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

Boeing Month Ending August 2016 787 Program Numbers (updated)

The Month of August was subdued with a production/delivery output of only ten 787's delivered. However, September is front loaded with three or four 787's for the first week which normally is a dormant period of time during each month, as Boeing has exhausted its potential during the end of the prior month. Using the gauge of what’s delivered vs the year completed a simple forecast can be made.  66% of the year has passed with 92 total deliveries. Which is right on pace for achieving 138 Dreamliners delivered during 2016.

Fig. 1

The ninety day moving average goal of having delivered twelve a month has been reach with a  12.67 averaged each month. Even though August was a sub goal month the two prior months of fourteen 787 delivered exceeded Boeing guidance. September will make or exceed Boeing guidance of 12 a month.

Fig.2

Program strength is indicated in the below fig 3. The 455, 787, delivered over-all establishes wide Body dominance over its rival Airbus. The backlog of 718 provides Boeing with the opportunity for more sales as it out produces, and has more availability for production slots as Airbus sorts out its supply chain problems for its A350 Model. It will be another 3-5 years before Airbus matures its production to the level Boeing currently finds itself.

Fig.3

The by model spread is indicative of program strength as the 787-9 has overtaken the 787-8 by far during 2016. 

Fig.4

The below figure indicates Boeing has a leaner production model as only thirty-nine 787 are in process at one time. Prior to this Boeing has anywhere from 48-52 787 in the production mode at one time. The year 2016 is showing it has reduced the production process by about 10% body’s in-line at one time thus indicating a smoother and faster build flow.

Fig. 5

787 Orders are Fomenting in the Background

Qantas is going for forty-five more Dreamliners in 2017 or there about. China has indicated a lust for the Dreamliner, and a large order for 787-10's is hanging in the cusp from the Middle East. All this spells a 787 bounce after 2016 or during the remaining of 2016 order lull for this type.

Customers have suggested orders in the making for this, the 787. If all things are optimistically considered, Boeing could harvest 200+ more Dreamliners for its books by 2020, thus bringing its over-all total beyond 1300. It’s the magic number for Boeing for reaching a break-even over its own 28 Billion money pit.

In reality there will be some lost orders and some surprise orders yet to materialize, but the main thing Boeing has an active back stage changing its outlook. Qantas is looking for a per plane profit for its experimental operational fleet of eight yet to be delivered 787-9's, before it jumps into the order bin again for Boeing. Can Qantas make money with the 787-9 for its type of routes and customer base? 

It was noted they canceled the last of its ordered A-380 from a capital and passenger squeezing perspective from its financial planners. It is also noted the 787 makes money even with struggling operations such as Air India.

Qantas can't find routes filling-up the giant A-380 when holding Australians and others for vacation. However, they are more likely filling and flying the 787-9 while making a better profit per seat than its A-380. That is the business model, and yes the few 787-8's it now holds with subsidiary  Jetstar (11), makes Qantas a sizable profit from its 787 wide body segment it currently holds. Time is the play that must be acted out, and not by the Boeing 787-9 performance metric it needs. As it is some kind of excuse for not placing an order at this time. Qantas has nothing but time for leveraging an efficient and revamped operation from the former times of lost values. 

The 787-9 will of course seem luxuriant against the Jetstar's 787-8 fleet of eleven. Five years ago Qantas announced it would buy a boatload of 787-9's, such as about 35 of its type. Then it cancelled the lot during August of 2012. By 2015 it wanted a mulligan order delivering in 2017 with its 787-9's.

Australian 2015:

"Four of the fuel-efficient Boeing 787-9s will be delivered in the 2017-2018 financial year, with the next four from 2018-2019."

The order is for eight 787-9's, which are awaiting a Qantas review for the in-service metrics for 787-9 efficiency and what it contributes towards a positive financial bottom line. We all know the outcome of that profitable metric. Only Qantas fails to see what the outcome will be until it flies select routes while introducing this type into its fleet, and during its replacement with the venerable 747-400.

It’s a reasonable and appropriate business check, however there are already over 400 hundred 787 flying examples around the world answering the Qantas question. The 787, no matter the model type, makes money if you fill the aircraft. That is Qantas real question. Can they fill an airplane for long routes more than it will run the 787 efficiently? 

The nation’s airline must answer that question as Qantas reformulates its offering. The A-380 is at max usefulness for Qantas in Australia, as there are only so many Australian's who may potentially fly and an unlimited number of passengers from around the world wanting to travel to Australia where the A-380 can't land. 

