A Fast Ramp Up For The Boeing 787

Summary

  • Bad-case scenario spells a $7B shortfall, excluding unamortized tooling and non-recurring costs.
  • Base and iterated model shows balance shortfalls of $2-2.5B, excluding unamortized tooling and non-recurring costs.
  • 30 Deliveries expected for Q1 2017.

One of the articles that returns every quarter is the article about Boeing's (NYSE: NYSE:BA) ability to increase profitability on the Boeing 787 program. Over time, this article has become more forward looking, making it harder for people who are new to the subject to understand all of it.

Therefore, after feedback from a Seeking Alpha editor, I have decided to split the returning analysis into two versions: A basic report that explains the importance and progress to new readers and a more advanced version that is more suitable for people already familiar with the subject. By doing so, I hope to better assist people who are new to the subject as well as people who know the subject inside out. Since Boeing releases figures each quarter and its cash performance is tied execution on the Dreamliner program a report will be published each quarter.

The basic report for Q4 2016 can be found here. In this more forward looking article I will look at how Boeing's deferred balance might develop in the coming quarter.

The Boeing 787

The Boeing 787 is the airplane that Boeing launched after oil prices increased and the airline industry was coping with a crisis that followed the 9/11 attacks. Competitor Airbus (OTCPK:EADSF) (TCPK:EADSY) bet on the hub-spoke network with airport congestion as its main focus and launched the Airbus A380.

Boeing bet on the point-to-point network that required smaller aircraft such as the Boeing 787. The jet maker aimed to cut costs by 20% compared to the Boeing 767. The aircraft was revolutionary in almost every sense, and to date the jet maker has grossed 1,200 orders for its Dreamliner.

The airframe does meet its promises on fuel burn, but delays in the development have significantly increased development costs. In fact, development costs are so high they

This article was written by

Dhierin Bechai profile picture
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In-depth insights from an expert on the aerospace and airline industries
Dhierin is a leading contributor covering the aerospace industry on Seeking Alpha and the founder of The Aerospace Forum. With his Aerospace Engineering background he has a more indepth knowledge about aerospace products enabling him to cover a complex niche. Most of his reports will be about companies in the aerospace industry or airlines industry, comparing products and looking at market forecasts providing investors with unique and thorough insights. Dhierin has accumulated nearly 20 million views never failing to spark healthy and thoughtful discussions for investors and aerospace professionals.

His reports have been cited by CNBC, the Puget Sound Business Journal, the Wichita Business Journal and National Public Radio. His expertise is also leveraged in Luchtvaartnieuws Magazine, the biggest aviation magazine in the Benelux.

AeroAnalysis offers wide variety of services, ranging from providing data and cost models to consultancy possibilities. Check out our website for more information. Though we believe in the strong nature of our analysis, we are in no way giving buy or sell recommendations and advise everyone to do their own due diligence before making investment decisions.

Disclosure: I am/we are long BA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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