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Friday, April 3, 2015

Boeing 787 Net orders Jump Up By 30 Today, Hainan?

Could it be Hainan or somebody else? Its unidentified!




2015 Net Orders663-734110

Customers737747767777787Total
Alaska Airlines6----6
All Nippon Airways5---38
GECAS2----2
Korean Airlines---5-5
Ryanair3----3
Silk Way Airlines-3---3
Unidentified Customer(s)55--23289
2015 Gross Orders713-735116
Changes-5----1-6
2015 Net Orders663-734110



737747767777787Total
I think its Hainan since it documented a stock advice-commitment for 30 787-9, the other could be anyone.
Changes since last update: 31 new orders (Unidentified Customer(s) one 737 and 30 787s). Identified All Nippon Airways order for three 787s previously listed as unidentified. In the changes category, reduced 737 net orders by one.
 Winging It: 787 Program Data sheet for the 787 (adjusted with Boeings updates).

2011
2012
2013
2014
2015
Total
Beg Backlog 736 778 773 891 842 736
Delivered 3 46 65 114 30 258
Ordered 45 41 183 65 34 368
Ending Backlog 778 773 891 842 846 846
Back-Log Delta 42 -5 118 -49 4 110
Total Boeing 787 Order Book
Ordered Delivered Back-Log
Total All Time 787 1104 258 846

Thursday, April 2, 2015

The Tide Has Shifted To The 787-9 and Air India

Today it was reported by The Financial Express where the 20th 787-8 signals a sea change for Air India as it considers converting its remaining 787-8 orders into 787-9 orders. Air India originally ordered 27 787-8's. It remains to be known, if the 7 remaining will be 787-9's or a combination of both. However, it must make a decision by the end of April to gain the earliest slots possible for any 787-9 deliveries with some 2017-2018 slots open.
The Financial Express Quotes:

"However, if Air India decides to go with the Boeing 787-9 variant instead of the older version, deliveries will begin only by 2017-18. If the airline decides to go ahead with the older variant, the 787-8, it will get the twenty-second aircraft by November, the twenty-third by December and the twenty-fourth by early 2016.
Air India is slated to take the delivery of its twenty-first aircraft by June. The airline had in 2006 placed an order for 27 Boeing 787-8 (Dreamliner) aircraft. It took the delivery of the first Dreamliner aircraft in 2012.
The fuel-efficient Dreamliner aircraft are key to the airline’s return to profitability, according to the government- approved Turn Around Plan (TAP).
“Air India will have to inform Boeing of its decision to upgrade the order by April so that we can work accordingly to deliver the aircraft,” Dinesh Keskar, Boeing’s senior vice president (sales), Asia Pacific & India, said."
Maybe Air India was bit by the Hainan bug as it has 30 more 787-9 under consideration for 2021 deliveries. If so an earlier,  "Winging It" prediction was true when the news came out Hainan mention of a 30 Airplane purchase in its stock filing notes. Winging  It concluded Others would soon follow mopping up available slots for the 787-9 in 2021. See:

cross link: (Hot News Of the Day For Boeing)

"The importance of this intent underscores the order book dynamics that are now in play. A shrinking order book and slots have emerge as the motivation for jumping in with 30 787-9's with order is an urgency by Hainan. The Opportunity index has risen to a level where airlines are now in the backrooms negotiating for the existence of 787 slots. Opportunity index during 2014 was dead, and now after 114 787 deliveries from 2014 proving and the steady start in 2015. The light at the end of proverbial tunnel is well lit for wide body customers like Hainan who has jumped first. Others will follow as the pace will quicken during 2015."

After considering this planning announcement, it stands to reason the change order is far along the process. Earlier in the year, Air India announced, a Sale lease-back (SLB) combo tender open to leasing companies. Air India's proactive financial arrangements for its current fleet indicates future planning is in play where a 787-9 order is imminently in the works.

