Podcast: Clearing The Way For A 787 Rebound

FAA okay to re-start 787 deliveries ends a long saga, but now Boeing has a new problem to worry about. Listen in as our specialists break down the situation—and the numbers.

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Rush Transcript

Joe Anselmo:

Welcome to this week's edition of the check six podcast. I'm Joe Anselmo, Aviation Week’s editorial director. Late last Friday, Aviation Week’s Sean Broderick broke the news that the US FAA had signed off on Boeing's plan to correct 787 production problems, clearing the way to restart deliveries of the widebody jets this month. And to call the FAA’s action a big deal is no exaggeration: Boeing has delivered just 14 787s in the last two years and none since June 2021. The development came as great relief to investors, who sent Boeing stock up about 6% on the news. So how many 787s were stuck in the delivery pipeline, how long will it take to get them all delivered. and what's the latest news in the certification of two 737 MAX variants, the Dash-Seven and Dash- 10. Joining us to explain it all are Sean Broderick, along with one of Aviation Week’s premier numbers guys, fleet flight and forecast manager, Daniel Williams. Sean, break this down for us. What's it all about?

Sean Broderick:

There's a lot going on. It's August, but you know, aviation, at least US aviation is certainly not taking a summer holiday. So, on the 787, what has not happened yet, but we expect to happen very soon is actual first deliveries. At least it hasn't happened as of the recording of this podcast. What did happen last Friday, and what we were the first to learn, was that the FAA finally signed off on a months in development plan that Boeing had to come up with, to identify and demonstrate how they were going to mitigate production problems on the 787 aircraft that had been discovered, boy, what are we? 2022 now, three years ago. Say about 2019 Boeing, some small, literally small production issues started to crop up on the airplanes. Things like how major pieces of subassemblies fit together, gaps that were created when fasteners were tightened down. There were a lot of them. And as Boeing started to look into the issues, they found more.

So what they had to do was basically [be] convinced [that] Boeing had identified all the issues, that there aren't going to be any more issues cropping up. They understand how to identify which airframes have which issues. And they figured out how they're going to solve the problems, fix the problems, repair the problems so that each airframe meets Boeing's design -- conforms to the minimum standards to get the airplane out the door to meet FAA’s requirements. As you said, I mean they stopped delivering, stopped handing over airplanes more than a year ago and production slowed from five a month to what? One a month now. And really Boeing was focused on getting this problem solved so they could start pushing them back out the door.

            That's what they finally have in hand. Still to come as an airplane by airplane plan, to identify the specific issues and to fix the specific issues. That's got to go one by one on each airframe. And assuming that goes well, then the FAA will handle an inspection. Boeing was doing these pre-delivery inspections before, the FAA is going to do them going forward indefinitely. Same as they're doing on the 737 MAZ, and deliveries will start again probably this month, probably in August, probably very soon. So that is where we are today on the 787.

Joe Anselmo:

So we've been going through the 787 crisis for a long time. So can you give our readers a quick refresher about what this is all about. How does an airplane that's been in service for years all of a sudden not be able to be delivered?

Sean Broderick:

Well, it's a good question. And it should underscore that the very same issues that Boeing is finding on the undelivered airplanes exist on the delivered airplanes as well. These are not safety of flight issues. There were a couple of the issues that when found together on the same airframe posed a safety of flight risk. And that's really how all this came to light back in 2019. There were I believe eight airframes that had this combination of problems that Boeing said, ‘These need to be looked at right away.’ They were pulled from service, inspected and cleared, but for the other airplanes that are in service, they will probably need, and they will certainly need some attention probably at a regular maintenance or a heavy maintenance check.

But the real issue comes down to Boeing's ability to deliver airplanes to their specifications. And you can't underscore enough: We're talking about very, very fine variances here from their specs. It's not as if they're delivering airplanes with flaps hanging off, right? But still, in our business, as our audience knows, precision is key and accuracy is key. And the ability to repeat the same design, the same production and meet the same standard over and over and over is key. Boeing wasn't doing that on the seven eights, they discovered it in 2018, 2019, somewhere in there is where the first issue popped up and Boeing realized it had a problem. And so to its credit -- it was under a lot of pressure, especially after the MAX accidents in [2018 and] 2019 -- but Boeing said, ‘This isn't good. We need to understand this and we need to fix this.’  So it was as much their initiative to make sure that they understood their problems and would get them right, as it was the FAA saying, ‘Fix this.’ Add in the pressure with the MAX and the pressure that both Boeing and the FAA has been under, and that certainly exacerbated the process. It made sure that Boeing was leaving no stone unturned to try to understand everything that was going wrong, both in its factories and at its suppliers and why certain specifications were not being met.

 As to why this airplane, probably things for us to dig into in the coming months and years. My theory is, I mean, this is the first all-composite fuselage airplane. Boeing has pushed composites further than anybody on this airplane they did when you're talking airliners. And I think that, and the way that they set up their supply chain, which is a whole other podcast and the way that they leaned heavily on suppliers to do major subassemblies, you combine those things and it set the stage for what we have on the 787.

