Boeing is proving to be an increasingly productive company, with output from its plants growing 76.9% since 2011. The following table, based on Boeing data, summarizes deliveries in first quarter of this year and the prior four years.
Data from the first quarter of 2015 confirm the continuing growth in deliveries at Boeing, which needs to deliver more aircraft to recover from a $28 billion and growing financial hole on the 787 Dreamliner program.
The 77% growth over the last five 1st quarters is substantial, and a rate of growth we have rarely seen historically (outside of wartime production or the mid-sixties). 737 deliveries are the mainstay of the production, with the 737-800 model leading the way. Although 737-900ER deliveries have risen, they have been somewhat counterbalanced by a reduction in the smaller -700 models, while the -800 production rate is now above 30 per month in 2015.
In the wide-body market, the 747 and 767 lines see shrinking backlogs, and one has to wonder how much longer the 747 can remain in production, as even the Air Force One procurement was accelerated by a year. The aging twin-aisle 767 has been saved by the KC-46 tanker program, soon to enter production. 777 deliveries have primarily been the larger -300ER variant. The 787 production lines have shown good growth, with the second plant on line and well established, plus the added volume from a second model, the 787-9.
As impressive as this performance is, there is another aspect worthy of note. This would be the breakdown of that rapid production increase. The following chart shows the breakdown.
What we are seeing is a rapid rise in the number 737s being churned out of Renton, as well as a significant increase in the 787 line. Boeing plans to grow this again – from the 1Q15 40.33 per month to new levels of 57 and eventually 60 per month. Those are very big numbers. To provide a further perspective on the numbers, we broke down the data into percentage terms.
Today, despite higher production rates, Boeing is less dependent on the 737 than they were five years ago, when the 737 accounted for 83% of first quarter deliveries versus 66% today. The early stumble with the 787 Dreamliner has been replaced with a rapidly increasing delivery rate. At the same time Boeing has kept a steady pace for 777 deliveries primarily highly profitable -300ER. The 767s and 747s are increasingly marginal for Boeing.
The Bottom Line
Boeing’s delivery mix is changing, increasing its mix of higher-priced wide-body aircraft with higher margins. While Boeing may not be able to maintain production of the 777 at current levels before the new 777X arrives, it is increasing production on the 787 and catching up on deliveries for customers whose aircraft were deferred during that development debacle. While the 747 series appears to be on its last legs, the KC-46 tanker program will provide continuity for 767 production rates.
The good news is that Boeing’s mix is becoming healthier at the same time it continues to grow, with a better balance of wide-body to narrow-body aircraft. The question is how long that growth can be sustained, and whether a market bubble will burst with the next economic downturn for the industry just as production rates ramp-up to record levels.