The only negative, Air India faces is the pause in its fleet expansion plans if it switches the remaining standing order 787-8 converted into 787-9. A two year delay is in play waiting for additional aircraft. It would slow its feet expansion schedule. Other financial considerations could be in play, but not likely at this time. Air India could continue with the scheduled remaining seven 787-8's and then make an additional individual order for a half dozen or more 787-9's within normal order book availability, or as Boeing's backlog would allow. Boeing could be the decider for that type of ordering sequence.

If they offer special discounts on either the optional change order of switching to 787-9's from 787-8's on the remaining unfilled orders, or making an additional stand-alone 787-9 order, it will completed in the next 30 days. Either way Air India seems to struggle with financing from its government or from its own financial worthiness.

However, it has gained a financial improvement from the 787-8 in service, and this could be the tipping point for this "Winging It" speculation. Has the 787-8 done its job turning around Air India's profitability projections enough? Can Air India sustain meeting its commitment for conducting a significant follow-on order, or will it complete a change order instead, on its existing books? If the answer is yes or yes (either way), by the end of April the Air India 787 family of 787 will expand it's fleet dichotomy in seat count and route range.


Wednesday, April 1, 2015

The All Important 787 Break-even POINT



"The Dreamliner 787 will be achieving breakeven by this year’s end, which is great news for investors as the planes were being sold at a loss due to increased development costs of manufacturing. This break-even, according to reports, is due to the fact that per unit cost of production is decreasing."

Okay the Dreamliner day of reckoning is coming in about 90 more 787 deliveries with this optimistic WSJ statement. My own predictions said it should be 2016-2017, way back in the day during 2012. However, production costs keep falling down a profitable slope for Boeing with its retired risks.

"I said prior in a posting, that I believe Boeing will reach Break-even when 150 (142 actual orders as of today's book) 787-10's are sold or delivered.  I don't know when that will happen but, I believe this can be done well before 2021, but not by 2015 (I was wrong on the 787-10). Boeing will have to exhaust a significant portion of its order backlog through deliveries by 2015 to meet that goal (I was right on that statement). However, by 2015 Boeing will have all risks retired, and certainty of "when it will exactly meet, the profitability barrier beyond 2015" (I was right on this prediction from 2012).  A 2015 forecast for the year 2017 from Boeing, is a better forecast than this years 2012 forecast for 2015. Two years from now a solid view to the future will excite the investor, and I believe Boeing will state it will make money by 2017 (I was wrong), (not the press prediction) during 2021. A financial cushion of time would lean towards 2018. Boeing will make money on the 787 project as a whole surging past its breakeven point late 2017 (late 2016)or early 2018 (2017)."

I was wrong with my own prediction made at the end of 2012. It will be the end of 2015 or early 2016 according to this WSJ quote today.

December 12 2012 Winging It Quotes:

"However, the press and financiers will have a collective moment of throwing cautionary tales out for the reading public to sell copies, while financial people love conservative analysis sold to investors. So 2021 becomes the outer time limit for a conservative target date for profitability. In the meantime, an investor has time for buy/sell;  knock you self out selling short, buying low, or dumping stock, because the crazies are running the market during any week or two period of time. But, long term investors are far more certain of success if picking a spot now and jumping in for a smooth ride.

The newspapers will continue to chase every little dust ball found on new aircraft coming out of the factory, until people stop reading those news reports that "made them look". This battle will "continue into infinity" as in some kind of "Toy Story".

Final points: To the investor, keep your eye on two big ticket items in your portfolio analysis.
·       One, the accumulation of new Boeing orders after post A-350 introduction, 
·       and how much money airlines are making flying their 787's."

Why I was not exactly on point for the break-even timing?

