The lead aero major Boeing has witnessed huge difficulties with its revolutionary aircraft, the 787 Dreamliner which is the first aircraft to be madeof composite material. Losses and costs have been piling up year after year. The company expects that the deffered cost with respect to the jet to increase to $25 billion by the end of next year. However, the plane manufacturer is working to stabalize the production rate of the 787. The deliveries of the initial lot of planes would comes at a loss. But if Boeing manages to maintain the jet’s production level to 10 a month, break even wouldn’t be a farfetched target.
However, the jetliner’s technical snag seems endless. This means more investigation and additional cash drain. Under such scenario, how attainable would breaking even be, and when can the program turn profitable?
The Recent Woe
The Dreamliner was caught in a technical glitch for the second time in a week when Air India witnessed some issues that could not be resolved by a group of engineers even after devoting hours. In the earlier case when the 787 was grounded in the same week, the cabin crew of the jet realized that the flight deck door did not shut fully because of which the sound of the air was audible. This aircraft too was taken to the engineers to see if the slip could be fixed, but its didn’t work out.
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The first plane was suppose to fly 126 passengers to Birmingham, while the second plane was to fly 246 passengers from Delhi to Australia. Both these planes were grounded and replacements where found to carry the passengers to their respective destinations. Early July too, a couple of Dreamliners were reported to have suffered slips in their systems.
While on one hand headlines regarding the technical faults with the Dreamliner come out every now and then, Boeing’s working hard to head towards profitability of this program. If we factor in such recurring problems with the Dreamliner, will the company be able to creep in the black?
When to Expect the Dreamliner to Move in the Black
Knowing the massive cost of developing the Dreamliner, Boeing’s working to streamline the production process from quite some time. The efforts have eventually started paying off. Improvement in the supply chain process and incentive programs have done good to take the Dreamliner closer to profitability and turn the project into a feasible one.
The American manufacturer is gaining efficiency and is getting better at making the aircraft. This is visible from the 30 Dreamliner deliveries that the company made in the second quarter. This is the highest ever Dreamliner deliveries volume from the time it entered service. Company CFO Greg Smith gladly said at the second quarter conference call that the unit cost of the 787 has fallen by a good 13% over the past one year. He also said that “The cash flow position of the 787 continues to improve, as we drive productivity throughout the system.”
This is positive news for its investors. Boeing’s making good progress in the Dreamliner project and is finally converting the huge amount invested into cash. The program was delayed by three years when the company kept bleeding money on the aircraft. Technical issues keep popping up which could push back its profitability. Some industry experts believe that Boeing would have to produce and deliver more than 1,000 units of the aircraft to cover its costs and break even. Every improvement in the process would add towards lessening the piled up cost and headind towards profitability.
The company proposes to deliver 110 Dreamliners in the current fiscal year. And if Boeing is able to meet its target this year, it could mean that the company’s on the right track to make up for the cost and losses of the project. However, it should be noted that factors such as technical difficulties could weigh on the results.