Boeing Co.’s 787 Dreamliner, grounded for two weeks because of a fire during a flight, will be delayed for a seventh time as months of testing remain before the plane can be certified for passenger use, analysts say.
A postponement of as much as six months from the current delivery target of the first quarter of 2011 is already priced into Boeing stock, said Peter Arment, an analyst with Gleacher & Co. in Greenwich, Connecticut. Jefferies & Co.’s Howard Rubel in New York predicted an extension of less than three months, while Morgan Stanley’s Heidi Wood pegged the second half of 2011 for the setback with a worst-case scenario of 2012.
“There’s going to be some delay -- it’s inevitable,” Rubel said yesterday in an interview. He has a “buy” rating on Boeing shares.
The six Dreamliner test jets have been parked since the Nov. 9 fire, with only a few flights allowed to get all of the planes back to Boeing’s Seattle hub. The aircraft involved in the incident lost its primary power, and the crew had to evacuate on emergency slides after it landed in Texas. The 787 already is almost three years late after six previous delays.
Even after the jets are flying again, and without a major redesign, they still need to complete more than 700 hours of an expected 3,100 hours of testing. Boeing must prove the plane’s extended-operations capabilities, its fuel-mileage performance, and its function and reliability, among other tests required by the U.S. Federal Aviation Administration before the jet is certified. Boeing originally targeted May 2008 for entry into service.
In the past week, Arment and others have reduced their estimates for 2011 deliveries of the Dreamliner, the first composite-plastic, all-electric airliner. Arment now expects Boeing to deliver just 17 of the jets next year instead of the 42 he had projected.
The expected drop in deliveries led some analysts to lower their profit estimates for next year, including a 10 percent cut by Merrill Lynch’s Ron Epstein, who now forecasts Boeing will post earnings per share of $4.05 in 2011. Epstein said he doesn’t expect the 787 program to turn profitable until 2013, a year later than his previous prediction.
Boeing is building about two Dreamliners a month now, storing them around its Everett, Washington, factory until they’re certified. The latest schedule called for production to ramp up starting next year and increase to 10 a month in 2013. The company has advance orders for 847 planes, valued at more than $150 billion, based on the average list price.
‘Get Buffer Back’
Depending on the length of the delay, which is “all but assured” and may be substantial, Boeing may have to take a charge against earnings this quarter, said Kenneth Herbert, an analyst with Wedbush Securities in San Francisco. He wrote in a Nov. 22 note that he expects Boeing to deliver only 14 Dreamliners next year, down from his previous estimate of 22.
Boeing rose $1.49, or 2.3 percent, to $65.09 at 10:01 a.m. in New York Stock Exchange composite trading. The shares have dropped about 7 percent since the day before the fire.
The company also may use the opportunity to reassess the full program and incorporate extra time for other problems, including the faulty horizontal stabilizers that Boeing machinists are repairing, Herbert and other analysts said. Boeing in June found gaps in the stabilizers, the small wings on the tail that were built by a Finmeccanica SpA unit in Italy. Boeing has had to fill those in with metal and composite materials.
“Now’s the perfect opportunity, if they know the margin was already tight because of the stabilizers, to just throw it all in and get that buffer back,” Herbert said.
Boeing has said it can’t comment on the Dreamliner’s delivery schedule until an investigation of the fire is finished. The Chicago-based company hasn’t provided an update on the probe since Nov. 16. Boeing shuts down its operations for two days over the Thanksgiving holiday in the U.S., starting tomorrow.
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