Boeing May Take Fourth 747-8 Charge as Analysts See Next Delay

Boeing Co., whose engineers are redesigning a part on the new 747-8 jumbo jet, may announce a fourth financial charge for the aircraft and another delay that could make it almost two years late.

That announcement may include a delay of another 3 months to 10 months for a plane that’s more than a year behind, nine analysts said in a Bloomberg survey. Eight of the analysts also anticipate a charge ranging from $100 million to $1 billion, on top of the $2.04 billion in charges already taken.

“This is inexcusable -- they should know that airplane like any airplane they’ve ever built, and then some,” said Howard Rubel, an analyst with Jefferies & Co. in New York who has a “buy” rating on Boeing shares. “They’ll figure it out eventually. I just believe the cost and the delay will detract from what they wanted to accomplish.”

The Chicago-based company is completing the 747-8’s schedule as it continues to work through two of several issues that came up in flight testing, and it plans to update customers and investors soon, Boeing Commercial Airplanes President Jim Albaugh said in an interview.

Chief Executive Officer Jim McNerney said in July that the 747-8’s schedule was more at risk than the composite-plastic Dreamliner’s, which the company pushed back last month, saying it wouldn’t be delivered until the first quarter of 2011. Both planes were supposed to reach customers by the end of this year.

Six-Month Delay

The analysts in the survey predicted, on average, a six- month delay for the 747-8 and a charge against earnings of about $360 million.

It’s only the second plane in the company’s 94-year history to be in a “reach-forward loss position,” an accounting status the program entered at the end of 2008 that requires it to record future plane deliveries at no profit margin unless its profitability improves. It could require Boeing to record additional charges if the estimated loss increases.

Engineers are redesigning the 747-8’s inboard aileron actuator, a system on the wings that helps the plane turn and had moved up and down unexpectedly on one of the jets, Albaugh said.

They’re also testing new software this week to help control some oscillation, or vibration, experienced during the test flights and are “encouraged that we have a solution,” he said. Vibration can cause a plane to break apart if it amplifies to become the self-feeding motion termed flutter, which Albaugh said isn’t the case for the 747-8.

Wheel Well

Boeing also adjusted the angle of the main wheel well to address some buffeting during landings, Albaugh said. The two unresolved concerns, and dozens of more minor ones discovered since the plane’s maiden flight in February, are “all addressable issues, but take some time to resolve,” he said.

While Boeing had said that the 747-8’s initial woes were due to the Dreamliner siphoning away resources, Albaugh said the team is getting what it needs. The company has had to make more changes than expected to the fifth variant of the 40-year-old jumbo jet, he said.

The wing is the longest Boeing has ever built and supports a stretched fuselage that has 16 percent more room in the freighter model. The passenger version holds 51 extra seats, for a total of 467, and carries 26 percent more cargo. Both models use new General Electric Co. engines based on those developed for the 787 Dreamliner.

“There’s no such thing as a simple derivative,” Albaugh said in the Sept. 27 interview. “There’s some things you just can’t model, and that’s why you do the test program.”

The 747 was the world’s largest airliner until the Airbus SAS A380 superjumbo, which carries more than 500 passengers, entered service in 2007. The 747-8 offering was launched with an order from Cargolux Airlines International SA in November 2005.

‘Trouble for Airbus’

“The 747-8 was designed to cause trouble for Airbus, taking away purchases from the A380, but now I think it’s caused more trouble for Boeing,” said Rob Stallard, an analyst at RBC Capital Markets in New York. He has an “outperform” rating on Boeing stock.

Albaugh replaced the 747-8 program chief last month for the third time in three years, giving the job to Pat Shanahan, the head of all of Boeing’s commercial-plane production.

“I just wanted to get Pat, who has access to all the resources in the company, to drive this over the goal line,” Albaugh said. “I just want to get this done.”

Boeing has orders for 76 of the 747-8 freighter and 33 of the Intercontinental passenger version. Albaugh said Boeing is now in talks with three airlines about both models. The Intercontinental is scheduled to enter service with Deutsche Lufthansa AG at the end of 2011, a year later than planned.

Boeing has four freighters doing test flights from a base in Palmdale, California, because the 787 Dreamliner is using the Boeing Field testing center in Seattle. The company has begun building two Intercontinentals in the wide-body factory in Everett, Washington -- the world’s biggest building by volume, constructed specifically for the 747 in 1967 -- and is working on its 12th freighter version.

“We’re in the home stretch now,” Albaugh said. “We’ll be late on the 787, but once this airplane is delivered, our customers will be very pleased and will forgive us for being late, and the same is true on the 747.”

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net;

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