Boeing Commercial Deliveries To Drop in 2016

The start of a transition from the Boeing 737NG to the 737 Max on Boeing’s Renton, Washington production line and a previously announced cut in production of the 747-8 to just six per year will account for a majority of a some 20-airplane reduction in projected commercial airplane deliveries this year, according to executives speaking during the company’s quarterly earnings call on Wednesday. After delivering a record 762 airplanes last year, Boeing now expects to ship somewhere between 740 and 745 in 2016.

Boeing CEO Dennis Muilenburg said the transition to the 737 Max will account for a drop of roughly 12 airplanes, due in part to the need to build two Max test articles and “build ahead” some airplanes for delivery in 2017.

“This year you’ll see a bit of a transition because of the Max [and] a temporary reduction in revenue, top line if you will, as a result,” said Muilenburg. “But we can tell you very clearly that our long-term view here is increasing top and bottom line performance and cash growth year-over-year.”

In fact, Boeing announced plans to increase 737 rates to 57 per month in 2019 following a move from 42 to 47 in 2017 and from 47 to 52 in 2018, reflecting what Muilenburg characterized as a fundamental strength in the marketplace. Although plans call for 787 Dreamliner production rates to increase from 10 to 12 this year, shipments will remain basically flat at some 135 due to natural shifts in delivery timing. The company expects book-to-bill ratio to again reach 1:1, said Muilenburg, suggesting roughly flat unit sales. This year Boeing reached its 1:1 book-to-bill target with late sales in December that raised its net total to 768.

Separately, Boeing confirmed that the transition from 777 to 777X production in Everett, Washington, will require it to lower 777 rates from 8.3 to seven per month in 2017. Notwithstanding the reduction, Muilenburg cited continued strong demand for the widebody, reflected in a sellout of delivery slots in 2016, an 80 percent sales-to-delivery-slot ratio in 2017 “a healthy position” for 2018. Boeing has booked firm orders for 101 777s over the past two years, including an order for six from Air China earlier this month. The 777 backlog now stands at 224 airplanes while the 777X orderbook shows orders for another 306. “We indicated last year that we did not anticipate the production rate on the program going below seven per month,” said Muilenburg. “In solidifying our production plan over the last few months we can confirm that view.”