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Rediff.com  » Business » Boeing admits Dreamliner delay

Boeing admits Dreamliner delay

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March 20, 2008 12:55 IST

Boeing admitted on Wednesday that it would have to redesign parts of its troubled 787 Dreamliner, raising the prospect of a third delay to delivery of the new aircraft would be delayed for the third time in recent months.

The company's comments came in response to a warning from Steven Udvar-Hazy, chairman of International Lease Finance Corporation (ILFC), the 787's biggest customer.

Mr Hazy told a JPMorgan Chase conference that the state of the Dreamliner programme was "not pretty", saying the aircraft's first deliveries would be delayed for at least another six months because its centre wing box - which holds the wings in place - needed to be redesigned.

Boeing refused to comment on the specifics of the redesign work but said Mr Hazy was not painting an accurate picture of the overall programme. "We are doing some redesign work but things are more complex than what he said," Yvonne Leach, for Boeing, told the FT. "There's a whole load of things going on."

Mr Hazy said he expected delivery of the long-range, 250-300 seat jet to be delayed until the end of the third quarter of next year. Boeing's most recent guidance was that the Dreamliner would be ready "early" in 2009.

Boeing said it was sticking to its most recent guidelines, but added that it was undertaking a review of the 787 and would report its findings publicly at the end of March or early in April. There is now widespread expectation in the industry that the company at that point announce a further delay.

Mr Hazy's warning echoes a report from Goldman Sachs this month, which also said delivery of the 787 would not begin until the third quarter of 2009.

A further delay would be hugely embarrassing for the company, which sacked Mike Bair, the former head of the 787 programme, after the first delay was announced in October last year and replaced him with Pat Shanahan, who was drafted in from Boeing's missile defence unit.

Mr Shanahan has found it difficult to stick to the aggressive timetable laid out for the aircraft and in January the programme was delayed again. The two earlier delays were both attributed to assembly problems rather than issues with the aircraft's design.

Boeing now faces having to make penalty payments to customers of the sort that have plunged Airbus, its European rival, into heavy losses. Last month ILFC said it would seek compensation "on a large scale" from Boeing for the 787 delays. Qantas, the Australian flag carrier, has also said it will ask for damages.

The 787 is Boeing's most successful new aircraft, with 857 orders in place, worth about $140bn. But analysts are asking difficult questions about how profitable the whole programme could be if penalty payments are added to other cost concerns. "The large number of 787s sold at low prices, combined with rising recurring costs, are steadily eating away at programme margins and long-term programme profitability," wrote Joseph Nadoll of JPMorgan in a research note on Wednesday.

ILFC, world's leading aircraft leasing firm, has ordered 74 Dreamliners, making it the biggest buyer for Chicago-based Boeing's fastest-selling aircraft. The company has already struck leasing contracts with a string of international carriers such as Air Berlin, Lan Chile, Royal Jordanian, AeroMexico and Air Seychelles.

Boeing shares were down down 2 per cent to $74.97 on the news.

Hal Weitzman in Chicago
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