Dec. 11 (Bloomberg) -- Boeing Co., the world's second- biggest commercial-plane maker, said it's still working through ``wrinkles'' in the supply chain for its new 787 Dreamliner and will deliver the first aircraft as scheduled in late 2008.

There are still ``significant supply chain wrinkles,'' Scott Carson, chief of Boeing's commercial airplane group, said today on a conference call with reporters. Parts shortages are declining and there's greater availability of fasteners needed to assemble the aircraft, Chicago-based Boeing said.

The Dreamliner has 762 orders valued at more than $120 billion, making it Boeing's most successful new aircraft in sales. The company on Oct. 10 delayed first delivery by six months to as late as December 2008 because of parts shortages and so it can complete work suppliers should have finished. The next milestone comes next month, when the 787's power will be first switched on.

``This will be the next date for investors' diaries,'' wrote Robert Stallard, a Banc of America Securities analyst in New York, who has a ``buy'' rating on Boeing's shares. ``This is an important knowledge point, at which the company can retire a significant amount of risk on the program.''

Powering the first plane will allow fuller testing of the aircraft's basic systems. The initial flight test is still scheduled for the first quarter of 2008, Boeing said today. All six of the test aircraft will be built by the end of the second quarter, said Pat Shanahan, who Boeing placed in charge of the program Oct. 16.

Flight Test

Also today, Boeing backed its plans to deliver 109 Dreamliners by the end of 2009. Shanahan warned that remaining on schedule ``assumes no major unknowns are uncovered in flight testing.''

Boeing said that for the first time in the company's history, it and the Federal Aviation Administration agreed on all the plane's testing requirements prior to flight testing.

Boeing fell $3.94, or 4.3 percent, to $88.70 at 4 p.m. in New York Stock Exchange composite trading, as overall U.S. stocks dropped as investors speculated the Federal Reserve's quarter-point interest rate cut will fail to prevent a recession. Today's decline marks Boeing's biggest fall in more than four months. The stock has fallen 1.2 percent in the past 12 months. Airbus SAS, based in Toulouse, France, is the world's largest plane maker.

Delay Penalties

The company will pay penalties to customers affected by the delay. The cost of penalties hasn't been disclosed.

About 50 percent of the Dreamliner's weight will come from carbon-fiber composites instead of traditional aluminum, making it the first airliner of its kind. The lighter material increases fuel efficiency.

Testing of the plane's composite structure is now 80 percent complete and 90 percent of its hardware is qualified for first flight, Shanahan said on the call. Boeing is still trying to reduce the weight of the 787 to meet customer requirements, he said.

Flight control software made by Honeywell International Inc., which had been behind schedule, is now complete and being tested, he said.

The 787 is also Boeing's first attempt at a new production process where suppliers deliver fully completed wing and fuselage parts that will ultimately be assembled in three days at Boeing's plant in Everett, Washington.

Parts Suppliers

One supplier is Spirit AeroSystems Holdings Inc., a former Boeing unit which is in charge of building the plane's nose. The section will have a cockpit and landing gear already installed when it leaves Spirit's factory in Wichita, Kansas. Other large parts are being shipped from manufacturers worldwide.

Some companies, such as Finmeccanica SpA's Alenia unit and Carlyle Group's Vought Aircraft Industries Inc., fell behind schedule, prompting Boeing to send engineers to help out.

So-called ``traveled work,'' which is assembly work that was supposed to be completed at supplier facilities and is instead being finished by Boeing, is starting to decrease.

``In terms of the biggest constraints, it's the traveled work,'' Shanahan said. ``I've spend most of my time redesigning the process, so that we can systematically accomplish that traveled work. We're starting to turn the corner there.''

Now that design and development of the plane is complete, Shanahan is visiting and reviewing work being done at suppliers worldwide, in an effort to quickly transition the program to full-rate production, he said.

To contact the reporter on this story: James Gunsalus in Seattle at jgunsalus@bloomberg.net

Last Updated: December 11, 2007 17:12 EST