Boeing Announces Further 787 Delay

December 11, 2008

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Boeing's nightmare with its 787 Dreamliner continued as it pushed back its schedule for the fourth time on Thursday, making its new plane almost two years late and risking cancellations from angry airlines.

The US plane maker blamed a two-month strike by its machinists and problems with wrongly installed bolts on the first batch of planes, as it pushed back its schedule by three to six months.

It did not give details of the financial effect, saying it would update its financial outlook at an unspecified time in the future.

The delay was widely expected in the industry and may not be the last.

"Given its 100 percent failure rate in forecasting the 787 timetable so far, we expect airlines, suppliers and investors to be suitably skeptical as to whether this latest revised schedule will actually be achieved," said Macquarie Securities analyst Robert Stallard.

Boeing has been struggling with a number of problems assembling the carbon-composite jet, mostly due to late design changes, shortages of parts and substandard work by suppliers.

Problems on the plane were aggravated by a 58 day strike by Boeing's machinists, which shut down the company's Seattle-area plants for most of September and all of October.

The company now faces greater penalty payments to impatient customers and a further blow to its prestige.

"We were originally due to get them (787s) in early 2011 and wouldn't be surprised if we now don't get them until 2013," Paul Charles, director of communications for British carrier Virgin Atlantic said.

"We want to hear from Boeing as soon as possible because we're trying to plan our own growth in the future," he added.

Virgin has 15 787s on order.

Russia's Aeroflot, which has 22 787s on order, said it is still waiting for guidance on a new delivery date from Boeing.

"We are waiting for that as soon as possible," Viktor Sokolov, deputy head of Aeroflot's press service said. "As for a possible cancellation of the order, we would address that if and when we get further notice from Boeing."

Boeing said the first test flight of the 787 would now take place in the second quarter of next year, and the first delivery in the first quarter of 2010. Before the strike, it had been aiming for the first test flight before the end of this year and the first delivery in the third quarter of 2009.

Under Boeing's original plan, Japan's All Nippon Airways would have taken delivery of the first 787 in May 2008.

"This latest delay is very regrettable given that we worked to the best of our abilities with Boeing to produce the last delivery schedule," said an All Nippon spokesman.

The airline will look at the possibility for further compensation when it gets a revised delivery schedule from Boeing, he added.

The latest setback means first delivery is almost two years behind schedule; but later planes will almost certainly be further delayed, as Boeing struggles to match the ambitious production schedule it set out at the start of the program.

The main problem facing Boeing is that it outsourced production of most of the 787's structure to other companies around the world, while focusing on assembling the plane itself.

It did not anticipate how hard it would be to ensure that high-quality work from a vast array of suppliers arrived on time at its Everett, Washington, plant.

In an attempt to get a better handle on its supply chain, Boeing announced on Thursday the creation of a new Supply Chain Management and Operations group, to be led by Boeing veteran Ray Conner.

It also promoted the general manager of the 787, Pat Shanahan, to head a new group controlling all Boeing's commercial plane production programs. Shanahan, who took over from the 787's original general manager Mike Bair in October last year, will keep direct oversight and accountability for the 787.

His role as general manager on the 787 program will be taken up by Scott Fancher, who previously worked in Boeing's missile business.

(Reuters)