The test must be made with flying customers no matter the aircraft manufacturer/type providing the aircraft. Australia and its visitors will grow in the Qantas bet. This is just one example of a Boeing customer who has a pending a sizable order.

The second big time operator in search of an aircraft is found in the common suitor for a big frame, Emirates. It is in search of a big aircraft when its main leader, Tim Clark reports:

"Clark says the performance offered by the new-generation widebody twinjets "gives whoever has them great potential". (a reference with a choice between the A-350 and 787-10) 

It’s between Boeing and Airbus of course and the mark is for up to 100 aircraft such as the Boeing 787-10.

Emirates is number crunching its way into nirvana with making its choice. It has already taken two years and no decision has been made. One can only conclude the decision has already been made and it awaits some timing to align with its order. 

A team of accountants know the answer already. In both the aforementioned cases the customer controls the clock. The only concern for Emirates is thrust with its heat and range for the aircraft. The A-350 has better range than the 787-10 but for how many people? The 787-10 has purported enough thrust for hot conditions. But is it limited by certain weight conditions restraining a certain passenger count? Boeing could give the 787-10 more seating space while reducing take-off weight, a common configuration for routes and conditions.

No one is saying. Emirates Tim Clark could be milking the clock for a best offer from either, when in fact he knows what he needs at this time, but he is holding his cards close to the vest. My own conclusion is concerning the backlog for either maker or when it can deliver. The race is in the 787-10 development and build spots and for either manufacturers programmed build line-up. 

Airbus has not solved its production line woes where Emirates would have already pounced into some build slots if it could. It’s waiting for either manufacturer to preposition itself for Emirates time table by completing air frame development (Boeing) or completing production efficiency (Airbus). The forth coming order expects a long range first delivery time by 2020, and beyond, and not necessarily in a continuous stream. 

It is also waiting for a manufacturer presentation of a year by year delivery schedule keeping pace with Emirates growth and replacement needs. Guessing is the best estimate for that answer. I can see Emirates wanting ten aircraft a year for ten years starting in 2020.

Who can even do that at this time after studying respective order books? It can be done only by the order book natural churning where other customers cancel or financial miss-fortunes of an airline delays a delivery order. Could an airline like Emirates fill in after it becomes a risky promise when a framer offers production room? 

Airbus would like to even make ten A-350’s in a half year at this time thus it has clouded up its order book. Advantage goes to Boeing as Emirates waits to see what can be done on the delivery table before it orders.

Boeing bullet points toward winning Bid for the 787-10;

·      Delivery slots

·      Development timing

·      Model fit

The A350 Is Becoming Late At The Gate

Airbus is seeking making fifty of A-350 during 2016. They have delivered only fifteen to date during 2016. The month of August is a French sacred cow for vacationers on the continent. Airbus is desperate to offer overtime and work to the vacationers at the plant to meet production goals.

Quoting the press, "“It would be a disaster for Airbus to miss its 50-aircraft target. The costs of the A350 programme aren’t coming down and delayed deliveries mean airlines seek compensation, so it’s a double whammy.” 

What's a company to do when escaping the inevitable of sub fifty production? Boeing is making fifty 787's every four months without the desperate call for immense overtime. In real time Airbus hopes to build four A-350's per month, but it even may fall short of that goal. Its customers who are anxious to get their hands on the A-350's, may in turn opt to say, "We ain't going unless its Boeing", and line up with the recent 787 production surge while tapping into the shrinking Boeing 787 backlog, which has shrunk under the stumbling Airbus A-350 backlog.

Overtime is the stated strategy, and then no vacations in the south of France the final penalty. Airbus has long said its supplier chain is the problem where they all of a sudden, can put the peddle to the metal and surge forward to fifty by year's end. The suppliers carefully worded its response to Airbus, "we are capable and ready for your production pace". 

Who’s correct in this problem? Is it a seasonal problem or a long standing production flaw in the Airbus scheme of things? Airbus said they could reach Boeing like production numbers from three years of first delivery back in 2014. Year end is rapidly closing with a paltry fifteen bodies in 2016 so far.

Customers can't plan anything with this Airbus response of so few A-350's and having a larger wide body backlog than Boeing is because Boeing it is making so many. Not only is the A-380 languishing in the market and production line, it appears customers have a way out of its A-350 dilemma from its slow delivery pace by penalizing Airbus. The answer comes back to overtime in the month of August and cancel your vacation plans French workforce. "C'est la gerre", Boeing has been ramping up with a very successful air frame and Airbus is stuck in the French mud and not going south of France just as yet.