Supply Chain Matters highlights this week’s commercial aircraft industry news that Boeing has landed a significant new order for 787 Dreamliner wide body aircraft.

 

Significant New Order Received

Commercial aircraft designer and manufacturer Boeing announced another significant aircraft deal this week.

The Government of Saudi Arabia is funding an order to acquire 78 Boeing 787 wide body Dreamliners. This order will be split between a newly announced national airline and an existing national carrier.

The new international air carrier is to be named Riyadh Air, which is reportedly procuring 39 Boeing 787-9 aircraft, with an option for 33 more. This new airline is being formed to compete with existing Middle East based international carriers Emirates and Qatar Airways.  The nation’s existing national carrier Saudia will purchase 39 Dreamliners with an option for 10 additional.

The combined deal is valued at $37 billion at list prices but typically deals of this magnitude are often discounted. Business and financial media reports indicate that this deal involved a considerable level of nation centric political influence and was likely a back and forth regarding whether the deal would involve Airbus or a combination of Airbus and Boeing.

This procurement further includes the aircraft being powered by General Electric engines, which is another boost to GE’s order backlog. Reportedly GE Engine’s unfilled order backlog equated to $135 billion at the end of 2022.

This development adds to the optimistic news surrounding the commercial aircraft industry and its associated global supply networks.

In February the industry basked in the single largest aircraft order ever, reported at a value likely exceeding $60 billion at list prices. The order was with Tata Group owned Air India for a total of 250 Airbus and 210 Boeing aircraft.

In December, United Airlines indicated the airline would buy 100 Boeing 787 Dreamliners as part of a deal that included Boeing 737 MAX single aisle aircraft.

 

Added Perspectives

As noted in our last commercial aircraft industry focused commentary, this sector has now transitioned from the demand shocks that threatened the future of the industry during the heights of the global pandemic, to one of now an accelerating pipeline of unfilled aircraft orders. Once more, prior to the pandemic, global demand for wide body aircraft destined to support international travel demand had dried up. With the current wave of new orders now involving significant wide body demand, the cycle has renewed. However, the industry supply network was not anticipating this shift.

Added Challenges for Boeing

For Boeing specifically, these latest new orders provide considerable good news, not so good news conundrum. The wide body 787 Dreamliner program has endured a number of component and manufacturing quality challenges, reportedly now taking four to five months per aircraft to address, with upwards of 100 aircraft yet to be modified for delivery on long standing existing orders. In February, completed aircraft deliveries were halted because of regulatory documentation issues. At the current time, the FAA has to sign off on each 787 aircraft delivery.

Boeing’s existing goal is to be able to produce and deliver three Dreamliners per month with a goal of upwards of five per month later this year. Yet, this aircraft continues to be challenged with ongoing supply chain component and labor shortages.

Boeing recently reported that the unfilled order book for the 787 Dreamliner aircraft stood at 575 orders and that likely does not include the latest Saudi order of 78 aircraft. Reportedly, production of wide aisle aircraft was sold out through 2025.

At current monthly production goals, the implication is that it will take over ten additional years to deliver the existing backlog of the 787 alone. Boeing and its supply network partners will have to seriously up their game in planning and execution, not to mention added capacity needs.

At the same time, the U.S. aircraft manufacturer cannot afford to take its eye away from the 737 MAX aircraft delivery challenges which have their own set of program and operational execution challenges.

 

Skilled Worker Shortages Permeate

Since the pandemic first impacted the industry, thousands of skilled workers have been let go, and that is having a significant impact as demand levels return.

Reuters recently reported that GE alone continues to struggle with supplier labor shortage and material challenges. Noted in the report was that in the fall of 2022 on the day after the Thanksgiving holiday, GE dispatched 12 machinists from its Rutland Vermont facility to assist a supplier in Arizona that had skilled labor shortages and could not add a second work shift.

GE CEO Larry Culp is cited as indicating that it is now a daily challenge to keep up with demand needs and that his senior leadership team “conducts a weekly review of the supply situation- component by component, supplier by supplier.”

Our readers can equate that to a war room or supply chain control tower scenario of tactical and operational planning. That is obviously not goodness, and the message is that many in this industry’s supply network ecosystem have similar actions to consider.

It is little secret that Boeing has and will continue to have a broader scope of multi-program operational, production and customer delivery logistics challenges. The question is whether it will garner necessary senior executive attention and leadership action.

Investments will have to continue be made in people, added technology and improved planning and operational performance. That may require added financial resources in an uncertain global economy.

Time will tell.

 

Bob Ferrari

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