Boeing 2011 Annual Report Download - page 39

Download and view the complete annual report

Please find page 39 of the 2011 Boeing annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

747 Program The accounting quantity for the 747 program increased by 25 units in 2011. The 747-8
Freighter was certified during the third quarter and first delivery occurred in October 2011. First flight of
the 747-8 Intercontinental passenger derivative occurred in March 2011 and type certification was
achieved in the fourth quarter of 2011. During 2011, expected first delivery of the 747-8 Intercontinental
was moved from the fourth quarter of 2011 to the first quarter of 2012 due to a delay in flight testing
and the time required to incorporate all flight test driven engineering and design changes. We remain
focused on incorporating these and other changes identified during flight testing into completed
airplanes, achieving a planned production rate increase from 1.5 to 2 airplanes per month in mid-2012,
reducing out-of-sequence work and improving supply chain efficiency. We are also continuing to
monitor cargo market conditions. If risks associated with these areas cannot be mitigated, the program
could be impacted by customer claims, lower orders, supplier assertions and/or the recognition of an
additional reach-forward loss. We continue to implement mitigation plans and cost-reduction efforts to
improve program profitability and address program risks.
767 Program The accounting quantity for the 767 program increased by 36 units in 2011 due to the
program’s normal progress of obtaining additional orders and delivering airplanes.
777 Program The accounting quantity for the 777 program increased by 200 units in 2011 due to the
program’s normal progress of obtaining additional orders and delivering airplanes. The 777 program’s
first delivery at 7 airplanes per month from 5 per month occurred in June 2011. A further increase to
8.3 airplanes per month is planned for the first quarter of 2013.
787 Program We completed initial type certification flight testing activities and received design and
production certifications for the 787-8 during the third quarter of 2011. We delivered the first 787-8
airplane in September 2011 and delivered two additional aircraft in the fourth quarter of 2011. We also
completed the critical design review for the 787-9 derivative in 2011. In October 2011 we announced
that the expected date of first delivery of the 787-9 had moved to early 2014 from late 2013.
We continued to produce aircraft during flight testing and established a separate facility to incorporate
engineering and other design changes identified during flight testing on already completed aircraft. We
expect that aircraft completed in our Everett facility through mid-year 2012 will also require change
incorporation. However, we expect that these later airplanes will require significantly less change
incorporation than airplanes completed prior to 2012. We remain focused on achieving planned
increases in 787 production rates while continuing to satisfy customer mission and performance
requirements. We also continue to monitor and address challenges associated with aircraft assembly,
including management of our extended global supply chain, incorporation of design changes into
aircraft in various stages of assembly, completion and integration of traveled work as well as weight
and systems integration. During 2011 we increased the production rate to 2.5 per month at our Everett
final assembly line and started up the North Charleston final assembly line. We currently expect to
increase the production rate of 787 aircraft to 10 aircraft per month in final assembly by the end of
2013 with first deliveries occurring at that rate in early 2014. Our efforts to achieve planned production
rate targets include improving the production system, coordinating rate increases with suppliers,
increasing production rates in both Everett and North Charleston, and establishing transitional surge
capacity at Everett. In addition, we continue to work with our customers and suppliers to assess the
specific impacts of prior schedule changes, including requests for contractual relief related to delivery
delays and supplier assertions.
During 2009, we concluded that the first three flight-test 787 aircraft could not be sold as previously
anticipated due to the inordinate amount of rework and unique and extensive modifications made to those
aircraft. As a result, costs associated with these airplanes were included in research and development
expense. We believe that the other three 787 flight test aircraft are commercially saleable and we continue
to include costs related to those airplanes in program inventory at December 31, 2011. If we determine that
one or more of the other aircraft cannot be sold, we may incur additional charges.
27