Boeing has been hit this year by economic weakness and Pentagon budget cuts -- factors well outside the company's control -- but Boeing has no one to blame but itself for the biggest threat to its long-term outlook.
The world's No. 2 planemaker this week said it would delay the first test flight of its 787 Dreamliner, the carbon-composite plane that promises to usher in an era of lighter, more fuel-efficient planes.
Unlike previous delays that put the aircraft two years behind its original schedule, this one results from a structural flaw and not from supply-chain or labour problems.
"There's a whole bunch of setbacks, concerns and unfortunate events, and then one very big area of focus that kind of puts the others in the shadows," said Richard Aboulafia, an aerospace expert at the Teal Group.
"It really is about the 787," he said. "This is something they're doing, and not something that's being done to them."
Boeing said it delayed the test flight to reinforce an area within the side-of-body section of the aircraft. Boeing has not given a new target date for the test flight. The fix itself is inexpensive and raises no other concerns about the aircraft, the company said.
Customers with Dreamliner orders were disappointed by the latest delay. And experts wondered if cancellations might follow. Such a turn of events could take a toll on the company, which already has suffered its share of bad luck.
"We have been anticipating the 787 delivery, so it really is disappointing if our delivery schedule will be pushed back," said a spokesman for Japan Airlines on Tuesday.
So far this year, Boeing has logged only nine net orders as global economic weakness has spurred a string of cancellations, including 58 Dreamliner orders.
"Someone could definitely make the argument that we're at the trough," said Alex Hamilton, aerospace analyst at Jesup & Lamont Securities. "The orders were so abysmal (this year) it's going to be pretty hard for them to get worse."
Boeing's chief rival Airbus faces the same economic pressures. Its equivalent plane to the 787 -- the A350 -- is due in the middle of next decade.
DEFENSE TAKES A HIT
Boeing's defense unit was hit hard by sweeping cuts announced by US Defense Secretary Robert Gates in the Pentagon's fiscal 2010 budget request earlier this year. Defense revenue came to USD$32 billion in 2008, accounting for nearly 53 percent of Boeing's total revenue.
The US Army's Future Combat Systems program is being restructured and opened to more competition. Boeing was the senior partner in managing the USD$160 billion modernization project.
Also, the proposals called for the C-17 military cargo plane, built by Boeing in California, to get no further US orders. Some missile defense programs would be scaled back, including Boeing's Airborne Laser designed to zap missiles soon after their launch.
Boeing is now hoping to win a multi-billion dollar Air Force contract for new refueling aircraft after losing to a team of Northrop Grumman and Airbus-parent EADS in an earlier round.
The company hopes that increased foreign sales will help offset potential losses in US defense revenue. At the same time, it is expanding in other segments, such as unmanned aerial vehicles.
Boeing shares have fallen 5 percent since Tuesday, when Boeing announced the 787 delay. But the stock has dropped some 60 percent since October 2007, the year in which Boeing saw a record number of net orders -- 1,413. The number fell to 662 in 2008.
Hamilton said that because the stock tends to track aircraft orders, investors are looking for signs of improvement in the financing markets and signs of stability in the order book.
"This is a stock you want to buy in mid-2010," Hamilton said. "They're just going to have a turbulent year. There's lot that needs to be figured out."
