Editorial: A “perfect” production storm?

October’s news that China Eastern was cancelling its order for 24 Boeing 787s and instead ordering 15 A330s likely did not come as any surprise to Boeing. Surprise or not, however, it was a sobering moment.

China Eastern softened the blow with an order for 45 737s, but for all its talk of a weakening economy, the carrier still clearly anticipates a need for extra long-haul capacity or it would not have required the A330s.

Boeing executives—and Wall Street—expect cancellations as the manufacturer works through mitigation talks with customers. Given the continuing fragility of the economy, it’s inevitable there will be airlines that use the delivery delays as a convenient way to get out of their commitments. Others will see a chance to strike a good deal with Airbus. So cancellations are to be expected. But the China Eastern news is significant because until now airlines such as Singapore Airlines and Qantas have typically ordered more A330s while keeping their 787 orders intact. If the tide changes and the economy continues to stumble along its rocky path, then Boeing’s backlog could be hurt.

This is also where the impact of the well-documented 787
production woes could truly
start to show.

Boeing Commercial Airplanes president and CEO Jim Albaugh, speaking at the Aero Club in Washington in September, underscored the risks this industry now faces as it no longer churns out new aircraft types on a regular and continuous basis. “One of the reasons we had issues with the 787 was because we had not done a development program for 15 years—since the 777—and we paid a very heavy price for that,” he said.

Albaugh is correct. It is extremely difficult to restart such a huge and complex endeavor like a new aircraft type after long gaps, particularly with today’s rapid technology advances. But manufacturers of airframes, engines and avionics are going to have to tackle the issue and find smarter ways to operate because it’s not a problem that is going to go away anytime soon, if at all.

 There is good news this fall. Launch customer All Nippon Airways has celebrated taking delivery of the first 787 and begun services. ANA has stayed loyal and true to the program despite having to endure a 40-month delay. And Boeing still has over 800 orders for the 787 despite the 26 net cancellations excluding the China Eastern aircraft.

Boeing, meanwhile, has boosted 737NG production from 31.5 aircraft a month to 35 to meet demand. This will again increase to 38 a month in 2013 and 42 a month in 2014. The more efficient production processes it is using to make that possible have doubtless been learned in part, at least, as the manufacturer has worked through the 787’s problems.

There is also good news on the 787 production story, as our cover feature shows (page 28.) Boeing’s 787 factories are very different places now; more streamlined, better coordinated and more efficient. There’s still a long way to go to get from the current two aircraft off the line each month to the planned 10 by 2013 and many are skeptical it can be done. But the potential silver lining of this particular storm cloud may be that the cancellations provide some breathing space to help that
gap be bridged.

Those airlines still holding to their 787 plans and eagerly looking forward to their own in-service dates will be carefully monitoring that ramp-up progress.