Boeing delays 787 debut to 2009

April 9, 2008 8:13:08 AM PDT
The Boeing Co. delayed its 787 jetliner program again Tuesday, pushing back its expected debut in commercial service to the third quarter of 2009 as it continues to grapple with problems involving its supply chain and the need to redo work done by contractors. The newest delays push the 787's schedule back approximately another six months and mean the aircraft touted for its potential to be more fuel-efficient than other large jets is now more than a year behind its original schedule.

The first test flight now isn't expected to take place until the fourth quarter as Boeing builds more time into the schedule to reduce the risk of further delays. The company had initially planned to begin test flights last August or September and deliver the first plane to Japan's All Nippon Airways this May - a delivery it had recently rescheduled to early 2009.

The fourth delay with the 787, coming less than three months after the last one, further undermines Boeing's credibility on the much-hyped program and also is a setback to the more than 50 airlines that have placed nearly 900 orders for the top-selling plane. Buyers are likely to seek compensation for the delays.

The 787, Boeing's first newly designed jet since airlines started flying the 777 in 1995, will be the world's first large commercial airplane made mostly of carbon-fiber composites, which are lighter, more durable and less prone to corrosion than more traditional aluminum. Boeing says it will be cheaper to maintain and offer greater fuel efficiency and more passenger comforts than comparable planes flying today.

But the unprecedented plan to assemble a jet from components manufactured largely by other companies has run into multiple snags involving outsourcing problems involving contractors in numerous countries.

The company said that while significant progress has been made assembling the first airplane, it is rescheduling the first flight "due to slower-than-expected completion of work that traveled from supplier facilities into Boeing's final assembly line, unanticipated rework and the addition of margin into the testing schedule."

Boeing now anticipates delivering a total of 25 of the new airplanes in 2009, down sharply from the originally planned 109.

"Over the past few months, we have taken strong actions to confront and overcome start-up issues on the program, and we have made solid progress," said Scott Carson, president and CEO of Boeing's Seattle-based commercial airplanes unit. "Nevertheless, the traveled work situation and some unanticipated rework have prevented us from hitting the milestones we laid out in January."

The company said research and development costs will likely increase because of the latest delay but it expects no change to 2008 earnings guidance. It said it will disclose more financial details when it reports first-quarter earnings on April 23.

Citing evidence of what it said is substantial progress, Boeing said it will power up the first aircraft by the end of June and also begin final assembly of the third and fourth 787s. It also revised the scheduling of the different 787 models, saying the larger 787-9 now will follow the original 787, with first delivery planned for 2012, while the shorter-range 787-3 that originally was pegged for a 2010 delivery will be pushed back behind the 787-9.

Cai von Rumohr of Cowen and Co. said the latest delay had been expected but it's unclear whether the program's schedule is likely to slip again until Boeing provides more details. "We continue to believe that the critical milestone for determining whether all the bad news is on the table is apt to be a week or two after first flight," he said in a note to investors.

The analyst said Boeing could face extra costs exceeding $4 billion because of the delays and late penalties to the airlines. The company earned $4.1 billion in 2007.

Boeing shares rose $3.14, or 4.2 percent, to $78.16 in morning trading.

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