Two months ago, we told you about FedEx's (FDX +0.88%) ambitious plan to buy at least 50 new 767 freighters from Boeing (BA +4.26%). Now, it seems this good news for Boeing will translate into more good news for Boeing workers -- and extra shifts at its Everett, Washington, Boeing 767 plant.
Step on it! FedEx delivers another multibillion-dollar order to Boeing. Image source: Boeing.
Reportedly intended to update and upgrade FedEx's fleet by phasing out fuel-inefficient MD-10 transports, and potentially Airbus A300s, as well, FedEx's order for 50 (or more) new 767s will soon give FedEx a nearly all-Boeing fleet. It will also make FedEx one of Boeing's very largest customers.
There's just one wrinkle to the news: Now that it's got the orders, Boeing has to figure out how to build these planes faster.
Step on it!
Boeing currently produces about one 767 airliner a month, but FedEx wants to more than triple the size of its Boeing 767 fleet. In addition to the 50 firm orders reported in July, FedEx also took out "options" to buy 50 more 767s after those are delivered. Additionally, the U.S. Air Force has asked Boeing to produce 179 KC-46A Pegasus aerial refueling tankers, built on a modified 767 chassis. (And the Air Force will be buying even more KC-46As after that.)
Some Boeing 767s will transform into KC-46 Pegasus refueling tankers, and be diverted to the military. Illustration source: Boeing.
What this all adds up to is an immediate need to ramp up production at Boeing's Everett 767 factory. One plane per month just isn't going to cut it anymore.
Recognizing this, Boeing had already targeted a two-planes-per-month production rate for next year, and was already halfway toward meeting that goal. But then, Boeing moved the goalposts.
To ensure it can keep up with demand, Boeing has announced that, in 2017, it will ramp production to 2.5 planes per month, or nearly twice its already accelerated build rate. Intrigued by this announcement, I thought now might be a good time to check back in on Boeing's plane-production rates for its various models of airplanes, and update you on how that's looking.
Based on the most current data, here's how that production schedule now looks:
|
Plane |
Order Backlog |
Current Production, in planes per month (PPM) |
Ramping up to... |
Then ramping up to... |
Backlog in Months (approx.) |
|---|---|---|---|---|---|
|
737 |
4,269 |
42 |
47 in 2017 |
52 in 2018 -- and perhaps 60 thereafter* |
87.8 |
|
747 |
29 |
1.5 |
1.3 in September* |
1.0 in March 2016** |
19.5 |
|
767 |
83 |
1.5 |
2 in 2016 |
2.5 in late 2017 |
39.6 |
|
777 |
552 |
8.3 |
-- |
--*** |
66.6 |
|
787 |
777 |
10 |
12 in 2016 |
14 in 2020 |
60.7 |
*Boeing has not officially promised this, but mentioned at its annual meeting in April that it has the ability to ramp up 737 production to 60 PPM. Airbus has countered that it can go to 63.
**This is actually a deceleration in production rates -- and it may have implications for the U.S. president.
***Last year, Boeing confirmed it has won permission to build 777X airplanes as fast as 10.4 PPM -- but Boeing has made no official announcement yet of plans to do so.
Where we are now
Since we last checked in on Boeing's production rate and backlog numbers in January, we see that the company has whittled down its backlog of 737s by 30 planes, shaved seven planes off its 747 backlog, and reduced 777 backlog by a dozen planes. Boeing's made even more progress on its 787 production pipeline, reducing backlog there by 66 planes. (The fact that Boeing's 787 backlog now stands at 777 planes is an amusing coincidence.)
Meanwhile, the company has added 36 Boeing 767s to its backlog.
What it means to investors
That makes the 767 the only Boeing aircraft for which backlog is still increasing. Even as the company has continued to sell other airplanes (and not just airplanes), the company's announced production ramps are up to meeting the demand -- for every plane but the 767. There, despite the just-announced ramp-up in production, backlog is increasing both in terms of absolute number of planes to be produced and the number of months needed to produce them.
Going forward, this almost certainly means that we should expect further production rate increases on the 767. That means more capital expenditure by Boeing to expand production, and more shifts for Boeing workers, as well. Rising costs -- but also rising revenues from the 767 production line.
As "problems" go, this is a nice one to have.
Boeing's 767 is flying high -- and production will fly even higher in years to come. Illustration source: Boeing.
