Search This Blog

Friday, October 12, 2007

Boeing : Delaying Delivery of Its 787

The Boeing Company's announcement yesterday that it would delay initial deliveries of the 787 Dreamliner by six months is a blow to a program that had been seen as the most successful in commercial aviation - a seemingly perfect blend of new technology, marketing and production line innovations.

Skip to next paragraph

Robert Sorbo/Reuters

Boeing workers at the 787's debut in Everett, Wash., in July.

Yet, as the company's stock fell below $100 a share yesterday, Boeing officials remained confident that the program remains on track for the long haul. Analysts as well saw the delay as more of a temporary setback, and not of the same magnitude as the problems that its rival, Airbus, has experienced in producing its superjumbo A380, which has also fallen behind schedule, but by two years.

Boeing's delivery delay was caused by the problems of Boeing's global chain of suppliers in completing their work, as well as unanticipated difficulties in its flight-control software.

This delivery delay comes after Boeing announced last month a three-month delay in the plane's flight-test program caused, in part, by a worldwide shortage of fasteners that hold together the plane's fuselage, wing and tail sections.

"We are very disappointed over the schedule changes that we are announcing today," said W. James McNerney Jr., Boeing's chief executive. "Notwithstanding the challenges that we are experiencing in bringing forward this game-changing product, we remain confident in the design of the 787, and in the fundamental innovation and technologies that underpin it."

With 710 orders worth $100 billion from 50 airlines, the Dreamliner has been the fastest-selling commercial aircraft in history. It is also one of the most innovative. It is being made, in pieces, all over the world, with only the final assembly taking place at Boeing's plant in Everett, Wash.

Its fuselage will be the first to make extensive use of composite materials rather than traditional aluminum. It will use new energy-efficient engines, and its interior cabin is being designed to provide more humidity and bigger windows for passenger comfort.

The first delivery of the planes, to All Nippon Airways of Japan, is now scheduled for late November or early December 2008, rather than the original date of May. The first test flight will take place at the end of March 2008, rather than at the end of this year, Boeing said.

While Boeing said the delays would not lower the company's earnings for this year or for 2008, the announcement was clearly a setback in the image of a program that had appeared to be nearly flawless in its execution. It also showed that Boeing, which had the program on a highly ambitious schedule, might have been overly optimistic about what it could deliver - and when.

"Annoyance is the first word that comes to mind," said Howard Rubel, an analyst with Jefferies & Company. "It's annoying because they have done so many good things to get this program right. But this provides that the program is a little more complicated than they expected."

In a conference call with analysts, Mr. McNerney said that Boeing anticipated producing 109 Dreamliners through the end of 2009, three fewer than initially planned. When pressed by analysts over whether this new delivery schedule, in light of the supply chain problems, was still realistic, Mr. McNerney maintained that it was.

"Recognizing that there is risk with any new airplane program," Mr. McNerney said, "we still remain confident that this new plan is achievable and we are all aligned to make it happen."

Boeing' shares fell $2.77, or 2.7 percent, $98.68.

Scott Carson, head of Boeing Commercial Aviation, said yesterday it was too early to determine what penalties Boeing might have to pay to customers as a result of the delay.

"We have taken this into account in our financial models," said Mr. Carson. "In some cases, our customers say, 'We will work with you.' Some will insist on some form of compensation."

One of the big American customers for the 787 is Northwest Airlines, which has orders for 18 Dreamliners and had expected to get its first planes in August 2008. The Dreamliner is central to Northwest's plans to expand its international routes by more than 4 percent a year through 2010.

But Ben Hirst, a Northwest spokesman, said a six-month delay would probably not hurt its plans. "A longer delay, obviously, we would have to recalibrate," he said.

Continental Airlines has 25 787s on order. The first one was expected in 2009 with deliveries continuing through 2013, said Dave Messing, a spokesman. "It's too early to tell what impact, if any, Boeing's announced 787 program delay will have on Continental," he added. Continental has not determined whether the 787s will replace existing planes or add to its fleet, Mr. Messing said.

Cai von Rumohr, an analyst with Cowen & Company, said that the delay gave Boeing that "chance to do it right" and added that it should not hurt Boeing in its competition with Airbus, which suffered after announcing a six-month delay in its A380 superjumbo jet in June 2006. It has also had problems in producing the A350. The A350, a midsize, wide-bodied plane, would compete directly with the 787 but is not expected to be available until 2013.

"People got over the setbacks in the A380," Mr. von Rumohr said. "They are not going to go to Airbus, whose plane is not going to be ready until 2013."

Production of the 787 is being spread to suppliers across the globe in an effort to cut costs and spread the financial risk involved in the program. Yet even with this new and far-flung production - as well as the new composite body - Boeing had planned for an ambitious test-flight program for the Dreamliner, scheduling just nine months from first flight until first delivery, two months less than the tests on its newest commercial plane, the 777.

But Boeing maintained that the delay would provide the company with the breathing room to work out its supply chain problems and get the program back on schedule.

"The reason we think we will meet the new timetable is the detailed bottoms-up planning that we have done to assure that we can make it," Mr. McNerney said.

source :

Technorati :

No comments:

Find here

Home II Large Hadron Cillider News