Accounting notes, adjustments and deferrals for the break-even analysis often reduce the cost accumulated during production or development within a program.  Some of those accumulated cost can be applied to other programs such as the MAX, 777X, or other programs. The production rate has achieved a remarkable pace of almost 120 units a year. A feat the 777 program never could sustain. The rapid acceleration of production, the retirement of risks, and R&D cost sharing all contribute towards a targeted time for a 2015 break-even milestone where the 787 starts making money for the investor. Boeing reached its ultimate efficiency in a very rapid progression faster than I could anticipate.


Its a A Horse Race For The Long Range Bomber Award.

The Long Range Strategic Bomber (LRS-B) competition may undo what a wartime enemy couldn't do. Eliminate a US military production capability without dropping a bomb. Boeing - Lockheed and Northrop-Grumman has been invited to the RFP bidding docket. A loss for Northrop-Grumman may spell the the end of an era leaving Boeing-Lockheed in partnership for all primary defense industry offerings for America. It may weaken our national defense industrial complex having a duopoly for all next generation sole source offerings in its industrial complex defense capability.

The F-35 program went to Lockheed and Boeing failed to impress its offering, mainly it didn't look like and efficient fighter, it looked nontraditional straight from Seattle's boat races. But it did what the F-35 could do just the same. Brass wanted military sex appeal over underlying performance measures.

Boeing Photo Credit


F-35 Photo credit Lockheed

Image result for f35

Northrup Grumman F-5 Last Star Fighter

F-5 Tiger

The Department of Defense must determine if it will carpet bomb a manufacturing arm of its industrial aviation complex. If it awards a proposed LRS-B to Boeing- Lockheed, this may be a death blow in this section of the military competitor realm. This condition must be researched intensively, during the award LRS-B process. How does Government get the best offer while saving strategic production of its four large competing companies. Its another twist to sole sourcing in the procurement processing where a winner may take-it- all, where the loser can no longer compete with future programs from the lack of military orders. However, the losing competition is necessary for the DOD gaining optimal outcomes in the military's bidding process into the future. 

Solution Proposal: All competing bid participants have a stake in the award outcome. The winning contractor must allow resources coming from qualifying competitive bidders (ie) such as stealth features, or other technological and  proprietary contributions from its competition . The primary awardee must share in the award with a 80%/20%  contribution/spit as an example in its development.  If the competitor can qualify by showing its technological advances as a sub contractor for the primary awardee. It can share risks, cost and advancement with the primary contractor as a specialist.

The intent is to keep the competition surviving during the process even though an award goes to the primary awardee, while the valuable loser is not lost through attrition within a multi billion dollar contract process. This idea may be rife with weaknesses, but having a sole source availability is dangerous going forward when needing new equipment without having other competitive industrial complex offerings with a bid. Northrup Grumman may be an endangered competitor.

Boeing.Com Alert ! Standard Reports is Changed!

Boeing has revamped its web page starting in April 1, 2015.

The orders and delivery page is completely changed in look but not function as you carefully consider each standard report.

Boeing Orders and Deliveries Link

In fact some tables download directly to excel or another spreadsheet format. I don't like change. I don't like getting old. But a better working Boeing interface is a good thing for all those who hang on to  Boeing change management reports. Spend some time between breaks, before your next water cooler trip and see what has changed. Time well spent when spinning a blog.

April-Boeing 1st Quarter Recap

The below tables represent a snapshot of Boeing 787 production pacing and overall sales for 787 family of aircraft. Even though the prior Winging It blogs  have used tables concerning the 90 day moving average, it was necessary for some simplification illustrating both total sales and backlog of the aircraft.

The first table is the big picture using backlog as the key indicator for production and sales. Many production bumps are contained in the numbers as well as those missed sales opportunities and Boeing wins. It is a solid and stable chart, which encourages the investor during the first four years as Boeing gained control with its 787 program, and it is growing into its promised potential.

The second table below illustrates whether Boeing has met its own delivery governance for a ninety day period. Boeing has met its governance during first quarter 2015 with 10 787 delivered on average!

