Boeing Expects 787 Rework To Cost Around $1 Billion

Boeing has revealed fixes to the 787 Dreamliner are expected to cost the company around $1 billion. In…

Boeing Expects 787 Rework To Cost Around $1 Billion

Boeing has revealed fixes to the 787 Dreamliner are expected to cost the company around $1 billion. In its third-quarter results published today, Boeing chalked up $183 million in losses due to 787 complications for that quarter alone and noted its production rate is currently set at two planes per month.

Problems with 787 production may end up costing Boeing over $1 billion. Photo: Vincenzo Pace | Simple Flying

787 issues expected to cost around $1 billion

Boeing expects 787 Dreamliner production issues and reworks to end up costing around $1 billion in abnormal costs.

In its quarterly results, Boeing said,

“The low production rates and rework are expected to result in approximately $1 billion of abnormal costs, of which $183 million was recorded in the quarter.”

The planemaker is dealing with several quality issues on its 787s and is working closely with the Federal Aviation Administration (FAA) on fixes.

Boeing added,

“The company continues to focus 787 production resources on conducting inspections and rework and continues to engage in detailed discussions with the FAA regarding required actions for resuming delivery.”

Boeing 787 9
Boeing 787 Dreamliner production is now at two planes per month. Photo: Boeing

Boeing also revealed that its current production rate of the 787 Dreamliner is now at two planes per month. At its peak, Boeing was producing 14 787s per month but has repeatedly slashed its production rate of the aircraft, which stood at five planes per month this summer.

Boeing said,

“The current 787 production rate is approximately two airplanes per month. The company expects to continue at this rate until deliveries resume and then return to five per month over time.”

New problems discovered this month

Earlier this month, Boeing revealed that certain titanium parts on some 787s built in the past three years were not up to strength, citing problems with a third-party supplier. Affected parts of the plane include fittings that assist in securing the floor beam, while other fittings, spacers, brackets, and clips are still under investigation.

Boeing Expects 787 Rework To Cost Around $1 Billion
Boeing has dealt with several problems with its 787s over the years. Photo: Getty Images

The 787 Dreamliner program has been hit with multiple issues over the years, including early battery problems in 2013, which led to all 50 787s in service worldwide being grounded for over three months. Last year, more problems were discovered, including quality issues with seams on the fuselage, forcing Boeing to rework around 100 undelivered 787s.

Although deliveries of the 787 took place earlier this year, they were halted again in May and are yet to resume. Boeing has delivered just 14 Dreamliners this year, all between March and June. In its quarterly results, Boeing noted it had secured orders for 12 787s.

Revenues are up by 8%

Revenues at Boeing were up by 8% compared to the same period last year, bringing in $15.28 billion for Q3 2021. The company notes that this was “driven by higher commercial airplanes and services volume.”

Boeing 787 Production
Boeing secured 12 more orders for the 787 in the third quarter. Photo: Getty Images

CEO Dave Calhoun said,

“Our commercial market is showing improved signs of recovery with vaccine distribution and border protocols beginning to open. As demand returns, supply chain capacity and global trade will be key drivers of our industry and the broader economy’s recovery.”

However, revenues were lower than the $16.3 billion market analysts had predicted. Boeing reported net losses of $132 million for the quarter, a favorable reduction on the $466 million net losses from Q3 2020.

How do you think Boeing has handled the issues with the 787 Dreamliner program? Let us know what you think in the comments.

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UK Cuts APD For Domestic Flights But Raises It For Ultra-Long-Haul

The UK Chancellor, Rishi Sunak, has revealed plans to reform how Air Passenger Duty (APD) is applied to…

UK Cuts APD For Domestic Flights But Raises It For Ultra-Long-Haul

The UK Chancellor, Rishi Sunak, has revealed plans to reform how Air Passenger Duty (APD) is applied to travelers on flights taking off from the country. Domestic flights will see a lower rate of APD applied. However, those on ultra-long-haul flights will suffer, with an increased rate applied.

The UK Government has announced a shakeup in air passenger duty. Photo: Heathrow Airport

Air Passenger Duty has been a hot topic when discussing aviation in the UK over the past year. It was one of the factors cited in the demise of Flybe and has attracted criticism from a range of other operators. Now, the UK government is taking steps to address the issue.

Changes coming into force

Presenting his budget to the House of Commons earlier today, Chancellor Rishi Sunak revealed that the UK would shake up its current APD regulations, according to Sky News. From April 2023, the changes will mean that domestic travelers will see their APD cut in half, something Sunak says will,

“Bring people together across the United Kingdom, and because they tend to have a greater proportion of domestic passengers, it is a boost to regional airports like Aberdeen, Belfast, Inverness, and Southhampton.”

This move will likely be welcomed by all domestic airlines, particularly those without significant international operations. APD was seen as a big part of the fall of Flybe. Passengers used to have a return flight APD exemption, but the UK was required to remove this in 2001.

