Boeing executives acknowledged on 21 October that the current 777 production rate may not not sustainable over a four-year bridge period until a re-engined and re-winged version of the 20-year-old widebody hits the market in 2020.
Although some analysts are forecasting that monthly 777 output will drop nearly 40%, Boeing chief executive Dennis Muilenburg sought to establish a more optimistic baseline for any future rate cuts.
“We don’t see any scenarios that would take us below a seven per month production rate,” Muilenburg says.
Muilenburg’s theoretical floor, representing a 15% reduction, could become reality early next year, when Boeing must begin ordering parts for 777s that would be delivered in the latter half of 2017.
To keep the line humming at a 8.3 per month clip through 2020, Boeing would need to fill about 200 production slots combined in 2018 and 2019. An estimated 43 production slots are currently claimed during that period, according to Flightglobal’s Fleets Analyzer database.
Alternatively, lowering the rate to seven per month after 2017 would reduce available production slots 125, including the 43 already claimed. That would give Boeing two more years of sales activity to fill out the bridge.
Muilenburg repeated Boeing’s claim over the last 12 months that it only needs to sell 40-60 777s per year to make it through the bridge.
But other developments could still make Boeing’s seven-per-month rate minimum a challenge to sustain. At least 45 777-300ERs are scheduled to come off lease during the same time period.
Such a sudden glut of long-range widebody aircraft re-entering a market already depressed by airlines preferring to wait for the more fuel-efficient 777X could cause further rate cuts, says Rob Morris, head of Flightglobal’s Ascend consultancy.
“A rate cut is inevitable to avoid a surplus of 777-300ER in the market over the next few years, which would have negative consequences for values and lease rates,” Morris says.
Ascend forecasts that Boeing will deliver 64 777s in 2018 and 62 in 2019, including both the passenger-carrying 777-300ER and 777 Freighter, Morris says. That represents a monthly rate of only 5.33 in 2018 and 5.17 in 2019, significantly less than what Boeing is now calling the minimum.
But Boeing also acknowledges that seven is the minimum for the monthly production rate only. That figure does not include the effect of Boeing’s plan to “fire blanks” down the assembly line, in which a production slot is left intentionally empty as a new model flows into the production system.
But Muilenburg suggests the number of production blanks will not be significant ahead of the 777X debut on the assembly line in 2018, calling the number “an incremental” portion of 777 output.
Despite acknowledging the potential rate cut, Muilenburg still maintains that overall widebody demand remains high. He notes that global passenger traffic growth remains strong, the rate of order deferrals and cancellations remains at a historic low and demand for replacing existing aircraft is still high at about 40% of the overall sum in Boeing’s 20-year outlook.
Source: FlightGlobal.com