Table analysis and notes:
  • Boeing sales has also maintained an ever increasing backlog during the 2011-14 time period, and should have a similar backlog by the end of 2015, when compared with its first delivery year backlog found in 2011. Boeing delivered 258 total 787 and booked a total of 339 new orders during the period charted. A net backlog increased by 81 787's from the 2011 to 2015 period. 

  • Boeing demonstrates a determination for meeting its production and delivery advice with 10 787's  a month delivery pacing, even after a typical Holiday production pause.

  • Program Snapshot Table since 2004 until March 21, 2015, demonstrates the steady build progress and continued sales effort. 



First Quarter 787 Inventory Comparison and Analysis For 2011-2015

   2011 2012       2013       2014       2015     Total
Beg Backlog 736 778 773 891 842 736
Delivered 3 46 65 114 30 258
Ordered 45 41 183 65 5 339
Ending Backlog 778 773 891 842 817 817
Back-Log Delta 42 -5 118 -49 -25 81


90 Day Moving Average Table

  01/31/2015 2/28/2015 3/31/2015     Results 
In Months Delivery 7 12 11 30
Moving Average 10
Goal 10
Goal Trend 0


Complete 787 program annual Order Additions and Delivery Subtractions 

Year Yearly Orders Yearly Delivery
2004 52 0
2005 197 0
2006 99 0
2007 269 0
2008 59 0
2009 24 0
2010 36 0
2011 45 3
2012 41 46
2013 183 65
2014 65 114
2015 4 30 Back-Log
Totals 1074 258 816

Tuesday, March 31, 2015

KC-46 Tanker Tanks Progress a Few More Months

The KC-46 Pegasis tanker still needs additional time as reported by the Puget Sound Business Journal. The March 26, 2015 article explains how additional time is required will not impede its ultimate delivery date in 2017. In fact, the tanker was scheduled as being fully loaded by April 2015. The date now moves to Late June (probably August) 2015. This three (probably five) month time bump is not serious during this stage of development. Other developmental progressions scheduled for the KC-46 tanker continue congruently with the delayed portion of the project. The workload shifts slightly when installation and validation of systems are carefully reordered. A first time production of any prototypical and systemic installation has the two headed conditions; of where it should be according to the plan; or where it actually is during the program in its reality mode. the KC-46 program progress is in reality mode at this time and a good thing too.

System stuffing in the KC-46 will be complete by August 2015 instead of the planned April 2015 deadline, including the tricky boom installation in question. Then its go time for flying its systems testing on the first 767 KC-46 2c. Early in 2016 will be the first of the 18 KC-46 completions, as it will begin assembly during this same period. Boeing will upgrade production copies on the ground during the testing phase until it ends.  Noting testing updates and risks retirement can be applied to the completed delivery queue waiting for final readiness, It gains back some time for Boeing's original delivery date for 2017. I only assume this from Boeing's 787 program, when they built 40 to 50 787's before final configurations, risk retirements, and updates were applied while they "rested on the flight line".

This first group of KC models may rest on Everett's flight lines until testing is complete.  It took several years until further 787 completeness was enacted, through its Change Incorporation and Rework Centers. It won't take several years for the military, since the 767 airplanes and its complimentary engines are a known and solid factor. It will only take weeks from installing the remaining ongoing changes accumulated throughout the program, as it chases the continuous improvement model. Upgrades are made when solutions are determined in process. It only has to consider new military systems interfacing with well developed Boeing systems. They have its arms around that consideration at this time.


Boeing KC-46 December 28 First Flight, Boeing Photo

All this was projected and promised in a timeline by Boeing to the Military. The phase of the project has moved to installation of all new system applied to the airframe. An earlier wiring problem with the schematic did not adhere to military redundancy and survivability codes. Five different power sources intersected at one point. The main electrical power wiring needed five separate routes not a junctions at one point, in case of a damaging or a coincidental hit during combat. This problem has been corrected, as it had added additional time into the project. This reinstallation compounds the time penalty as it affects the built-in slack time needed for such occurrences during a project. The cushion it had open for dealing with other "normal" developmental problems as it occurs is gone. As the schedule reaches closer to the development cycle conclusion, all the pent up delays are pushing out the first delivery window a few months.


