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<< Previous   of   Next >> (click to enlarge)   ADVERTISEMENT   Related Stories • Business Week in Review 10/14/07   CONTACT THE HERALD Robert Frank, City Editor frank@heraldnet.com   Published: Thursday, October 11, 2007 Boeing softens blow, hopes to catch up quickly By Michelle Dunlop, Herald Writer EVERETT -- You won't see a Boeing 787 flying overhead this year, but you could see Dreamliners lining Paine Field this time next year. That's if everything goes according to the Boeing Co.'s revised 787 schedule -- a timetable that pushes the delivery of the first Dreamliner back six months. Persistent problems with piecing together the first Dreamliner in Everett caused Boeing to bump the plane's first flight until spring. And the company will miss 30 to 35 Dreamliner deliveries next year involving 15 customers. "It has simply proved to be more difficult to complete the structural work in our factory in Everett," said Scott Carson, president of Boeing Commercial Airplanes. Earlier this year, Boeing's partners in Japan, Italy, South Carolina and Kansas shipped major components to Everett for final assembly. However, many of those pieces came without wiring or without permanent clips and brackets in place. At times, Carson said, work on the first 787 has been stalled while Boeing waited for these key parts to arrive. Just five weeks ago, Carson and Mike Bair, head of the 787 program, assured investors and airlines that the first 787 would be delivered on time in May 2008, despite a two-to-three-month delay to the plane's first flight. The Dreamliner's maiden flight was slated for mid-November to mid-December. "We don't see a high ­probability -- or even a low probability -- of it moving out of the year," Bair said in September. At the time, Boeing thought it could quickly resolve problems with the 787's flight control software and with the incomplete sections shipped from suppliers around the world. The company managed to assemble the Dreamliner for an elaborate rollout ceremony in July. Boeing officials later said it was having trouble finding and replacing the temporary fasteners put in place by suppliers with the permanent ones. Last week, an aerospace analyst with Lehman Brothers suggested in a note to investors that a six-month slide in Boeing's delivery schedule would be more accurate. Jim McNerney, Boeing's chief executive, announced exactly that on Wednesday. "While we've made some progress ... the pace of that progress has not been sufficient" to meet the May 2008 delivery deadline, he said. The new schedule will give the company a little more leeway in its flight test program, which had been shortened to as few as five months by the earlier delay. The company will continue building Dreamliners, stockpiling some even before the initial one takes flight. In doing so, Boeing hopes to deliver a total of 109 Dreamliners by the end of 2009, three short of its initial goal. The 15 airlines affected by the delay could demand penalty payments from Boeing. And the aerospace company won't see as much cash flowing in next year since it won't deliver as many 787s as intended. Still, "the business case for the 787 remains extremely solid," said James Bell, chief financial officer. Boeing has 710 orders for its fuel-efficient Dreamliner from 50 customers. On Wednesday, Boeing first announced its Dreamliner delay in a press release. Its stock, which had jumped from $100.89 to $102.40 early in the day, dropped as low as $97.04. After Boeing's conference call with investors and media, the company's stock seemed to stabilize, closing at $98.68, down $2.77 for the day. Carson has more confidence in the revised schedule than the original partly because the company has a plan for dealing with incomplete parts shipped by suppliers. Over time, the assemblies should arrive with less and less need for rework. "We're now working with dates our suppliers have committed to not to ones we had imposed upon them," Carson said. Even if Boeing remedies the problems presented by having to do work out of sequence on the first 787, it still could see challenges pop up in a flight test, said Scott Hamilton, an analyst with Leeham Co. If Boeing were to discover problems during the flight, it will have several 787s already built. The company intends to have 40 Dreamliners built by the time it delivers the first one to All Nippon Airways. "You just can't fix this sort of thing on a dime," Hamilton said. However, if Boeing doesn't continue to build 787s as planned, the company could put itself in a risky situation, said another analyst, Paul Nisbet with JSA Research. "They don't want to get permanently behind," Nisbet said. Earlier this week, aerospace analyst Richard Aboulafia suggested that Airbus' trouble with the A380 centered around design flaws while Boeing's issues with its 787 relate to production. Boeing's McNerney reiterated this point Wednesday while talking with analysts and media. "The integrity of the design here remains solid," McNerney said. For the most part, Boeing anticipated problems in production given it's building the mostly composite 787 much differently than it has built mostly aluminum aircraft in the past. "We're not experiencing things we didn't think we would," ­McNerney said. But Boeing is taking more time to resolve issues than it anticipated. Carson and McNerney insisted the supply chain is strong. Last year, when Airbus came forward with another delay to its A380 superjumbo jet, pushing back deliveries by two years on average, most industry observers saw it as boost for Boeing. But when Boeing's bad news surfaced Wednesday, few forecasted a windfall for Airbus. Nisbet noted that Airbus has seen more severe delays to not only its A380 but also its A350. "You could be jumping from the frying pan into the fire," if customers lose confidence in Boeing, he said.

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