In October we reported that Boeing would be cutting its production rate of 787 Dreamliners from 14 down to 12 per month. On Thursday we saw a prediction from a key stakeholder that the manufacturer might need to further cut its production – down to 10 aircraft per month. This is due to a slowdown in orders, particularly from the Chinese market.
Chinese orders absent
The prediction comes from the CEO of Air Lease Corp, John Plueger, at a conference hosted by Bank of America. Air Lease Corp is the eighth-largest lessor in the world based on in-service fleet size according to FlightGlobal. Reuters reports that Plueger sees the lack of orders from China as the key reason for why Boeing’s rate of 12 per month is unsustainable.
China is considered a major buyer of the 787. However, it hasn’t been buying the airplanes from Boeing recently and this could be a result of ongoing trade tensions with the United States. Whether or not specific tariffs are placed on Boeing exports, it would still be a politically unwise move for state-owned Chinese carriers to be seen as supporting American business at this time.
CNBC reports that Boeing CEO at the time, Dennis Muilenburg said the following in an October shareholder call:
“In the near term, as we have shared, the U.S.-China trade situation has presented challenges for our wide-body production plans…The lack of orders from China in the past couple of years has put pressure on the production rate.”
“Phase 1” of a US-China trade deal will be signed next week, on January 15th according to CNBC. If trade tensions ease and a better deal is struck in subsequent phases, could we see orders coming in? Only time will tell.
737 MAX production already halted
Given the ongoing and seemingly unending worldwide ban on the 737 MAX, Boeing has had to halt the production of MAX aircraft. Up until the production stoppage, Boeing had continued to produce around 40 of the aircraft each month. These aircraft, once built, have been stocking up in various Boeing facilities- including into employee carparks.
It’s because of the prolonged 737 MAX crisis that Plueger says Boeing’s momentum to develop a new mid-size airplane (NMA) “has diminished significantly”. The Boeing NMA is a direct competitor to Airbus A321XLR. “Until (the 737 MAX) is fixed and flying, forget about everything else,” Plueger says.
Currently, Boeing’s 787 backlog is listed at 542 aircraft. At a rate of 12 per month, if no new orders were to come in, we would be looking at just under four years of production. Decreasing the rate to 10 per month would add roughly eight months more. However, it is almost inevitable that more aircraft orders will come in – the big question is how many.
Do you think Air Lease Corp’s CEO is on to something? Will we see Boeing cut its 787 production rate in the near future? Let us know what you think in the comments.
We reached out to Boeing for a response to Plueger’s comments. At this time we have not received a response. However, we will update this article if any news comes in.