Revised Delivery Targets On The 787

At the International Society of Transport Aircraft Trading (ISTAT) conference in Orlando, Florida this week, Boeing’s VP Marketing, Randy Tinseth spoke about the ongoing work on the 787 Dreamliner.

Twenty one Boeing 787’s around the globe are at various stages of production, and Tinseth noted that achieving power on for the first airplane is scheduled for “the early beginning of the second quarter“.

Having seen the flagship airplane delayed twice now, last week’s analysis from Goldman Sachs alluding to further delays was not at all surprising, except that it was rather late - analysts at Bank Of America had already revised down their 2009 delivery projections from 100 to 50 airplanes.

Images courtesy of Newairplane.com

Speaking earlier this week, one European Boeing 787 customer who declined to be identified said of the Goldman Sachs analysis that the airline was struggling to source both new build and leased wide body airplanes to cater for the possibility of the 787 being delayed for a third time.

“It’s all very well Airbus and Boeing having such healthy orderbooks, but the reality is that neither can churn these jets out fast enough. With the Open Skies treaty ready to kick in in a few short weeks time, demand [for airplanes] has never been stronger, even moreso considering the likes of American, Delta and United Airlines have not yet placed any major orders during the 2005-7 boom cycle.“

“As for our 787 fleet, well, like everyone else, we’re playing the waiting game. If we’re still waiting by the end of 2009, that could seriously hamper our summer 2010 plans. Let’s wait and see the revised timetable from Boeing first.“

In initial guidance provided here, based on information available I had concurred that the target of 40-50 787’s for the period 2009 would be the company’s near term target. Given the ground-breaking technology in the largely composite built Dreamliner, achieving entry into service by the end of quarter one, 2009 will entail a slower rate of deliveries based on longer lead time to complete the existing airframes coming on stream into the Everett factory whilst coping with the traveled work and parts shortages that has thus far hindered the program.

Where Goldman Sachs had reported in its view that “Boeing continues to underestimate the amount of work required on the 787,” the wider consensus is that while there are challenges the design is not in question, rather, the fine tuning of the wider support and logistics network has negatively impacted on final assembly. The other concerns relate primarily to issues found in the flight test program, envisaged to be underway by the time the Farnborough Air Show kicks off in mid-July this year.

Analyst Richard Aboulafia has noted that many “have been expecting more delays.” If further setbacks occur on the 787 program, it will serve as a timely reminder that the airplane is setting a new benchmark for technology and efficiency - not just for the industry today, but also for every single new build widebody airplane that follows hereafter.

As Boeing Commercial Airplanes President Scott Carson had mentioned in the January media conference call, the airplane itself is not in question and customers understand that in order to get this revolutionary airplane right for service entry, time is required. During the certification process, any delivery delays will certainly afford Boeing a good window of opportunity to work through any flight test anomalies that may crop up, and certainly those that cannot be replicated on laboratory systems. From what we know already, the flight systems are ready for first flight.

It is worth considering that 2009 deliveries of the 787 may only reach 30 airplanes in reality - far less than the 112 Boeing had hoped to deliver and lower still by the analysis of Bank Of America and Goldman Sachs. It’s also interesting to note that Merrill Lynch has been yet more conservative and expects first deliveries to commence in the fourth quarter of 2009 - slashing the lead time over the rival Airbus A350 down to just over three years.

Amongst all this is the costly exercise of paying out untold sums in compensation to those customers who had planned, and re-planned their forthcoming schedules to take account of 787 deliveries - many of which will be renegotiated between now and service entry.

Launch customer All Nippon Airways has steadily been more publicly vocal about the delays and is not relishing having to utilise other airplanes in the interim.

“The longer we wait, the more servicing of the 767s we will need to do,” said Mr Shinobe, an executive at All Nippon Airways. “Some of them may become unfit for flying.“

It may be a far-fetched claim that some 767’s could be unfit for flying, but this further emphasizes the reality of the marketplace demand for the highly fuel efficient 787. Due to this and with no direct substitute available, it is rather inconceivable that the current crop of over 5o airlines already waiting for their Dreamliners would entertain the thought of cancelling their orders.

Early April’s anticipated revised production schedule will be a good indicator of how the wider 787 Dreamliner program is going forward - for the meantime, the countdown to power on for the first airplane continues.

5 comments March 14th, 2008