Boeing Issues 787 Dreamliner Statement

March 20th, 2008

Having forecast here that deliveries of the Boeing 787 Dreamliner may be slashed to just 30 airplanes by the end of 2009, news emerging of a possible third major delay to the program is likely to spur a flurry of orders for the Boeing 777 family.

At the recent the JP Morgan Aviation and Transportation conference held at The Waldorf Astoria in New York, ILFC CEO, Steven Udvar-Hazy had said that the state of the 787 was “not pretty”. Click here to read the full article courtesy of Bloomberg. This was followed up by a JP Morgan analyst who concurred with the earlier projection of reduced 787 deliveries by the end of 2009.

As of writing, Boeing has not yet announced a new delay based on the news of the 787 wing box.

Boeing did issue this statement clarifying its position:

“It is a normal part of the development of a new airplane to discover need for improvements, and that is what we are experiencing on the 787. The robust test process in place on the 787 program has confirmed the majority of our designs but we have found the need for some improvements.

The center wing box issue has been addressed. The fix is being installed on Airplanes 1-6 in the Everett factory. Installations have begun on the four airplanes currently in Final Assembly. All airplanes after Airplane 7 will have the solution incorporated from the beginning.

The fundamental technologies being used on the 787 are proving to be reliable and effective. The material choices and manufacturing techniques for the airplane are sound.

Boeing is working its normal processes for developing a new airplane. The test process is working when issues are discovered and we are reacting appropriately by implementing normal design validation and fixes when we find issues. “

The statement from Boeing is both reassuring and refreshing to see. At a stroke, it dispels much of the speculative mis-speak and ill-informed hearsay that somehow permeates through the airwaves, which some believe to be sacrosanct.

Image courtesy of Alenia Aeronautica

Delays Will Drive Boeing 777 Demand

In the interim, any possible new delay may be a blessing in disguise for the company and in particular for the 777.

Naturally, compensation for the delays to the 787 are inevitable. Boeing may well discount its other products too as a form of recompense.

With the 777-200LR and 777-300ER spearheading the charge, customer activity for these two models will likely increase from now until the end of the year. Being the two most fuel efficient airplanes in the sky, airlines faced with rising fuel bills and capacity shortfalls as a result of replanning their 787 deliveries means these two big jets will get a big opening.

Many of the existing operators of the 777-200ER will find that although the same sized -200LR has a greater range, it’s freight uplift capability makes it an ideal like-for-like replacement on existing routes served today.

Image courtesy of Randy’s Journal

Much has been made of the Airbus A350-1000 supplanting the 777-300ER, despite being narrower and carrying much less cargo and passengers, it is not available until 2015 or beyond. Emirates too has already acknowledged that the big Airbus twin will fall short on carrying as much cargo as its 777-300ER’s - cargo that is critical to the underlying success of the carrier too.

For the here and now, the marketplace only has one, true 8,000nm, 350 seat twin engine airplane designed for a plethora of routes - the 777-300ER.

Critically, both the 777-200LR and 777-300ER have a combined and healthy backlog - airlines placing orders now will likely see delivery timed with initial projections of 787 deliveries prior to its delays. While the Airbus A330 family had a very good sales year in 2007 and like the 777 has a healthy orderbook, it is neither the most fuel efficient twinjet available, nor does it have the range, passenger or freight carrying capability to match either the 777-200LR or -300ER models.

These factors will then play heavily in airlines minds when considering what to select in place of the 787 until these start to arrive. Deliveries, in the “short term may be limited” says analyst Richard Aboulafia, but in the face of rising fuel costs, the all round economics of the 777 family is too compelling in the absence of any direct rivals. Even now, the newest 777-200LR operator, Delta Airlines has been in talks with Boeing to further increase the range of the said airplane.

For all its flaws, the A340 family had already lost considerable market favour when the 777-300ER entered service and a reversal of fortunes for this model is highly unlikely.

No one is predicting triple-digit sales for the 777 this year, but if the 787’s debut to service remains uncertain, the impetus for strong, consistent sales upwards of 50 frames a year is certainly achievable.

While all eyes remain on Boeing’s impending release of 787 delivery rescheduling, discounting the 777 in the near term may not be an enviable proposition - but with no immediate rival and customers seeking new airplanes to compensate for the delayed 787, pushing the 777 forward will likely mean fewer sales for the larger A350 variants too.

What Boeing does in relation to a possible 777 replacement/upgrade will depend on the recovery and stabilisation of the 787 program and on how the A350 manifests itself in eating away at the larger 777-300ER customer base.

As Boeing’s VP, Marketing Randy Tinseth said this past week, the company will “wait, watch and see” how the A350 evolves.

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