Boeing rolled out another delay yesterday in the first flight of its hot-selling 787 Dreamliner, and company executives left vague the latest...
Boeing rolled out another delay yesterday in the first flight of its hot-selling 787 Dreamliner, and company executives left vague the latest goal for the first jet delivery to increasingly impatient airline customers.
It could easily be more than three months into 2009 before the first buyer gets its Dreamliner.
In a conference call Wednesday morning, executives outlined a revised timetable that postpones the 787’s first flight a further three months, until June — fully 10 months behind the original schedule.
But Boeing isn’t ready yet to commit to a new schedule for 787 deliveries, said Commercial Airplanes Chief Executive Scott Carson, because “we don’t want to be in a position where we do this with you all again.”
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So this time, Boeing is taking pains to avoid over-promising and won’t unveil a new timetable for flight testing and delivery of the first plane until “the end of the quarter,” meaning March 31, Carson said.
In the meantime it will hold detailed discussions with its supplier partners, which Boeing blames for much of the Dreamliner delays, to ensure they can deliver on their commitments.
“We have resisted the temptation this time to make a broad and sweeping generalization about where we are” on the program, Carson said.
Despite the uncertainty, Carson insisted the mess on the 787 production line does not signify outsourcing gone bad. The new jet’s global manufacturing plan is going to produce the game-changing aircraft Boeing has promised and airlines have ordered in record numbers, he said.
“Everything that we’re seeing in terms of the health of the technology and what it’s going to deliver continues to give us high confidence in this program,” Carson said.
He got support from Henry Hubschman, CEO of airplane-leasing giant GECAS, which has not yet ordered any 787s.
“It’s more important to get it done right,” Hubschman said in an interview. “The worst thing that can happen to an airline is that you deliver [an airplane] and then you have problems with it. … That’s a disaster.”
GECAS is still considering buying some Dreamliners, he said.
Still, individual airlines will be hit. The Dreamliner’s launch customer, All Nippon Airways of Japan, called the new delay “extremely regrettable,” and an official told Bloomberg News in Tokyo that it may seek compensation.
Geoff Dixon, CEO of Australian airline Qantas, said the company will discuss damages with Boeing in the coming weeks because its low-cost carrier Jetstar has 15 787s on order, most of them set for delivery in the first year of production.
Adam Pilarksi, an aviation economist with consulting firm Avitas, said it could cost an airline $500,000 a month per airplane to substitute a leased wide-body jet for a Dreamliner it was expecting. Boeing will have little option but to pay up.
But aviation consultant Michael Boyd of the Boyd Group said the delays won’t affect the fuel-efficient jet’s long-term prospects. “It’s a whole new airplane we’re going to need with $3-a-gallon jet juice.”
Boeing may also have to make advance payments to its major supplier partners, who will be squeezed for cash because they don’t get paid until planes are delivered.
“The company most vulnerable to this is Spirit [AeroSystems of Wichita, Kan.], which has about $5.5 million per airplane that is delayed,” said Paul Nisbet, an analyst with JSA Partners.
But Boeing has deep pockets. It doesn’t expect a significant hit to the 2008 profit forecast, and 2009 profits should still be strong, executives said Wednesday.
Getting first plane done
The Boeing teleconference with media and Wall Street analysts gave details of the assembly delays on the first Dreamliner, which has turned into a fiasco.
There was some good news: 787 program chief Pat Shanahan said parts shortage are no longer holding up the first jet.
However, many of the parts are still sitting beside the assembly line. Mechanics can’t install them because the work is all out of sequence.
“About a month ago, we had on airplane No. 1 over 10,000 fastener shortages,” Shanahan said. “We’re down to hundreds.”
And out of several thousand system components that go into activating the airplane — including flap actuators, pumps, computers, and generators — only 27 are still missing.
“By Monday, we’ll have all 27 of those parts,” Shanahan said. “So if the airplane were available on Monday, with the wiring, the tubing and the ducting, we would be able to install all of those system components.”
The next step on the jet would be to switch on the power and begin testing to ensure the systems work. That had been scheduled to start in late January.
Unfortunately, the airplane won’t be available Monday because the wiring, tubing and ducting aren’t fully installed. Shanahan said he expects the airplane’s power won’t be turned on until March.
The big issue now is out-of-sequence work, tasks the major partners were to do on the first airplane.
Boeing underestimated how long it would take its employees to complete that work, Shanahan said, and it has clogged an Everett production system designed to efficiently perform only final-stage assembly work and system tests.
Simply reconciling the engineering records from supplier partners with the reality of the assembled sections received has been “very onerous and time consuming,” he said.
“We thought late December we would really turn the corner so we could start installing the systems racks and the wiring,” Shanahan said. “We have not been able to finish that assembly work.”
The critical task now, he said, “is getting all the partner supplier factories doing the work they were supposed to be doing and so we’re doing the work we were supposed to be doing.”
That’s what will determine if the follow-on airplanes can be built much more quickly than the first one.
After the first 787 flies, five others must be swiftly rolled out to do full flight tests and certify the jet before delivery can start.
“I can see a path forward based on how much work we’ve completed,” said Shanahan. “I’m confident that we’ve got the right plan and it’s really about focus and execution.”
Carson acknowledged Boeing had offered similar assurances last fall.
“I know our credibility is also being tested on this program,” said Carson, “It is up to us to deliver.”
Dominic Gates: 206-464-2963 or email@example.com