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Photo courtesy of The Boeing Co.

The 787 Dreamliner during its 2007 world debut in Everett, Wash.

Boeing again delays 787 Dreamliner program

by Jason M. Breslow
April 09, 2008

Boeing Co. for the third time in six months delayed its delivery schedule for the 787 Dreamliner, pushing back the release of the new commercial aircraft to the third quarter of 2009.

Boeing, which announced the postponement in a written statement Wednesday morning, originally hoped to have the 787 in service by May 2008. The revised schedule puts the Dreamliner at least 14 months behind that initial target.

The company had been aiming to perform its first test flight of the 787 later this quarter. The revised schedule now has “first flight” occurring sometime during the fourth quarter. Boeing was also projecting to deliver 109 of the planes in 2009, but is now targeting only 25 deliveries next year.

“This is very disappointing news for us to have to deliver today,” Scott E. Carson, president and chief executive officer of the company’s commercial airplanes division, said in a teleconference with analysts and reporters. But, he explained, “given our experience we believe a more conservative approach to setting these milestones is the right way to go.”

Boeing is also delaying the introduction of two later models of the 787 currently under development: the 787-9 and the 787-3.

All Nippon Airways Co., which is scheduled to receive the first 787, expressed in a statement that it is “extremely disappointed” with the delay and urged Boeing to provide “a 120 percent definitive schedule as soon as possible.”

Despite the latest delay, which had been widely expected, Boeing stock rose to $78.60 Wednesday, up $3.58 or 4.7 percent.

The sentiment surrounding Boeing had gotten very negative in recent months, according to Peter J. Arment, an analyst with Greenwich, Conn.-based American Technology Research Inc. The shares dropped 2.7 percent when the first postponement was announced in October, and 4.7 percent, the most in four years, when the second delay was reported in January.

Arment, who rates Boeing shares “sell,” says this most recent postponement “kind of clears the air of the overhang” for the aircraft maker. “There is some cautious confidence that they might be moving closer to achieving some milestones,” Arment said.

The 787 represents the most successful new-plane sales campaign in Boeing history. The company has already taken 892 orders for an estimated value of about $154.3 billion.

The Dreamliner is Boeing’s answer to the A380, the jumbo double-decker passenger aircraft produced by European rival Airbus SAS.

The twin-engine 787 is innovative because it is made almost entirely of lightweight composite materials rather than aluminum. The relative lightness of the aircraft makes it approximately 20 percent more fuel-efficient than comparable models, a feature not overlooked with oil now costing more than $100 a barrel.

Yet the innovative design of the 787 is also one of the factors contributing to delays. Last month Boeing acknowledged it would have to strengthen the center wing box, the key structure that attaches the wings to the fuselage. Production problems, such as a shortage of parts, have slowed progress on the 787 as well.

Brian Nelson, a senior analyst with Morningstar Inc., said in a telephone interview Tuesday the delay could cause Boeing to face up to $1.5 billion in penalty payments to customers. Nelson said the strength of Boeing’s balance sheet would make any such payments manageable.

Some customers could forego penalty payments and seek earlier delivery dates for other models on order from Boeing instead, according to Nelson, who has given Boeing an overall rating of four out of a possible five stars.

Delays should be expected, he said, but at the end of the day the 787 is still “a revolutionary airplane” with a commercial backlog of seven to eight years.

It comes down to execution, according to Nelson. If Boeing “is able to execute this backlog,” he said, “then they’re going to be in good shape.”