By the standards of commercial airplanes, the Boeing 787 was supposed to be a modern marvel. Its carbon-fiber body and new electrical system give it a reduced weight, which allows it to burn 20 percent less fuel than the midsize airplanes it’s meant to replace.
( http://www.businessweek.com/articles/2013-01-24/boeings-787-dreamliner-and-the-decline-of-innovation#p1 )
Boeing 787 Dreamliner completed its first passenger flight in Japan. The new plane has performed and proved its effectivenss. Now it is up to the efficiency engineers to take over the methods and identify inefficiencies or waste and come out with ideas, methods and solutions to improve the efficiency and reduce costs.
Boeing Chairman and CEO Jim McNerney assured Wall Street analysts that the 787 production process will show a steep efficiency improvement within the next six months, and thus future earnings will improve.
( http://seattletimes.nwsource.com/html/businesstechnology/2016612066_boeing27.html )
The company claims that it the design and production processes have utilized number of efficiency improving technologies. One piece fuselage section has eliminated 1,500 aluminium sheets and 40,000 to 50,000 fasteners.
( http://www.boeing.com/commercial/787family/background.html )
Boeing 787 Cashflows and Costs
Boeing Co. could find it difficult to hit its target for break-even 787 cash flow by early 2015 as it seems that 787 costs are not declining rapidly enough for the aerospace company.
During the fourth quarter, 787 unit cost is estimated at $218 million, down from $232 million in the third quarter, although well above the $190 million level that would have helped Boeing pacing to its 787 cash flow guidance.
Boeing expects its 787 deferred production balance to peak at $20 billion in late 2014 or early 2015 as production stabilizes at 10/month, up from $15.9 billion now. This would require its 787 unit production cost to fall below its average program accounting cost by then.
Given Boeing's assumption for low single- digit margins on its initial 1,100-aircraft accounting quantity, this also implies an expectation for a per-unit cost below its average selling price by then.
"Our analysis indicates that in order for Boeing to hit its 787 cash flow guidance, it will need to bring its unit production cost down roughly 50% faster than it did on 777," UBS analyst David Strauss wrote in a note to clients.
Strauss expects Boeing's unit cost would need to drop to roughly $111 million in early 2015 from $218 million in the fourth quarter with its cumulative average cost falling 24 percent with each doubling in production.