With just over a quarter of the year remaining, Boeing has taken orders for less than 20% of the wide-body planes it has forecast. The company has begun walking back its planned increase of 787 production, currently 12 per month, to 14 per month by the end of the decade. In Boeing’s conference call discussing second-quarter results, CEO Dennis Muilenburg said:
"Our principle here is to keep wide body supply and demand in balance. And we’re confident in the 787 program across that span of scenarios, and we’re going to continue to work campaigns to fill out to the 14 a month rate step-up, and we’ll evaluate timelines and decisions around that. But you can be very confident that whatever we decide, we’re going to keep supply and demand in balance."
In what may be an even more important decision, the company is now planning to reduce production of the current model 777 from 8.3 per month to 7.0 per month early next year, with an eye to reducing the rate to 5.5 per month in 2018. The 777 Classic, as it’s called, is a bridge to production of the new 777X, which is due for production in 2020. Last month the president of the company’s commercial division said that orders for the 777 Classic are “pretty solid” through the third quarter of 2017. According to Aviation Week, 777 production is about 55% sold for 2018 and 30% sold for 2019.
Boeing’s Chief financial officer told a conference audience earlier this month that over the next couple of months the company will have more insight into orders for the 777 Classic, “We’ll either solidify those orders and be able to [match the bridge plan], or we’ll modify the production rate, at least through that bridge.”
Through August 16, Boeing’s backlog of orders totaled 5,697 commercial jets, of which 4,404 are orders for the 737. The 777 backlog is 476, including both the Classic and the 777X, of which just 170 are orders for the Classic.
At a production rate of seven per month that backlog will last two years, but that leaves Boeing with no backlog until the 777X is in production. The company has admitted it needs 40 to 50 new orders per year for the 777 in order to bridge the production gap between the new and old versions of the plane. So far this year it has taken eight new orders.
(Paul Ausick - 24/7 Wall St.)