in 2016. However, Boeing's 787 seems to not have reached its full technological maturation. The measure of this stage will be signaled when all issues on advanced systems are validated by many service cycles, pealing back any design or innovative risks when implemented within its frame.

A perfected 787 will exceed the perfected A-350 from the customer point of view. This is occurring as each model is tweaking its technological bundle towards perfection. Since Boeing chose the very risky high ground it will end up on top while validating its risk within the reward model. Boeing took a chance on high risk technology knowing it would have severe teething woes with that same technology, but will end up far ahead of Airbus once it emerges out of the "Risk" period. The reward is coming in the next five years as Boeing expands its world footprint with its sound and advanced proven technology. Airbus has some work yet to do in the wide body arena.

How The 787 Moves In Asia?

This is an update for the delivered region of East Asia's domain where it includes air space from China to New Zealand, not including any other South Pacific Islands. The Below Chart indicates the 787 Asian Footprint with potential seats on order and in service considering 100% occupancy. Today Boeing move about 37,000 passengers each day out of it current sales potential of about 82,000 seats currently held for or delivered through production. Boeing has about 46,000 more seats to go with the 787 models in its family of aircraft as the passenger market expands its reach and imprint with the 787.

Fig 1.

These are unofficial numbers as fleets change weekly and is shown as a demonstration signaling the 787 impact on East Asia's growing market. The air space race is on in the East Asia region and is making a significant world market impact with its orders confirmed for Boeing 787 aircraft.

The obvious observation is that the region's population with its ideal business/vacation appeal is driving an immense market for air travel and has only just begun. The above information only addresses the current order book and delivered seats for each perspective area of aviation. The Boeing effort has made a substantial beach head in this market.

The A-380 is Dying because It Tried To Kill The 747

The A-380 doesn't have any new significant orders in several years. In fact Singapore Air just canceled the lease on its first in service A-380 from ten years ago. The market is about to have a dumping of older A-380's from Airlines that have changed its business model. Emirates the leading customer in the world for JUMBO's, has no market to slough off its older A-380's. In deed it appears the death of the Jumbo is the prognosis. With no additional airports to go has put a ceiling on the aircraft's orders. It also has successfully ended 747 passenger frames from the market place.

It is a quixotic gesture when tilting at wind(s) mill(ing) about. The A-380 is showing its death defying ground loops with no help on the way.  

The 787 Has Reached Lean Production Numbers

An obscure topic in the corporate manufacturing is Lean production. It indicates efficiency, inventory management, and optimal investment within its Works-In-Progress Inventory. It also has far reaching implication for Boeing's over-all strategy of reducing backlog and upping cash flow, which in turn gives Boeing a far reaching strategy of giving customers a higher degree of product immediacy within that company’s own planning. The below Chart is a quick and dirty illustration of the Boeing production efficiency is reaching a climax for optimal outcome touching many aspects of Boeing's over-all game planning.

Fig.1: 37 units Works-in-progress (WIP) 8-2016 Data

Fig.2 The 11-30-2015 WIP Report is 45, 787’s

The above two charts show a reduction of Works-in-process 787's by about 21%. The number came down from 45 Dreamliners found in the November 2015 report of only having the current 37 Dreamliners in the same status. Several assumptions can be made from this decrease with production floor units.

1. Factoring the WIP reduction production floor churning, indicates more a efficient production line where Boeing does not need additional space caused by slow production. As the production rate per month increases the WIP numbers decrease.

2. It also indicates rising cash position as it delivers more 787 each month.

3. Additionally, an intrinsic value comes from customer satisfaction while opening Boeing up for more sales.

4. Finally, there is a reduction of production cost for materials, space and labor expended, which meets the optimal Just-In Time model for efficiency.

A final optimal number is derived by Boeing as it reaches 14 units per month with its work force, plant, and inventory. Boeing's always improving theme will squeeze the WIP number below thirty-five a month giving it optimal flexibility and response to the market growth. It is a distinct advantage over Airbus' production start-up for its own A-350's. They are still working the kinks out as Boeing grabs more sales in the upcoming months when its backlog dips below 700, 787 this month.  

Reading the 757 Tween The Lines

Boeing has yet to announce a 757 replacement in 2016 as many has suggest will come. It remains a big question for which Boeing has indicated it has time to consider. Now it seems it will say something by years end. With that a meaning is derived from this hint. Boeing prefers to work out all details about a "Tweener" aircraft first rather than build it first and then modify it later. This becomes reading between Boeing's lines when it sounds plausible. In other words the Boeing corporation new attack formula on aviation's market is getting it right on paper first, and then acting second.

It has been over ten years since the original 757 ceased production and Boeing has had plenty of time and resource ciphering the proposal. The "things change" factor is the ghost which continues to chase new airplanes that is not unlike tagging a rainbow. The 787, A-321, and other types confuse the picture of what passengers and airlines want. Boeing could have built a Tweener five years ago but airplane wars was in the middle of a big battle with the 787 and A350. Then the 777X assault began having a topping of Max-bits to boot.

The 737-9 is an unmitigated market pause suggesting Boeing needs more than a A-321 rival, it needed fulfillment with a "game changing" expectation instead, as customers have begun to expect from Boeing everything Boeing is "Game Changing". Once again back to the 757 replacement.

Now comes a tid bit, at the end of 2016 when "Boeing will know what it will do with a new class of airplane". A "Make it" rather than "break it" mentality. It should announce something the competition can't do at this time or into the next ten years. Build something special and they will come. Boeing has the parts bin, technology and design mechanism to do this, but it doesn't have the capital or risk managed for such a venture. Data will address the winds of risk before it will proceed, since it has so much on the production and R&D table at this time. Boeing should provide an answer by stating a solution having a five year time line this December. 

LOT Is Planning A Lot of 787 Airplanes by 2020

LOT is an early 787 customer with a lot more 787 planned by 2020. Currently Lot has a Boeing score card of: All Things 787 Data

It shows Boeing has only to build two more 787-8's for a total of 8 787-8 in its eventual inventory.

However, below comes this little snippet forward from ATWonline:

"LOT Polish Airlines said it plans to more than double the number of passengers it carries annually from 4.3 million in 2015 to 10 million by 2020.

In a strategy paper, the carrier said the growth will be achieved via a combination of short-haul expansion in Central and Eastern Europe, long-haul expansion to the US and Asia, and a growing number of transfer passengers at its Warsaw hub. The plan includes growing its Boeing 787 fleet from six currently to 17 by 2020."

Clearly All Things 787 would show LOT is Boeing bound with more 787, as this above ATW quote has inferred. Seventeen, indicates nine more 787 will be affirmed soon as they can be slotted into 787 production positions perhaps an unrecorded commitment  coming from an earlier time period where it committed unannounced to 787-9's once money and flying occured.

Well, Lot is ready and by the sound of the above news flash! Lots of 787 will be added to its fleet as the article has indicated. "Winging It" will pencil in Nine 787-9's for a while and call it not a bad Boeing year at all until an eraser is needed.

LOT Polish Airlines

LOT

787-8

8

6

2

2

Total YTD Boeing Sales Including Farnborough MOU's

New additions include PIA eight 787 just signed on 9-5-2016