With All Nippon Airways (ANA) in possession of the first 787-8, Boeing is upbeat about taking the first steps in its next big challenge—a production ramp-up—but hesitates about when the industry’s first composite jet will begin to pay off.
Boeing Commercial Airplanes President and CEO James Albaugh says production rates will notch up to 2.5 airplanes per month from the current two in November and reach 3.5 per month in “late winter or early spring.”
The bulk of that immediate expansion, maybe all of it, will come entirely from the company’s main 787 final assembly line here at its widebody headquarters north of Seattle. Line No. 46 is now being assembled in Boeing’s newest factory in North Charleston, S.C., but officials are not saying when the aircraft will roll out. However, 787 General Manager Scott Fancher says, by mirroring Everett’s line, the new plant will have the capacity to assemble at a higher rate than the three per month it is initially being called on to achieve.
Boeing Chairman and CEO James McNerney says the 787 will be cash-positive before 2020, a reference to cash flow on a unit basis and not to the program’s overall profitability. In the 787’s early days, when orders were piling up and schedule slips had not arrived, Boeing was estimating its backlog would last until 2015-17. A company official said it does not have an estimate of how far its current 820-aircraft backlog will last.
Although the company does not reveal program research, development and production costs, various analysts have called the 787 a $40-50 billion program for Boeing and its suppliers. They also have put its cash-positive break-even point at 1,200-1,900 airplanes.
The first 787-8—the eighth from Boeing’s production line—arrived in sunny skies in Tokyo on Sept. 28 after a rain-soaked celebration here for Boeing and ANA employees.
The 787 is the first airplane that ANA has launched, and the carrier’s executives have enthusiastically embraced it, despite waiting an additional 39 months to receive it. Boeing first promised a May 2008 delivery date.
“I cannot wait to see the day when the skies of the world are filled with 787s,” ANA President and CEO Shinichiro Ito declared. Taking note of ANA’s patience, McNerney said, in Japanese, “Thank you for waiting for this day.”
“I’ve dreamed of this moment for a long time—actually, for longer than I’d have wanted,” quipped Pat Shanahan, Boeing’s head of aircraft programs. The comment drew laughter from hundreds of mechanics and engineers as well as quality control, systems and test employees who gathered to celebrate the delivery. “As we all know, the journey here wasn’t easy or smooth,” he said.
Program slips are one thing, but technology gains are another. At Jefferies & Co., analyst Howard Rubel sees the company as ready “to convert its technology developments into a competitive and operating performance edge.”
Achieving a 10-per-month build rate will be a “substantial challenge” and one not achievable until final engineering changes related to the 787’s certification last month are incorporated into its supply chain, notes Rubel.
For suppliers, certification is a milestone that outshines the more transient celebration of a first delivery. The document is an official approval stamp of build processes and helps Boeing and suppliers establish what Spirit AeroSystems President and CEO Jeff Turner calls “a drum beat” that continues regardless of block upgrades. At this stage, “the risks of getting to rate are more known than unknown,” says Rubel.
Beyond the 3.5-per-month assembly rate that Albaugh forecasts for early next year, Rubel forecasts a monthly pace of five by the end of 2012. But that is just half of what Boeing wants by the end of 2013. “I don’t think there’s a chance whatsoever of getting to that rate,” says Teal Group analyst Richard Aboulafia.
He acknowledges that 787 production “is on the mend,” but says the company still must incorporate design improvements in Block 1 aircraft (through Line No. 21) as it matures an “entirely new supply chain and entirely new technologies.” Ten per month will be a record assembly rate for widebody jets, he notes.
On top of that, Aboulafia takes a wait-and-see approach to what adjustments Boeing might need to make with the airplane in service. “You don’t know how well it will perform until it does,” he declares.
If its service entry is as smooth as the 777’s, then Boeing will be OK. Fleet managers routinely refer to the 777 as having the least number of squawks (complaints) of any aircraft they have ever received.
