787 Deliveries Seen To Slip, Airbus Under Greater Threat
October 16th, 2008
Air India Seeks Further Compensation, Unlikely To Get It…
In a week that has seen both highs and lows for Boeing, one of the most controversial aspects of the effects of the industrial action reared its head with one of the largest Boeing 787 customers speaking about compensation in lieu of late deliveries.
During the first ever aerospace exhibition, to be hosted biennially at Hyderabad Begumpet Airport, Air India made no secret of its desire to both remain committed to the 787 and yet seek further penalty payments in the wake of the strike that has almost certainly left Boeing with no option but to push the entire 787 flight test, certification and delivery schedule farther out to the right.
The chairman and managing director of National Aviation Company of India (NACIL), Raghu Menon made the remarks this week and will largely be seen as misguided given that from a contractual standpoint, Boeing will not be liable for compensation payments due to any further delays to the 787 as a reult of the industrial action that is currently ongoing.
“I am afraid the ongoing strike will lead to further delays for the Dreamliner. And further delays will obviously lead to an increase in the compensation amount,” said Menon.
Speaking exclusively to FleetBuzz Editorial.com right after the Farnborough Air Show, Boeing Commercial Airplanes Vice President, Sales, South & Southeast Asia, Dr. Dinesh A. Keskar had made clear that 787 customers in India would be compensated as a result of the third major delay announced back in April this year.
Image copyright/owned by FleetBuzz Editorial.com
During the exhibition in India, Keskar stated that he was “sure [Menon] is aware of the [787 Dreamliner] contract details, and the compensation will be worked accordingly.”
At a time when Boeing is still securing huge orders for the 787, such as those from American Airlines, Air India’s surprisingly bizarre suggestion to seek more compensation is not one that will be emulated by other 787 customers, or indeed, other carriers awaiting delivery of other Boeing airplanes.
Consensus is now forming across the board that service entry for the 787 will be during 2010. With four of the six flight test airplanes in various stages of production, Spirit AeroSystems and other notable programme suppliers cutting back production in the wake of the strike means that the aim of getting all six airplanes flying by the end of February 2009 is going to be an arduous task, particularly as major sub-assemblies for the fifth and sixth test 787’s have not arrived in Everett.
The knock-on effect of which, means that the entire certification programme will likely be pushed well into the fourth quarter of 2009 meaning delivery in the first half of 2010. It is unlikely that there will be any 787 deliveries in 2009 and it is expected that Boeing will discuss this further at its third quarter earnings conference call next week.
On the bright side, with the likes of India’s Kingfisher Airlines and Jet Airways scaling back their overseas ambitions, delays for the overcrowded Indian aviation scene may just be a blessing in disguise.
This site has already noted how Airbus’ exposure to order cancellations is far higher than that of Boeing - despite Jet Airways being rumoured to seek deferment of existing 737’s and 777’s, the likes of Kingfisher and IndiGo are almost certain to cancel A320 orders, and comes as little surprise as Airbus’ John Leahy admitted that production rates will not be raised during 2009.
(And what of that production line in Tianjin…? Hm…)
Image courtesy of American Airlines
Evolution Securities Nick Cunningham succinctly points out - “when it comes down to it, which airlines’ deliveries are they going to cut? That’s a more difficult process.“
Further, seasoned aerospace analyst Robert Stallard highlighted his optimism about Boeing, despite the ongoing strike.
“Aerospace fundamentals are deteriorating, but the sell-off in the Boeing stock has been so extreme it has overshot even our pessimistic revised industry scenario by about 30%.
Around half the company is defense, which we think is likely to remain steady over the next few years, and using a sum-of-the-parts analysis, we calculate that investors are currently getting BCA for about US$10 out of the current US$47 stock price. We think the stock is poised for a bear market rally, and that this is likely to be a good entry point for investors,” he noted.
While the strike casts a shadow over Boeing, the fact that confidence in the 787 remains high coupled with Airbus’ precariously suspect backlog, things will certainly look an awful lot better when it ends.
(Prior articles on the Boeing/IAM strike can be found by clicking these links here, here, here, here, here, here, here, here, here, here, here, here and here.)