Joe Anselmo:

Sean, I want to get to Dan Williams, but one more thing you told me before we hit record throw anything at you. So I'm going to throw something at you. You have pointed out that airlines were flying 787s that had some of these same problems, Those airplanes weren't grounded. And yet the FAA was saying Boeing couldn't deliver an airplane that had these kinds of problems. Would this kind of scrutiny had been applied to Boeing had there not been the MAX crisis?

Sean Broderick:

That's a good question. I would like to think so, yes, because meeting your own design standards is part and parcel to having a type certificate or in this case a production certificate. So, I would like to think so.

But I think that we can safely say this, that the halting of deliveries for more than a year, and really it was 18 months because the deliveries restarted, and then the FAA said, ‘Hold on a second, what you're doing, we're not quite cool with the way you're handling this.’ So really it was 18 months with a slight little blip in there. I don't think you would've seen that. But I think it's a new world order. I mean, that's the phrase I keep using and it's not just here in the US with the FAA, the regulatory scrutiny [has] gotten to a point where aviation [has] never been safer yet. Yet it can never be safe enough. And so the sort of scrutiny that the FAA is applying and the regulators are applying in situations like this, I think it's simply going to continue. And unfortunately we may see more situations like this if the manufacturers don't stay on their game.

Joe Anselmo:

Dan Williams, thanks for being so patient, how many, 787s are there in the delivery pipeline and how long's it going to take to get those out to the customers that ordered them?

Dan Williams:

Thank you very much for letting me join as per usual. It's an interesting set of numbers. You know, it's a little bit difficult to get some numbers because as you say, they've ramped down their numbers quite considerably and obviously they consolidated their production to exclusively the South Carolina facility. So we think there are about 118 outstanding aircraft, plus there is another four that Boeing will probably keep, that our waiting delivery. So those extra four we don't think necessarily will be delivered of those. There are some big numbers in there. American have got 10 built and awaiting delivery. And to go back to what Sean said before, there is a suspicion, a chance, that some of aircraft will be delivered this month, August. I imagine with American having 10, they probably could take a number of those aircraft. The number that has been bounced around has been maybe a couple. Some of the other big airlines Qatar have got nine, ANA have got six, and then BA, KLM and Lufthansa have all got five apiece that are built waiting to deliver.

            So there's some big airlines with some big aircraft waiting for delivery. In terms of getting through the backlog: Now the bad news is that Boeing have had to go through something similar to this before with the MAX. But the good news is Boeing have had to go something through similar to this before with the MAX. So they understand how to start delivering a backlog. Obviously this backlog is a little bit different than the MAX backlog. However, the process I imagine will be similar. We have seen aircraft in being fixed. Let's use the term ‘fixed’ or ‘prior to delivery.’  So we will get some delivery soon, which is brilliant. In terms of production, I say around one, they're going to need to ramp up probably to maybe two a month over the coming maybe six months, because they're going to have to start ramping up production once they can start shifting inventory.

            You know, the MAX inventory got up to a 400 aircraft and having to store 400 MAXA got very difficult and they had to spread all over the Washington state using Moses Lake, et cetera. Likewise with the 787, it's a big aircraft. They didn't want to build too many to have lying around to then subsequently fix and re-deliver, so in that respect, ramping down the production really helped Boeing because they only have 118ish outstanding to deliver. So, if they're going to work through that, it's going to take its time. We have chatted informally. And if they start chipping away at maybe five a month of that inventory, then that's going to take 20 months ish to get through. Plus, then if they do slowly ramp up the production to a couple [a month], maybe even pushing for three, and maybe later in ‘23 or ‘24, as the market slowly returns and the wide need for wide body comes back, although we have seen the 787 fare quite well in the return of utilization [by] travelers. So ,it's probably going to take a couple of years to get ultimately through the existing backlog. Another slight twist on this is 15 of those aircraft, we now believe are actually technically whitetails. So, these were ordered by a customer and built and subsequently canceled, be it that the airline went out to business in some cases. And in some other cases they've been canceled because they had get-out clauses, which meant they could get out of the deal because they've taken so long for delivery. So, the reality is there's 103 ish to deliver that have an attached order. Those are the 15 they have to find orders for and then deliver them. So perhaps they may take a little bit longer.

Joe Anselmo:

Sean, he mentioned a little twist. Let's talk about the MAX, because we've written about the 737-10, the largest variant of the MAX. And if it isn't certified by year end, Congress is going to have to change the law or Boeing's going to have to redesign the flight deck. And they said, they're not going to do that. Now there's yet another wrinkle that you are writing about. Tell us what that wrinkle is.