Boeing Video KC-46 First Flight

The parts suppliers are having issues of timely delivery for essential refueling tools, as supplier design changes are encountered coming from both the military and Boeing engineering. This rolls back the time further as they are coping with the now tightened schedule. In response Boeing has deployed its personnel to various affected parts suppliers for shoring up critical mission parts, such as the aerial boom and the wing's flexible refueling pods undergoing newly required upgrades passed through Boeing to the supplier. Eight months of delay has been absorbed through the program from waiting for its suppliers who are making the necessary changes, thus making the initial fully operational first flight targeted for later in June. The Pentagon and Boeing are hoping for an end of June date going fully operational on the initial fully equipped test Tanker.

But a rule of thumb from "Winging IT" says 60 more days past middle June is likely, considering all the identified improved parts in the pipeline, and as all military systems become compliant with Boeing systems. Full implementation is yet to be achieved at this time until all parts and programming, flows into the assembly of the first four test frames. The Tanker status is in a "normal first time airplane manufacturing phase", as it experiences issues encountered for any military venture. Nothing here is showing up as a project stopper. The pentagon and congress should be pleased at this point, and they will go after "The Tanker  Project loose ends, conducting its part with due diligence.

However, Boeing is saying and the Air Force concurs, who is working closely side by side on this first flying copy, there is enough time to meet its 2017 deadline for an on time project conclusion. The news in this case, is really an inside look at any project churning out new technology and new systems concepts. The main understanding is realised by both parties. The estimated "contingent time slack" is gone, if it is to deliver in 2017. Both Boeing and the Air Force believe any show stoppers have been dealt with while the product schedule can be maintained, as the airframe is loaded with its all the secret systems. At this point I assume those systems have been ground tested or flown on test bed aircraft long ago. It remains to test on the actual first KC-46 frame fully loaded. Then it will build the first bunch.

Having the program this far along with so few major change-orders is a good indication the purchasing concept of using a well tested commercial frame is avoiding many of the time draining problems arising from an all new frame. Airbus is still working out its kinks on the A400 multi-tasking military transport after many years. Boeing will have proven engines, wings and 787-like avionics going in its favor before delving into the plug and play schemes brought on board  for the tanker. This is no F-35 clean sheet attempt. It purports to be the best of both worlds, proven ruggedness and all new advancements. Its a perfect military requirement.

Sunday, March 29, 2015

The 787-9 is the Giant Fuel Price Slayer

It is known that lower fuel price gives comparable status for the 777-200 with the 787 -9. In fact  Seeking Alpha Link has expressed with diagramming on whether the 777-200 can beat the 787-9 with lower fuel prices considering passenger load factors. Passenger load is defined as the number of seats filled on average compared to the number of seats available. If a 777-200 seats 316 persons and the load factor averages 85%, then it sells 268 seats each trip. If an airline sells that average, then the same number of seats sold fills 91% of a 294 seat 787-9.  The point is made through graphing, when the 777-200 at some point intersects with 787-9 profitability after fueling at the current lower fuel price. The article makes this point well.


Image result for 787-9
The reality is what is facing airline research teams when buying the 787-9. The 787-9 is the more real option in the long run. Prices will rise because Jet A potential is finite.

Simple observations:

  • Finite Oil Reserve
  • Fuel by Crops becomes more expensive from production expense.
  • Increased passenger demands increases fuel prices.
The theme above is fuel prices will naturally rise significantly and airlines know this fact. The current fuel price dip is a unnatural geo political economic condition brought by market imposition from oil producing nations. 

