March 19 (Bloomberg) -- Boeing Co. has to make design changes to its 787 Dreamliner that may further delay the plane's entry into service, JPMorgan said, citing International Lease Finance Corp., the new model's biggest customer.

ILFC Chairman Steven Udvar-Hazy told a JPMorgan conference yesterday that the state of the 787 program is ``not pretty'' and that he doesn't expect the first plane to be handed over until the third quarter of next year, Joseph B. Nadol, an analyst at the bank, wrote in a note to investors. Boeing, the world's second-biggest commercial aircraft maker, has said the Dreamliner will be ready ``early'' in 2009.

The Dreamliner, originally due for first delivery this May, has already been twice delayed by parts shortages. One main reason for another likely delay, Udvar-Hazy told investors, is Boeing needs to make structural design changes to the center wing box, Nadol wrote. ILFC has ordered 74 Dreamliners, making it the biggest buyer for Chicago-based Boeing's fastest-selling plane.

``Boeing's made two projections so far that turned out to be wrong,'' said Hans Weber, chief executive of Tecop International, a San Diego-based consulting company. ``If a further projection turns out to be wrong too, then in the sense that it's three strikes and you're out, that would be detrimental and really hurt their credibility.''

Boeing will give an update including timing once an assessment of the 787 schedule is complete, expected sometime around the end of this quarter, said Yvonne Leach, a spokeswoman in Seattle. The assessment includes some parts redesign, including the wing box, ``common'' for any new plane, she said.

`Complete Picture'

``We continue to do the work on our assessment,'' Leach said. In the briefing, Boeing will provide ``a complete picture of what's happening.''

Udvar-Hazy was traveling today and unavailable for comment, his assistant said. The Los Angeles-based company is owned by American International Group Inc., the world's largest insurer by assets.

``The changes will require retrofits of the first several 787s produced,'' JPMorgan's Nadol wrote in the note, meaning that Boeing will have to go back and rebuild parts of the planes already assembled. The wing box is a section inside the fuselage where the two wings are joined.

Nadol cut his 2009 delivery forecast for the twin-aisle, long-haul jetliner to 30 planes from 60 and reduced his earnings estimate for the year by 30 cents to $6.85 a share.

Program Margins

``We are mainly concerned with two issues,'' Nadol wrote. ``The certification timeline is still uncertain, as the first plane has yet to fly, and the large number of 787s sold at low prices, combined with rising recurring costs, are steadily eating away at program margins and long-term program profitability.''

Boeing fell $3.08, or 4 percent, to $73.45 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest drop since Jan. 15. The shares have declined 19 percent this year. Airbus SAS is the world's biggest commercial-aircraft maker.

Boeing's last specific delivery forecast for 2009 was 109 planes. Boeing's chief executive for commercial aircraft, Scott Carson, said Jan. 16 that the planemaker would no longer be able to make that number and hasn't given a new figure.

Analyst Richard Safran of Goldman Sachs Group Inc. on March 7 predicted that the initial powering up of the 787, scheduled for the end of March, may be delayed until the end of June, which would push back the first flight, and also deliveries, which may not start until the third quarter of 2009.

To contact the reporter on this story: Andrea Rothman in Toulouse, France at aerothman@bloomberg.net

Last Updated: March 19, 2008 16:33 EDT