Sphere: Related ContentEntry Filed under: Aeroplane, Aerospace, Air India, Air Transport, Air Travel, Airlines, Airplane, Airplane Order, Airplanes, Airport, Airports, Alenia, Aviation, Boeing, Boeing 747-8, Boeing 747-8F, Boeing 747-8I, Boeing 767, Boeing 777, Boeing 777-200LR, Boeing 777-300ER, Boeing 777F, Boeing 787, Boeing 787 Order, Boeing 787 Orders, Boeing 787 Premiere, Boeing 787 Rollout, Boeing 787-10, Boeing 787-3, Boeing 787-8, Boeing 787-9, Boeing Commercial Airplanes, Boeing Orders, Dinesh Keskar, FleetBuzz.com, Fuji Heavy Industries, Global Aeronautica, IAM, Jim McNerney, Kawasaki Heavy Industries, Mitsubishi Heavy Industries, Ray Goforth, SPEEA, Scott Carson, SpiceJet, Travel, Vought
9 Comments Add your own
1. boeing investor | October 16th, 2008 at 1:29 pm
Air India’s “demands” do seem spectacularly idiotic.
2. Chris Wallace | October 16th, 2008 at 1:36 pm
Well if AI is ready to place follow-on orders, I am sure Boeing will be happy to work with them.
3. Jacobin777 | October 16th, 2008 at 3:40 pm
This sounds like typical comments/attitude from AI..I agree with Mr. Wallace
4. Trike | October 16th, 2008 at 8:36 pm
It does seem to be a trifle opportunistic of AI to try to gain some sort of monetary or similar advantage here.
5. mike j | October 16th, 2008 at 9:24 pm
I wish Boeing “spokes-people” would stop blaming the IAM strike for 787 delays, and for 787 maiden-flight delays!
787 was delayed eighteen months before the IAM strike!
I will maintain that Boeing wanted a strike because of parts issues!
Prior to the strike most 787 personell were “standing-around-waiting-with-no-parts-and-nothing-to-do”, (then bust their but when a part did came in, IF the part was even installable).
The strike saves Boeing payroll money.
My intel into the factory says that EVEN NOW (five week later) the number five and six 787s major sections aren’t there yet.
Prior to the strike ZA001 (787 number one) was nowhere near ready for roll-out to the flightline. It was more than six months away!
And I know for a fact 777 Line was very behind on key parts too, because we were constantly going downline to install late parts.
Boeing provoked the strike mainly to save payroll money while parts get caught up.
I bet it’s a total myth that Boeing is losing money during this time. But I’ll bet they are losing tons of loyalty from IAM workers.
I feel bad for Air India and any other airline.
If Boeing keeps up their little game (breaks the Unions, and loses their skill-base), eventually all their products will be very low quality and unsafe, and total garbage, and not worth buying.
6. Field Veteran | October 16th, 2008 at 9:46 pm
I am not an MPRF but know for a fact those dedicated folks turn themselves inside out to support production & delivery. For Boeing to go after the materials delivery group is the most idiotic thing I’ve ever heard. The MPRF make a difference, they make it happen in spite of managements stupidity.
7. Precocious | October 17th, 2008 at 12:17 am
I agree with this Field Veteran. Point is no one cares in a global economy. with all the bailout baggage that happened recently when AIG Boeing’s leasing company rejoiced and played at Regis Spa in Califinia don’t bank that Blondin and Bofferding weren’t there as well. Now Dubai is the sharia firm of choice if you want to buy planes. I assume that we will all be greatfully back in the saddle come November 5th so we can all have a joyous Thanksgiving. We aren’t realistic in this global market place to be withholding labor.
8. Angel/MT-4 | October 17th, 2008 at 7:45 am
RE: Precocious
May I ask why you mentioned a specific date of November 5th? Is there something I missed somewhere?
Thanks
9. mike j | October 17th, 2008 at 11:02 am
Angel/MT-4 (blogger 8),
FYI: This is just a guess based on last time…
The last strike 2005, my picket-duty-card (which arrived in my mail in August before that strike), had October already lined-out, and lo’ and behold we were back by October.
My 2008 picket-duty-card (which also arrived in the mail in August before the strike “happened”, or was provoked to “happen”) goes until mid November, maybe strike ends then, who knows.
It could be just a guess, but it makes me wonder if these things are known ahead of time, because the 2008 “final-offer” was too very lousy. If so this means Boeing really is playing games with our very lives (which Doug Kight specifically said Boeing would not do)(possibly with the Union Leaders knowing ahead of time also, but can’t prove it).
Like I keep saying, this strike gave Boeing a perfect opportunity to save labor-costs while parts for all models catch up. Also Winter months aren’t good weather for doing maiden-flights, Spring is better.
I’m just guessing (by “putting two-and-two together”). Also, I’m only just a pawn in their game too.
It would sure be nice if strike ends soon. (I mean, I hope the part shortages are better soon.)
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