Dreamliner production lifts Boeing’s outlook

Boeing’s North Charleston campus produces the 787 Dreamliner and will be the only location to make the new 787-10 model.

Production of Boeing’s 787 Dreamliner climbed to 12 planes a month in the first quarter of 2016, the company announced Wednesday, matching the delivery rate it plans to meet this summer.

That puts the planned production increase ahead of schedule as the 787-10 — the largest Dreamliner — moves into the production system at the aerospace giant’s North Charleston campus.

“Development of the Dash-10 has gone very well, as has early production,” CEO Dennis Muilenburg said during a quarterly conference call with financial analysts Wednesday.

He added that the company will start to deliver the new airplane in 2018.

Muilenburg said the overall 787 program “continues to excel at opening new routes and delivering profitability and performance in operation.”

The Dreamliner numbers were a highlight of Wednesday’s earnings call, which had Boeing executives expressing optimism about the rest of the year despite a drop in first-quarter profit on the back of weaker commercial airplane deliveries and a $162 million charge on the KC-46 in-flight refueler aircraft program.

Boeing reported $141 million in deferred production costs for the Dreamliner in the January-March period — finance chief Greg Smith called it “better than planned” — to bring the total for that program to nearly $29 billion since its inception. Deferred costs — money spent during early planning and production that will be made up during future sales — have slowed, dropping 30 percent since the last quarter, and did not seem to concern analysts.

The 787-9 model is fast becoming Boeing’s most popular version of the Dreamliner, accounting for more than one-fourth of the roughly 400 Dreamliners delivered to date. Smith said deliveries of that model “will notably exceed” its older, smaller sibling — the 787-8 model — during 2016.

“We continue to make progress on the 787 program, including successfully transitioning production of the 787-9, increasing deliveries, reducing production flow times, lowering unit cost and improving overall aircraft reliability,” Smith said. “However, more work is ahead of us as we strive to further reduce unit costs and smoothly introduce the 787-10 into the production system, which is on track for later this year.”

The 787-10, a simple stretch of the 787-9, began major assembly in March, with the installation of ducts, wiring and other components into sections of the fuselage.

Boeing has reported 153 orders for the plane, to be built exclusively in North Charleston, accounting for 13 percent of all 787 orders.

The company said its first-quarter earnings fell 6 percent to $1.22 billion from the same period a year earlier. Adjusted earnings on a per-share basis fell to $1.74 from $1.97 while analysts had projected $1.82. Revenue for the first quarter increased by 2 percent, to $22.6 billion, based largely on deliveries of military aircraft.

“Overall, we are pleased with our performance trends, and our outlook for the year remains positive,” Muilenburg the CEO said.

Wall Street reacted positively to the earnings report, with Boeing stock advancing nearly 3 percent to close at $137.08.

Muilenburg called the global commercial aircraft market “generally healthy.” The optimism is fueled by a backlog of more than 5,700 planes representing $424 billion in orders and seven year’s worth of production. Despite lingering low fuel prices, Muilenburg said airlines and other customers “have not substantially changed their vision on fleet planning or their commitment to existing delivery schedules.”

In the first quarter, deliveries of Boeing commercial planes declined 4.3 percent from the previous year, to 176, causing revenue in the division to tumble by 6.4 percent.

Dreamliner deliveries bucked that trend, with the 30 brought to customers during the first quarter matching the total from a year ago.

Boeing reported one 787 order during the first quarter, which was offset by four cancellations. Boeing makes the Dreamliner at its North Charleston campus and in Everett, Wash.

While list prices for new planes continues to rise, fierce competition with European plane-maker Airbus and a surplus of cheap used planes has led to deep cuts in the prices actually paid by airlines. Smith acknowledged that a strong dollar can put Boeing at a disadvantage with Airbus for foreign orders.

“Exchange rates are going to move around,” he said. “We don’t rely on exchange rates. Sometimes they’re an advantage, sometimes they’re a disadvantage.”

Reach David Wren at 843-937-5550 .