Boeing is boosting 777 assembly rates to 8.3 per month in 2013 from the current seven. But the company has had nearly 20 years to perfect 777 final assembly. It redesigned the entire factory in the last decade and has more than halved total production days. But the 777’s mainly aluminum body has more in common with the 1980s technology 767 than it does with the 21st century 787.
Only recently has Boeing been able to step into the accelerated final assembly process it envisioned at the 787’s 2004 launch. The schedule slip is the result of some need for redesign, plus supply-chain issues. But the airplane’s most notable feature, its composite airframe, has not been a hurdle, says Fancher. “Filament-wound, single-piece composite fuselages have actually gone quite well for us,” he says. “We’re very happy with how strong they are and what they’ve brought to us.” He expects the 787’s technologies to be “the backdrop [for Boeing’s] airplanes for the next 30 years.”
But schedule slips have underscored the need for a focus on program management. “We’re working more closely with suppliers than we have in the past,” says Fancher. “It’s much more of a shoulder-to-shoulder approach.”
Boeing is starting production of initial parts for the first stretched 787-9, and is “on track” to achieve payload-range and empty-weight targets after completing the critical design review for the second airplane in the company’s new family in mid-September. The 787 is the 11th new jet that Boeing has introduced since the 707, which was the industry’s first successful commercial jet a half-century ago. McNerney proclaimed the new jet the biggest advance for commercial aviation since those days.
First deliveries of the 787-9 are set to begin in only 27 months, and long-lead items such as the production tooling are already under construction. These include the fuselage assembly mandrels for the two stretched sections of the 787-9 which is 206 ft. in length, or 20 ft. longer than the 787-8.
Although Boeing says its Block 1 versions will all meet the performance guarantees to individual customers, it acknowledges that the aircraft are overweight and suffering fuel-burn shortfalls.
ANA Senior Vice President Sutoru Fujiki says the heavier aircraft will be reserved for domestic operations, although the company has set the beginning of long-haul operations for early in 2012 with flights from Tokyo to Frankfurt. By the end of its current fiscal year next March 31, ANA expects to receive 12 787s. It is to add another eight by the end of fiscal 2012. This year’s delivery rates have been revised downward slightly to reflect softness in the Japanese air travel market since the March 11 earthquake and tsunami.
The Japanese carrier is one of Boeing’s biggest customers and relies heavily on 767s for domestic and regional operations. In December 2003, “the timing was right” for their replacement, Fujiki says. That was when Boeing made its initial offer of the 7E7, later renamed the 787. At first, ANA expected a large portion of its fleet to be the short-range 787-3, which would seat more than 300 passengers. Initially, Boeing expected the -3 to appear as early as the standard-size 787-8, which nominally seats 210-250.
But only ANA and Japan Airlines (JAL) showed interest in the 787-3 and Boeing dropped the model. Of the 55 787s it eventually ordered, ANA has set aside 15 in the stretched 250-290-seat -9 version. JAL is to receive all 35 of its 787s as -8s.
ANA bought the 787s as it was expanding well beyond its traditional role as Japan’s biggest domestic airline. The 787’s schedule slip forced the carrier to turn to 777s and 767s as substitutes. The 787s are to replace the latter. ANA is now the industry’s ninth largest airline by revenue and 13th largest by traffic. It has 126 domestic and 62 international routes, including nine added since 2010.
Both ANA and JAL are accustomed to using long-range aircraft to fly short-range domestic routes simply to take advantage of their high seat counts. One of Japan’s highest density and busiest city pairs, Tokyo to Sapporo, takes only 40 min. and was immediately assigned the 747 Domestics that Boeing introduced with ANA and JAL in mind soon after the initial 747-100/-200s arrived in the 1970s.
On its domestic routes, ANA has configured the 787 with only 12 business seats out of a total of 264. But for long-haul flights, it is seating 46 in its premium section and 112 in coach.
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