Boeing 787 Delivery Trends

| About: The Boeing (BA)

Summary

The backlog is being reduced.

787 customers are getting their aircraft faster.

The 787 demonstrates flexibility which keeps an attractive option.

Based on reader feedback we decided to add another Boeing (NYSE: BA) 787 post today - this one focused on deliveries. Let's get to the data. As the first chart shows, most (89%) deliveries have gone to airlines directly. Lessors account for 15% of orders and 9% of deliveries. Airlines customers are very important to this aircraft program and lessors, while important, less so.

For a yardstick, among Boeing's orders since 2000 through year end 2015, lessors account for 18% of orders where the customer is identified. As the next chart demonstrates the importance of lessors in Boeing's orders varies quite a lot by program.

Back to 787 deliveries. The following chart lists customers with deliveries through year end 2015. ANA is by far the biggest customer, but a lessor is #2. We think the customer base can be divided into three tiers; Tier 1 are the customers with 20 or more, Tier 2 are those with fewer than 20 but more then 10 and Tier 3 are those with less than 10. Looking at the order data, there are going to be some big moves among the Tiers.

The next chart breaks down the deliveries by world region. Nearly two-thirds (63%) of the fleet is based in only three world regions.

Next we look at how deliveries have been growing and see they are growing fast. Adding a simple trend-line suggests Boeing could be delivering over 200 annually by 2017. Boeing has not targeted that many deliveries though. The planned rate of 12 per month means maximum production of 144 per year. That being the case, 2015 production was at 94% of planned capacity.

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Finally, looking at orders and deliveries as well as the backlog, we see the following. It was in the eighth year of the program that Boeing started deliveries. Program hiccups are well known, so there is no need to rehash that here.

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However we note with interest that as the 2015 numbers on the trend-line showed, there was a delivery slowdown as production approached maximum. And in the backlog chart we can see that orders have not kept pace with Boeing's ability to deliver; the backlog has fallen since 2013. The backlog at the end of 2015 represents about five and a half years' worth of production, at maximum rate, which is a comfortable cushion.

Boeing initially set their 787 "accounting block" at 1,100 units in 2011 and then increased it to 1,300 in 2013. The current backlog and deliveries together are at about 70% of the revised accounting block. Boeing needs to sell another 386 787s to reach the magic 1,300. Based on a reasonable order rate of 100 per year, Boeing is about four years away from that hurdle. Boeing forecasts the market for small widebodies at 4,770 through 2034, so the program looks set to achieve profitability barring any more hiccups.

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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.