UK Government, Air Passenger Duty, Ultra-Long-Haul
APD will be slashed in half for domestic flights. Photo: Getty Images

A trade-off for long-haul passengers

While the changes to APD are great news for domestic travelers, those who like to venture further afield will end up paying more APD when flying. Sunak revealed that the economy rate for flights over 5,500 miles (8,851 kilometers) will increase to £91 from April 2023. He didn’t reveal what the premium economy, business class, and first class rates would be.

The increased APD seems to be angled as a form of carbon emissions tax, with Sunak commenting,

“We’re also making changes to reduce carbon emissions from aviation. Most emissions come from international, rather than domestic aviation. We are introducing from April 2023 a new ultra-long-haul band in air passenger duty… less than 5% of passengers will pay more, but those who fly the furthest will pay the most.”

UK Government, Air Passenger Duty, Ultra-Long-Haul
Qantas will be one of the carriers affected by the increased ultra-long-haul rate. Photo: Getty Images

As Sunak mentioned, the change will only impact a handful of passengers. The majority of destinations served by carriers from the UK will fall within 5,500 miles. The primary destinations affected will include the likes of Singapore, Hong Kong, southeast China, South Africa, and the farther destinations in South America. Qantas will also face the increased tax on flights to Australia.

According to data from Cirium, only 19 routes further than 5,500 miles from their origin are planned to depart the UK in November. These are,

Bangkok - ThailandKuala Lumpur - MalaysiaSeoul Incheon - South Korea
Brunei - BruneiManila - PhilippinesShanghai - China
Buenos Aires - ArgentinaMauritius - MauritiusSingapore - Singapore
Cape Town - South AfricaMexico City - Mexico CityTaipei - Taiwan
Darwin - AustraliaOsaka - JapanTokyo Haneda - Japan
Hong Kong - Hong KongPhuket - Thailand
Johannesburg - South AfricaPuerto Vallarta - Mexico

Is it worth it?

While Sunak angled the change at reducing carbon emissions, one must wonder how much of an impact the charge will have. Passengers currently pay an APD of £82 on such flights in the economy cabin, rising to £84 in April 2022. An extra £7 doesn’t seem like it will make a huge impact. The increase is by 7.7%. Applying the same boost to the standard rate of £185 for premium economy and upwards, the fee is only around an extra £14.

While passengers will pay more, such low increases seem unlikely to put many passengers off. It also doesn’t seem that the government will spend the money on reducing emissions. At the Airlines for Europe AGM in 2020, Ryanair Group CEO Michael O’Leary commented,

“The UK raises billions each year in APD, and not one pound has ever been spent on the environment. We have sent three or four separate questions to the treasury in the UK asking them to identify even one environmental project that APD has been spent on. They can’t even identify one.”

UK Government, Air Passenger Duty, Ultra-Long-Haul
Sunak suggests the increase will reduce emissions, but airline CEOs don’t support this view. Photo: Stansted Airport

While Willie Walsh, then CEO of British Airways owner IAG and now Director-General of IATA, added,

“IAG paid €967 million in air passenger duty in the UK last year, not a single cent of that money went to environmental research or environmental support. The idea that we add more taxes is just damaging to the industry because it is reducing our ability to invest in new technology, and our ability to invest in sustainable biofuels, and our ability to invest in research and development.”

Hear from aviation’s movers and shakers. Book your free ticket for the Future Flying Forum now.

So, what is APD?

APD, or Air Passenger Duty, is a fee charged for every passenger on a plane weighing 5.7 tonnes or more and fueled by kerosene regardless of whether passengers have paid for the flight or not. There is a limited set of exceptions, such as passengers on pleasure flights arriving at the same airport within 60 minutes of departure.

There are two bands to the tax. Band A includes flights where the distance from London to the destination country’s capital city is 2,000 miles or less, primarily consisting of geographic Europe. Band B includes countries where the capital city is more than 2,000 miles.

Ryanair, Ghost Flights, COVID-19
Ryanair’s cheapest fares are less than what it pays on APD. Photo: Tom Boon – Simple Flying

There are three types of rates. The lowest class of travel where seats have a pitch of under 40 inches (1.016m) counts as the reduced rates. Higher classes of travel or the lowest class where the pitch is more than 40 inches attract the standard rate. Meanwhile, planes weighing 20 tonnes or more carrying fewer than 19 passengers use the higher rate.

For Band A destinations, the rates of APD currently sit at £13 (reduced), £26 (standard), and £78 (higher). For Band B destinations it is £82, £180, and £541 respectively. From April 2022, these will rise to £84, £185, and £554.

Unfair on regional carriers

By halving the rate for domestic flights, the UK government is effectively putting airlines on a level playing field. A flight operating from London to Edinburgh and back would attract a basic rate of £26, compared to £13 for a flight operating from London to Paris and back.

Of the £250 million paid in APD from domestic flights in the UK in previous years, Flying was responsible for £106. It had pleaded with the UK to cut APD by half, but it seems that the drop came too late. Burdened partly by the cost of APD, Flybe ceased operations in early March 2020.

What do you make of the UK Government’s planned APD reform? Let us know what you think and why in the comments!

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