In this 2017 photo, a Boeing 787 airplane is shown at Boeing’s assembly facility in Everett. (AP Photo/Ted S. Warren, File)

In this 2017 photo, a Boeing 787 airplane is shown at Boeing’s assembly facility in Everett. (AP Photo/Ted S. Warren, File)

Boeing Dreamliner’s defects spur $7.5 billion cash drain

The company intends to repair 787 planes at its factory in Everett

By Julie Johnsson / Bloomberg News

Boeing Co. faces a new cash drain from structural flaws on its marquee 787 Dreamliner jets, potentially slowing the company’s recovery from the coronavirus pandemic and the grounding of the 737 Max, said a Bernstein analyst.

The Dreamliner’s woes will sap $7.5 billion from Boeing’s free cash flow for 2020 and 2021, Bernstein’s Douglas Harned said Monday as he cut the planemaker to the equivalent of “sell.” Boeing handed over only one 787 jet in December after none in November, Harned estimated, suggesting delays from repairs to undelivered jets.

“The problem we see is that the 787 situation is getting worse and we are not yet able to fully bound the negative impact,” Harned said in a report. He lowered his price target 10% to $199.

The burgeoning financial impact points to new turmoil for Boeing as it tries to rebound from the sharpest downturn in aviation history. While the Dreamliner’s defects don’t pose an immediate threat to safety, Boeing Chief Financial Officer Greg Smith acknowledged last month that inspections were taking longer than expected. That contrasted with the company’s upbeat message in October, when it predicted a strong fourth quarter for 787 deliveries.

Stored Jets

The Chicago-based company declined to comment beyond Smith’s warning last month about weak deliveries. The CFO said at the time that Boeing anticipated handing over undelivered Dreamliners throughout 2021.

About 75 completed Dreamliners are stored, Harned said, far more than the 10 to 15 undelivered aircraft that were typical when the program was a cash cow for Boeing. Harned predicted that the number of stored 787 planes would continue to grow during the first quarter.

Boeing’s inventory already stood at a record $75.2 billion at the end of September, swollen by hundreds of undelivered Max jets. Handovers of the single-aisle workhorse are now underway, since U.S. regulators lifted the Max’s grounding in November. The flying ban, the longest in U.S. history, was prompted by two deadly crashes that killed 346 people.

In the eyes of investors, the Max’s return and the rapid introduction of Covid-19 vaccines overshadowed the Dreamliner’s woes in late 2020, and the shares rallied sharply in the fourth quarter. Still, UBS Group AG warned that Boeing could be forced to record a reach-forward loss with its earnings later this month as it slows Dreamliner output and consolidates production in South Carolina.

‘Disassembling’ Interiors

Boeing intends to repair 787 planes for months at its factory in Everett, Washington, after ending production of the model there in March. The inspections require “opening up the airplane by disassembling the interior, floor, ceiling, etc.,” Harned wrote.

Where the two fuselage segments are joined, engineering specifications allow for slight variances, or wrinkles, in the inner surface that are about the width of a human hair.

Boeing and U.S. regulators are determining what course of action is needed for Dreamliners already in service. The potential responses include requiring the company to fix the structural issues or demonstrating that its previous engineering tolerances were overly tight, Harned said.

Talk to us

More in Herald Business Journal

Weatherstripping is installed Thursday afternoon at Pallet in Everett on January 21, 2020. (Kevin Clark/The Herald)
Everett-based Pallet offers a novel way to shelter homeless

The manufacturer’s small, temporary homes have helped hundreds of people get off the streets around Puget Sound.

An Alaska Airline plane lands at Paine Field Saturday on January 23, 2021. (Kevin Clark/The Herald)
Paine Field makes short list of airports that could grow

Arlington’s airport is also in the running, says a state group planning for future air travel demand.

The strip-mall site (bottom) where Trent Development hopes to build 350 studio, one-bedroom and two-bedroom apartments, on Wednesday, Jan. 20, 2020 in Lynnwood, Wa. (Olivia Vanni / The Herald)
Hundreds more apartments planned around Lynnwood light rail

In a new proposal, a developer envisions 350 units, two buildings of at least seven stories, a one-acre courtyard and a dog spa.

(Getty Images)
You voted: The best bakery in Snohomish County

Even during a pandemic, people still have their favorites.

Our readers have voted on a few of their favorite things in Snohomish County. (Getty Images)
The best in Snohomish County, chosen by you

Even during a pandemic, people still have their favorites.

submitted by Peg Tennant
Oak Harbor Farmers Market closes after more than 20 years

A new group is already planning for a new market this spring at Windjammer Park.

A Boeing 777X airplane flies over Moscow, Idaho. during a test flight Tuesday, June 23, 2020. The new model of airplane had its first flight on Jan. 25, 2020, from Paine Field in Everett, Wash. The 777X will be the world's largest and most efficient twin-engine jet, according to Boeing. (Geoff Crimmins/The Moscow-Pullman Daily News via AP)
Tax break proposed for manufacturers, but it needs a sponsor

Port of Everett CEO Lisa Lefeber hopes to boost manufacturing across the state with a new incentive.

FILE - In this Jan. 24, 2019 file photo Washington Gov. Jay Inslee, left, looks on as Suzi LeVine, right, the state's Employment Security Department Commissioner, talks to reporters at the Capitol in Olympia, Wash. The state of Washington is calling in the National Guard to help process unemployment benefit claims as officials grapple with a backlog caused in part by a fraud ring that stole more than half a billion dollars in aid, officials said Thursday, June 11, 2020. LeVine said that Gov. Jay Inslee approved the deployment of troops who will start assisting her team next week as it tries to reduce the unemployment claim backlog.(AP Photo/Ted S. Warren,File)
Head of state employment agency to join Biden administration

Suzi LeVine’s departure is effective Feb. 1. A deputy, Cami Feek, will serve as acting commissioner.

FILE- In this Sept. 30, 202, file photo, a Boeing 737 Max jet, piloted by Federal Aviation Administration (FAA) chief Steve Dickson, prepares to land at Boeing Field following a test flight in Seattle.  (AP Photo/Elaine Thompson, File)
European aviation agency: 737 Max to be cleared next week

The review of the aircraft “began with the MCAS but went far beyond.”

Most Read