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concedes that the FAA's (and other airworthiness
regulators') emergency grounding of the 787 might
adversely affect the guidance when he says: "If [our]
assumption changes after we have gained greater
'fidelity', we will let [analysts] know."
The prediction for 635-645 commercial aircraft
deliveries this year takes into account Boeing's
planned higher production rates and the additional
production flow time the manufacturer has provided
throughout its factories and supply chain partners
as the 787-9 is introduced. "We've also forecasted
fewer deliveries from our Everett Modification
Center as we begin to work on earlier produced
airplanes that require significantly more work than
the changing core airplanes we delivered in 2012,"
He expects Boeing Commercial Airplanes
predicted 9.5% operating margin to be driven by the
higher delivery volume and continued strong core
operating performance, which likely will be offset
by reduced numbers of 787 and 747 deliveries and
additional investments in future business growth.
At January's analyst briefing, McNerney and Smith
provided further brief updates for Boeing's other
McNerney dismissed as "highly hypothetical"
questions about whether Boeing would consider
cutting 787 assembly rates if there were an extended
delay -- for, say six months -- in deliveries, which
Boeing has halted.
"That's very difficult to comment on; I can't [and
won't] predict an outcome". He said the specialised
nature of the technology involved and of the safety
investigation meant no "critical" resources were
being drawn from other Boeing growth programmes,
such as the 777X or 737 Max projects. There was no
"significant" drain on resources.
Asked if he were concerned that the 787 supply
chain might be more rigid than planned if Boeing
needed a buffer for design changes (to avoid a
huge inventory of aircraft subsequently requiring
major rework), McNerney said there was already
"some buffer in our planning". For example, the
787-9 had many unique parts compared with the
-8: "You do want to give the people on the lines
some experience with assembling the airplane
in a slightly different way with different parts and
Smith says that a buffer for the 787-8 is
unnecessary because "the 'plane's largely designed
and it's flowing. So we're beyond the place where
a major redesign is going to cause [supply-chain]
disruptions. It tends to be more of an issue during
the development phase".
McNerney confirmed that suppliers had not
been instructed to slow down deliveries or prepare
for a slowdown. Indeed, Boeing had successfully
increased assembly rate from two to five/month and
was "on track" to increase to ten/month by late 2013.
Two things account for the difference between
planned production of 72 aircraft this year and
60 expected deliveries, according to Smith. First,
this year fewer 787s than in 2012 would emerge
from the Everett Modification Centre, where
outstanding work is completed, and -- second --
the initial 787-9s would "have longer [production]
flow [times] as we come down the learning curve".
After 15 months in service by January, Boeing knew
the 787 "delivers" on the manufacturer's promises,
says McNerney. "Quality metrics, jobs behind
schedule, open jobs -- those kinds of indirect
measures of quality and delivery -- are improving
significantly at the rate that we anticipated in our
The 787-9 is progressing as Boeing completes the
engineering and design phase, with final assembly
expected to begin in mid-2013. Longer production
periods for the first few 787-9s will accommodate
learning and ensure minimised disruption while
achieving planned build-rate increases, says
The Boeing chairman says the business case
for the 787-10, which the company has been
"conditionally" offering, has strengthened based
on customer discussions and a potential launch
this year. The company has made "good progress"
toward a launch decision on the 787-10, according
to Smith."We are focused on a technical solution that
offers significant performance advantages."
The US manufacturer remains focused on improving
747-8 production processes and programme
profitability, while "closely monitoring the softness
in the cargo market", according to McNerney. With
less than a three-year order backlog at the current
two/month build rate, Smith says this means "getting
volume the old-fashioned way: finding customers,
working with them".
737 AND 737 MAX
Boeing will increase the 737 production rate to 38/
month before July and move to 42/month in the first
half of 2014, says McNerney. "The [re-engined] 737
Max development is tracking to plan with the firm
configuration expected [in] mid-year and entry into
service in 2017." Smith thinks the manufacturer is
"hitting all benchmarks at or slightly in advance of
schedule, [as is] engine partner Snecma".
McNerney reports "good progress [in] assessing
customer requirements for improvements" to the 777.
Boeing is studying "777X" upgrade variants dubbed
Series 8 and 9 that could be launched commercially
by year's end, before a possible industrial launch in
2014. "We have more work to do and that's a big
part of [our focus] in the months ahead."
The most likely design is increased capacity
and a new composite wing with new engines and
some other additional work, according to Smith.
"We're trying to put final touches on [and] to get the
business plan to where we need it to be."
McNerney acknowledges that "as derivatives
go" the 777X will be "a significant amount of work,
so it's not without challenges." Last year, the 777
production rate was increased to 8.3/month.
It's business as usual for Boeing despite
the 787's woes, says the manufacturer.
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