Boeing 787 Delayed For A Third Time

As promised by BCA President & CEO Scott Carson back on January 16th, today we heard an update on the 787 Dreamliner program. Since the last conference call, Wall Street had been awash with predictions of setbacks and further delays to service entry and missed production delivery targets.

Image courtesy of Boeing

At 0830 ET this morning, the company announced a third major delay to the program. (The first being October 2007 and the second in January 2008). The key points are as followed:

• First flight moved into fourth-quarter 2008; deliveries to begin third-quarter 2009
• Production plan now targets approximately 25 787 deliveries in 2009
• Company expresses confidence in plans; will work closely with customers to minimize disruption
• No change to 2008 earnings guidance; strong 2009 EPS growth still expected

Listed below are the main points raised in the April 9th, 2008 media briefing:

Scott Carson (SC)

• Continued challenges
• Careful, thorough review
• First flight in Q4, 2008 – Delivery Q3, 2009
• Add margin to the program
• More conservative approach
• 25 deliveries by end of 2009
• Traditional ramp up, gradual increase in production
• Specifics of new delay to be discussed with each customer
• 787-9 EIS in early 2012
• 787-3 to follow
• Actions, not words will get 787 into the air
• Encouraged by progress on Airplane #1
• Better position than several months ago
• Japanese partners- better, improved structural assemblies
• Responsible for delivery
• Work that team can accomplish
• Addressing partners unique situations
• Wingbox not central issue
• LEAN practices to be implemented at Global Aeronautica
• R&D costs may rise
• 2008 earnings will not be impacted
• 2009 guidance in quarterly call
• Not in position to discuss interim lift/penalties for airlines
• Committed to both 787-9 and 787-3
• Belief in this game changing airplane
• Too early to tell who will get penalties
• Premature to speculate on when back on original schedule for existing contractual obligations

Patrick Shanahan (PS)

• Technology is sound
• Composite structures performing as predicted
• Full functionality in lab tests
• Airplane #3 will be first to have interior fitted
• Engineering progresses well
• Power on scheduled by June 2008
• Not enough time to decreased the travel work
• Wingbox issue slowed pace down by approx 2 months
• Impacted by rework
• Remains confident in completing Airplane #1
• Systems installation progressing well
• Forward body, empennage and mid-body installation almost complete
• Every system tested prior to first flight
• 900 part numbers, 100 systems
• 90% of systems tested in laboratories
• 95% of those have been tested
• IFE, brakes, maintenance and FCS remain
• 7 million lines of code – 98% written, tested & delivered
• 96% of tests done in preparation for first flight
• Boeing 777 was service ready 5 months after first flight
• Boeing 787 will be service ready at power on
• Pace of deliveries will dictate final assembly line output, as well as partner capabilities
• Produce 10 airplanes a month from 2012
• Production rate to increase in prudent manner
• 50% decrease of travel work on Airplane #2
• 75% decrease of travel work on Airplane #3
• Global Aeronautica productivity to increase
• Decreasing risk and airplane rework
• Confident in executing new plan
• Structural tests gone well on horizontal stabilisers, fuselage
• Partial wing taken to limit load
• 5 of 10 load conditions tested, remainder to be done by end of this quarter
• Better than expected results
• 15% component tests remain
• Static/fatigue tests to start in next few months
• Block point improvements will help counter weight issues
• Handful of issues remain to be resolved with FAA (ie lightning tests)
• Chief 787 pilot has flown both GE/RR engine test beds
• Static Airplane out of factory this month
• Airplane #3 parts also arrive this month
• System hardware integration by June 30, 2008
• All wire bundles installed on Airplane #1
• Focus is on getting into flight tests
• No decision on destruction in fatigue tests – however ultimate load test will be done
• All six test airplanes flying by Q1, 2009
• No impact on 787 performance

Naturally, it will take airlines time to digest this news - although they will have been aware of this prior to today’s call and the earlier press release.

Importantly, Boeing has made a raft of changes and must now work through the issues it faces in order to not only quell bad news on the 787 program, but also to restore confidence among those customers who have rightly been upset at the lack of progress and positive news on this revolutionary airplane.

Of critical importance is the 787-3. A report in the Times of London had alluded to the said model being dropped. Carson maintained that both models (the -9 and -3) would be built. Shanahan further said that the 787-9 would now be the first major derivative, slated to enter service in 2012. No timescale was provided for the 787-3 variant.

Air New Zealand’s CEO Rob Fyfe at a Sydney business conference just this past week had said that a delay on the 787 would “probably be a good thing”. The airline was originally due to take delivery of the first 787-9 in December 2010.

In the interim, Shanahan stated that the static and fatigue 787’s would be moved to their respective testing locations, allowing for final assembly to begin on airplanes #3 and #4. Power on is expected to be achieved by the end of June 2008.

“We have addressed the major challenges that slowed our progress while trying to complete the primary structure — the parts shortages, engineering changes, and manufacturing changes — and we are well into the systems installation that is the precursor to putting power on the airplane for the first time. We have also worked closely with our partners to achieve higher levels of completion of their parts of subsequent airplanes, and we will continue to drive improvements in the supply chain and production system performance,” Shanahan said.

Boeing states it will deliver 25 jets by the end of next year - not far off was the FleetBuzzEditorial prediction of 30 deliveries.

As mentioned before, part of this can and will be alleviated with demand increasing for the 777.

Image courtesy of Boeing - A 777-300ER Seen In Final Assembly

With the sixth model in the family entering final production, the 777F, Boeing and its partners have a legacy airplane with a reliable and trusted supplier base with which it can build and ramp up production on this big twin. Like the 787, it is unmatched.

Capitalising on that will make the wait for the 787 all the more worth it.

7 comments April 9th, 2008