Leonardo has warned that uncertainty around Boeing’s plans for 787 production over the remainder of the year could delay its aerostructures business reaching break-even but is struggling to get information from its customer on the longer-term implications of a new safety issue.
Boeing recently disclosed that in April it had uncovered employee misconduct relating to the falsification of completed safety checks for the widebody.
It has notified the US Federal Aviation Administration of the issue but has also slowed 787 output to allow inspection of aircraft still in the production system.
As a result, any planned production ramp-up has also been pushed back, with the airframer currently taking deliveries from Leonardo at a rate of around two to three fuselages per shipment, says the Italian group’s chief executive Roberto Cingolani.
“They are not taking them at the standard pace that we expected,” he says.
Leonardo manufacturers composite centre fuselage sections and horizontal stabilisers respectively at its plants in Grottaglie and in Foggia in southern Italy.
Rival aerostructures supplier Spirit AeroSystems on 7 May also disclosed that it had cut its forecast of 787 parts deliveries to Boeing this year, falling from 80 shipsets to just 50.
Cingolani, briefing investors on the company’s first-quarter performance on 7 May, said Leonardo was still in the dark regarding the implications of the safety problem on future 787 production rates.
“There is very little information we can receive from Boeing at the moment; we are constantly in contact, but they have changed top management and we don’t have a counterpart to discuss with,” he says.
A revised production plan should be available “by the summer, or later”, Cingolani adds.
Although the aerostructures business had a strong first quarter, delivering an EBITA loss of €43 million ($46 million) on income of €175 million – an improvement on respective figures of -€56 million and €151 million in the same period of 2023 – Leonardo is conscious of the possible impact of 787 delays.
It shipped 18 787 fuselage sections in the quarter and 12 stabilisers in the period to end-March – prior to Boeing identifying the latest issue – up from figures of 10 and 8 in the same period a year earlier.
Based on the assumption that shipments remain at the current low level then the aerostructures operation will “lose some €50 million in two years”, he adds. Break-even is currently targeted for 2025.
It is also preparing contingency plans for the division that will see staff from Grottaglie redeployed elsewhere within the group and other possible cost savings, says chief financial officer Alessandra Genco.
In addition, talks with its customer are ongoing with the aim of securing a rate rise on the programme. “We are continuing to engage with Boeing on getting compensation for the additional costs that we are incurring,” she says.
Leonardo hopes to switch to a pricing model “which is a reflection of the production rate” and takes into account the current “under-absorption of cost” from the lower output.
Despite the current setback, Cingolani points to the strong backlog for the widebody – Boeing data to the end of March shows it has 719 unfilled orders for the 787 – as a reason for future optimism.
In addition, the 787 work does not reflect the entirety of its aerostructures operation, he adds: “The rest of the aerostructures business works very well. [Grottaglie] is just one plant out of four – I think we will manage.”
