With a record number of airplane orders in recent years, Boeing Co. is ramping up production of its wide-body 787 Dreamliners both at its North Charleston campus and in Everett, Wash.
But what happens if the order bubble bursts?
Turns out Boeing has already factored that possibility into its production rates.
“One of the reasons we’re confident with the production rate adjustments and ramp-ups that we’ve already announced is that we factored in … historical trends,” CEO Dennis Muilenburg told stock analysts during a conference call last week.
Changes to customers’ orders — including deferrals, accelerations, debookings and cancellations — accounted for about 1 percent of Boeing’s production backlog of more than 5,700 planes during the past year. That is well below the 6 percent historical average Boeing experienced over the last 15 years.
“The decisions we’ve made to ramp up 737 to 47 a month, 52 a month, and then 57 a month and the ramp-ups we have planned for 787 all take into context these historical factors,” Muilenburg said. “If we were to see deferrals and cancellations begin to creep up, we wouldn’t change our plans. We’ve in fact designed our plans to envelope those historical averages.”
Boeing is increasing production of the Dreamliner to 12 a month from 10, split between North Charleston and Everett. That rate will go up to 14 a month by the end of the decade.
Muilenburg said he doesn’t see any indications that order deferrals or cancellations will return to historical levels.
“We continue to see strong passenger growth,” he told analysts. “Independent analysis is saying 6 percent to 7 percent globally growth year over year. And we’re going to continue to watch that and be mindful of it. But all of the trends right now support the analysis that we’ve done. And even if we would see some creep back towards historical levels, we remain very confident in the production rate decisions we’ve made.”