Sean Broderick:

So yes, the Dash -0 is to be the fourth and final member of the four-member MAX family. The third one is the smallest version, 737-7. That airplane first flew in 2018. Certification was well underway before the two fatal accidents, including Ethiopian airlines 302 in March 2019, which basically brought not only the MAX fleet and production to a halt or at least deliveries to a halt, but it also brought further development on this Dash-Seven and the Dash-10 to a halt. Once the MAX was back in the air in 2020, work on the Dash-seven resumed, or was well underway. And the assumption was that airplane was going to be certified well before the end of 2022. Southwest Airlines entered 2022 expecting to take something on the order at 90 of them. Well, again, going back to the new world certification, world regulatory order, the approval on that airplane still isn't done.

Flight test was done in late 2021, but here we are on August the whatever today is, but we're well past half year, and still not certain that the airplane is going to be certified.

Southwest has now said -- they still have 14 technically in their 2022 delivery plan, technically, but their executives said on an earnings call at the end of July, ‘We don't expect to take any of those airplanes.’ So that raises the question, whether the Dash-Seven is facing a similar hurdle as the Dash-10, if it's not certified by the end of the year. Then the flight crew alerting provision in a 2020 law that revamped certification comes into play. That law had a two-year implementation window that's designed to get these airplanes in. It was not supposed to stop these airplanes from being certified. It was supposed to stop any others from being certified by the FAA, unless they comply with current flight deck alerting requirements.

            The problem with making -- the Boeing could put the new flight decks on these two airplanes. The problem is that would make them different from not only the rest of the MAX family, but from all the NGs that pilots at Southwest and Ryanair fly. It gets back to the whole controversy with the 737 MAX and the MCAS that was added to make it fly like the 737 NG. The bottom line is that Boeing is not going to modify those airplanes, the Dash-Seven and the Dash-10. We've been talking about the Dash-10 because it was long expected to push the deadline. And now we know it's not going to meet the deadline, but all of a sudden here we are the Dash-Seven, five months to go, and there's no guarantee. All we know is that the biggest customer says we're not taking any in 2022. That's all we know for sure. And so the question is raised. ‘Well, does that mean it's going to be certified or no?’ And we just don't know.

Joe Anselmo:

So wait a minute, we know that Boeing CEO Dave Calhoun has said if the Dash-10 isn't certified by the end of the year, and they don't change the law, they're not going to redesign the flight deck. And he said a world without a Dash-10, it's not the end of the world. Nobody at Boeing has said yet that they wouldn't do a Dash-Seven if this happens have they? We haven't gone that far?

Sean Broderick:

They have it, but a world ... And I'm not going to put words in Dave Calhoun's mouth, but I'm pretty confident that Boeing would tell you that a world without a Dash-10 is scarier than a world without a Dash-Seven. So if a world without a Dash-10, isn't scary. I mean, the Dash-Seven is basically a Southwest Airlines airplane to replace their 700S. That's what it is. And I don't think personally that we're going to get there. I think that Boeing, it may not happen until in 2023, which is going to be interesting, And it's going to require a lot of explaining to a lot of folks out there, the exemptions, or the law. may not be changed until 2023, but Boeing's going to keep building these airplanes and get them to the finish line with the current flight deck as designed.

Joe Anselmo:

It's all bottled up in a lot of politics here in Washington, Dan Williams, let's give you the final word, any insights on this that you want to offer?

Dan Williams:

I thought what Sean said there was it ... The MAX Sven is built for Southwest and it's built for Southwest so they'll buy MAX Sevens and also by MAX Eights. The similar could apply to Ryanair… they want to buy MAX-10as, but they will not pay what Boeing wants for them because it makes good PR when you turn around and say, ‘We're not going to pay full price for a MAX 10, because we want to buy’ --insert figure here -- 400, 500 of those aircraft.

            And obviously Boeing could always do with a good news story. You know, they had a pretty good Farnborough when you compare it to announcements at the show compared to Airbus. But obviously subsequently Airbus have announced a few extra orders. Just because they didn't announce them at the show, it doesn't mean to say that the orders are still not coming in. So, they've still got a lot of their house to get in order, but they've done their homework on the 787, they've submitted it. And by the sounds of thing, the teacher likes what they're seeing. So hopefully they can start delivering aircraft soon.

Joe Anselmo:

And we'll end this on a positive note, guys. Sean Broderick, thanks again. Congratulations on your scoop. Dan Williams, always a pleasure to have you in here offering your insights.

That is all the time we have for today. Join us again next week for another episode of Check 6. Don't miss it by subscribing to Check Six in your podcast app. Until then, check out Aviation Week's Window Seat podcast, which this week focuses on an FAA proposal to address the risk of interference from new 5G wireless towers that airlines are angry about. You can find Window Seat wherever you're listening to Check Six and you might hear a familiar voice on that podcast. And one last request. If you're listening to us on Apple Podcasts and want to support this podcast, please leave us a star rating or a review. Bye for now and stay safe.