Is Boeing’s 787 Production Rate Sustainable?

by Douglas Royce, Senior Aerospace Analyst, Forecast International.

Boeing plans to increase production of the 787 to a rate of 14 per month in 2019. The company delivered 145 aircraft in 2018, up from 136 in 2017, and looks to be on track to make its goal for the new year.

The move is not without risk. Production of the competing Airbus A350 is ramping up, and the re-engined A330-900 has entered service, increasing competition in the segment.

While we think the existing backlog for the 787 is more than sufficient to support the higher rate in the near term, we also think Boeing can maintain the higher rate for only a short time at current levels of demand for widebody airliners.

While Boeing took orders for 131 aircraft in 2018, the manufacturer has averaged only about 90 net orders per year for the 787 over the past five years, well below a 1:1 book-to-build ratio at the current (or higher) production rate.

The backlog for the aircraft remains high (622 aircraft at the end of 2018, down only slightly from the year before), and it will continue to slowly shrink as Boeing increases production. We have also long built into our civil forecasts a mild cyclical downturn in the airliner market during 2021-2022, and the new forecast continues to reflect that assumption. Orders will be far below their long-term average during this period.

Assuming the backlog continues to shrink, by 2021 we expect Boeing to begin cutting the production rate, stabilizing at around 11 aircraft per month by the end of 2022 and into 2023. We believe production will begin increasing around 2024 and reach 160 aircraft per year by 2028.

Regarding the order breakdown between models, initially the 787-8 outsold the larger -9 by a wide margin, but in recent years -8 orders dropped sharply. By the end of 2018, Boeing held orders for 84 of its smallest model in its backlog, and Boeing is forecast to produce this variant at a relatively low rate in the future. Meanwhile, the 290-passenger 787-9 has become the most popular model in the family by far. We do not expect this to change during the forecast period.

Boeing launched the stretched 787-10 at the 2013 Paris Air Show. The -10 is longer than the -9 and seats 323 passengers in a typical three-class layout, essentially replacing the 777-200ER in Boeing’s product line. Deliveries of this model began in March 2018.

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