Story ID: GPmuilenburg10212015
Boeing’s Muilenburg Rebuts Talk of Widebody Bubble
By: Gregory Polek
Caption: Insists production rate will not fall below seven per month during transition to 777X
Word Count: 543
In an apparent effort to ease investor anxiety about the potential for a so-called widebody “bubble,” Boeing CEO Dennis Muilenburg insisted that 777 production rates would not drop below seven per month during the transition from the current model to the new 777X. Speaking Wednesday during his company’s third-quarter earnings call with securities analysts, Muilenburg cited factors such as “pulling ahead” automation to help build a bridge from the current 777 to first delivery of the 777X-9 in 2020. Now building 777s at a rate of 8.3 per month, Boeing estimates it will need to sell between 40 and 60 of the big twinjets a year to ensure the smooth transition it says it expects to execute. So far this year collecting firm orders for 44 of the current widebodies, the company reported that it has sold out its complement of 2016 delivery slots and roughly half of its slots for 2017.

“There’s been a lot of conversation about what the shape of that transition might be,” said Muilenburg. “We’re factoring in market demand [and] some uncertainty around cargo recovery...frankly, some uncertainty around Ex-Im Bank reauthorization. Those are some factors that can cause some customers to delay decisions on widebodies. So we’re mindful of that...We don’t see any scenarios where we would come down below a seven a month production rate during the transition.”

Muilenburg rebutted a recent assertion by Delta Air Lines CEO Richard Anderson that widebody prices will fall precipitously due to an oversupply not unlike that experienced in the real estate market starting some nine years ago, potentially resulting in ten-year-old 777s selling for as little as $10 million. “I’ll say that just based on our understanding of the marketplace and what we understand from our customers, that number is on the wrong order of magnitude,” said Muilenburg. “Frankly, the value of the 777 is holding up very well in the marketplace. It is a unique airplane, and in that 365-seat category there is no competing airplane out there; it’s a unique value proposition.”

The Boeing CEO did acknowledge that the company would likely “fire blanks” down the 777 line during its so-called Lean implementation, and that it would need to commit some of the airplanes on the line in 2018 and 2019 to flight testing. However, he insisted the numbers of airplanes not immediately assigned to customer delivery wouldn’t account for an inordinate or unusual portion of the overall number.

Muilenburg’s confidence in a smooth transition appears largely grounded in the company’s ability to apply automation into the 777’s fuselage build. In fact, he reported that Boeing concluded final testing and began implementing the 777’s Fuselage Automated Upright Build (FAUB) process during the third quarter. The new machinery employs automated guided robots designed by KUKA Robotics to drill and fill some 60,000 fasteners that attach the panels that comprise the 777’s forward and aft body sections.

The new process will use automated guided vehicles (AGVs) to move the components of FAUB into position, including work stands, fuselages and the robotic arms that drill and insert fasteners. The robots, positioned inside and outside the fuselage, not only drill the holes, but also act as a bucking bar and perform dynamic riveting.