Boeing Raises 787 Dreamliner Production

Boeing Raises 787 Dreamliner Production

Boeing Raises 787 Dreamliner Production. The Seattle-based aircraft maker will increase production on its 787 Dreamliner in 2019 and reinforce a key accounting measure that will improve the aircraft's long-term profit margins, said Chief Executive Dennis Muilenburg.

Both movements point to Boeing's confidence that the carbon-based jet will continue to generate strong sales despite a difficult market for long-range aircraft. The aerospace company is starting to fill its 787 order book as far as 2022, and that is before a wide-body jet replacement wave that should spur sales in the next decade, Muilenburg said at a Morgan Stanley conference on Wednesday .

"This is an important step for us and another indicator of market strength," Muilenburg said of the plan to boost Dreamliner's production to 14 aircraft a month from its current pace of 12.

The current pace is already the fastest recorded on a two-aisle aircraft, and some analysts have expressed concern that a faster production rate would burn the 787 delay, followed by a tariff cut that would hurt suppliers. But a faster exit will help Boeing to generate more cash from its more advanced aircraft, as the company reduces production of the 777 before moving to a new model.

"It's just another positive for Boeing's story," said George Ferguson, an analyst with Bloomberg Intelligence.

The planemaker is riding up the Dow Jones industrial average this year while largely avoiding the development stumbles of the new aircraft that have plagued Airbus SE. Boeing is also doing well on a promise to increase shareholder profits now that the 787 program is finally generating money after a decade of losses. Following Muilenburg's pronouncement, stocks reversed a previous decline and advanced 0.5 percent to USD 241.74 at 3:01 p.m. In New York.

While sales of most large-body aircraft dropped last year due to cheap oil and an influx of cheap second-hand models, there is still a healthy demand for the 787, the first commercial jet made primarily from fibers of carbon spun in place of aluminum. The Dreamliner has logged 78 orders for aircraft this year, and that does not include tentative deals like the deal for eight of the wide-body planes announced Tuesday by Malaysia Airlines.

The Chicago-based manufacturer is also increasing the accounting block for the 787 it uses to calculate expected sales and aircraft profitability under the program's accounting rules, Muilenburg said. The company is adding 100 units for a total of 1,400 sales for the Dreamliner. If it does, Boeing will get a larger number of aircraft sales on which the nearly $ 30 billion in production costs accruing to the Dreamliner will be distributed.

Increased production rates and accounting changes will help Muilenburg move Boeing's commercial aircraft division closer to a "mid-teen" margins target by the end of the decade, Ferguson said. The 787 "is probably its worst performing program at the moment from the margin point of view," he said. "Getting that higher is a big deal for the company."