The main concept for buying the 787 during lower fuel price period comes from the over-arching theme, efficiency is for higher fuel prices. The 787-9 is the most efficient wide body flying.. It will slay Giant fuel prices. The airlines know this graphically, statistically and profitably. It was not made for lower fuel prices which have a temporary nature. It was made for swinging at high fuel price fastballs with the fat part of the bat.

Seeking Alpha feature goes to the detail making sure the reader understand whether KLM is better off with its 777-200 or 787-9. My answer is no, the 777-200 is only a placeholder for the 787-9 arrival. If it is chasing the moving low fuel price target keep the 777-200. Low fuel prices are gone by 2016. An order filled takes five plus years where chances are fuel prices are doubled over today's prices. The doubling fuel price effect hits the fat part of the 787-9 bat, and all today's graphs become a moot point. Where they become only an important what if graph.

KLM should be pondering a 787-10 purchase if it perceives any passenger growth within its business model. At 323 passengers, the 787-10 is within a passenger step growth pattern. Buying the 787-9 having a 91% capacity average indicates a need for the 787-10 if KLM grows it market. The 8,000 mile range 787-10 will touch all its current route destination with greater capacity than both the 777-200 and 787-9. The stable compliment is part of a natural passenger growth progression as the travel world continues to grow. The higher fuel prices puts a shine on the corporate apple if equipped right.

Saturday, March 28, 2015

Boeing's 100 787 Order Year Depends On Emirates and the Devil

Hainan    30
Emirates 70
Total      100

It is a stretch thinking Emirates will come through in 2015, booking more 787. However the robust and trouble free last twelve months sounds promising for Boeing. Tied up in the Boeing order quandary is Emirates penchant for the A380 and Rolls Royce engines. They, Emirates wants the A380 NEO with rolls engine. Dangling a new A350 order in front of Airbus as an incentive since it cancelled an Airbus order for 70 last year. Is this a form of airplane thuggery or just a way  of showing money talks as the saying goes?

Somehow Boeing got messed up in these dynamics with its 787 offering. No other Airbus A380 customer really cares about what Emirates wants as a counterpoint for additional Airbus A380 purchases. Also, at some point the whole Boeing strategy could come unraveled with an additional 200 or more A380 ordered by Emirates. Simply, Emirates three years down the road may decided having 440 A380 on the books is not such a grand idea after-all. That becomes a big Airbus risk with Emirates. They are hesitant ramping up a Rolls equipped A380 NEO for the sake of one customer ideas. Emirates counters with "we are talking to your arch rival Boeing" on some more 787, savvy.

Airbus is between a hard place and a rock with the A380s. It has a dwindling backlog and a saturation of capable airports for landing the giants. Emirates offers a compliant hub for that matter, but that only represents one half of the travel side for a connection. It still has to fly to a destination capable of handling the A380 that may already be at max airport capacity. There are many moving elements when ordering 200 or more A380NEO's fitted with Rolls Royce engines. Emirates may not trump the market with its own strategy. The 70 A350 it had canceled, may stay cancelled, and the threat of a Boeing order may become a reality. As much as Airbus would like never turning down a customer, it may have to to save itself from its own greedy aspirations, and from ruining the company in the long run.

Two hundred more A380 NEO ordered doesn't take Airbus past a breakeven point for the program, after adding in NEO cost and testing resources to the program. A NEO A380 comes too soon in the A380 life cycle, as the first of its type are too new and are far away in time from replacing during its normal life cycle. Follow-on orders, after a Emirates A380 NEO initial order are non existent. A prospective 200 Emirates order is a non starter for Airbus, and will drive any profitability to the loss column. The threat of a Boeing order is the bait where Airbus should consider this as a rational consideration. Emirates already cancelled Airbus once. Boeing shouldn't never count on seventy 787 from Emirates. It should count on selling 60 787 worldwide with its other customers for the remainder of 2015.

The flirtatious order book for Boeing is making a deal with the devil. They should message Emirates as a serious contender who doesn't want to be played with faux kisses and winks, as the real goal of Emirates is ruining Airbus for its own gain.