Boeing’s Delays on 787 May End as Analysts See On-Time Entry
Boeing Co. (BA)’s new 787 Dreamliner earned the nickname “7-Late-7” for three years of delays in entering commercial service. The razzing may soon be over.
The world’s first composite-plastic airliner probably will be delivered to its first customer, Japan’s All Nippon Airways Co., by September as promised, according to 10 of 11 analysts surveyed by Bloomberg.
Boeing set the third-quarter goal in January after a fire on a test flight spurred a seventh postponement. The company has said it finished most tests for U.S. Federal Aviation Administration approval and is working toward shipments of 10 planes a month by 2013, a record rate for a wide-body jet.
“Everyone is so trained after seven delays to be reluctant to believe that there won’t be an eighth,” said Carter Copeland, a Barclays Capital analyst in New York. “That said, all things come to an end, and increasingly there are data points that are indicative of things being near closure.”
Boeing will answer analysts’ questions tomorrow about the 787 and the 747-8 jumbo jet, which is also running late, when the Chicago-based company holds an earnings conference call. First-quarter profit is expected to be 70 cents a share, the average of 21 estimates, unchanged from a year earlier.
A Boeing spokeswoman, Lori Gunter, said she couldn’t comment on the 787 ahead of the call.
Years of Delays
Once targeted to reach customers in May 2008, the 787 has been hampered by parts shortages and Boeing’s struggles with a new production system and materials. Analysts dubbed it the “7- Late-7,” and newspapers including London’s Daily Telegraph quipped that the Dreamliner had become a nightmare.
The delays on the 787 and 747-8 meant that Boeing has had to count on the single-aisle 737 and twin-aisle 777 for income. Boeing expects to deliver the first 747-8 freighter in the middle of this year.
Seven of the 11 analysts surveyed by Bloomberg said they expect Dreamliner deliveries to begin in August, two said September and one gave a third-quarter estimate. One said the plane might slip into the fourth quarter.
Many issued caveats with their on-time predictions.
“I’ve been wrong seven times,” said JB Groh with D.A. Davidson & Co. in Lake Oswego, Oregon. Groh rates Boeing as “neutral,” while Copeland is part of a Barclays team that recommends buying the shares.
Boeing gained 65 cents to $75.55 at 4 p.m. in New York Stock Exchange composite trading. The shares have fallen 26 percent since Oct. 9, 2007, the day before the first delay was announced, compared with a 14 percent drop for the Standard & Poor’s 500 Index.
Boeing executives have said test pilots are flying the distances and test scenarios needed for the FAA to certify the 787 to carry passengers. About 85 percent of the tests were done as of March 23, including the “critical ones,” Chief Financial Officer James Bell said in a presentation. Boeing said today it has begun pilot training with All Nippon, marking a “significant milestone” toward the first 787 delivery.
“I am more confident as we get closer every day that they can meet that schedule,” Clay Jones, chief executive officer of supplier Rockwell Collins Inc. (COL), said in an interview last week.
“But we still have work to do, and as we’ve learned from past experience, you don’t know what you don’t know,” Jones said. Cedar Rapids, Iowa-based Rockwell Collins’s cockpit instruments and surveillance systems for the 787 have been certified, he said.
Boeing still must prove to the FAA that the twin-engine Dreamliner can fly long distances over water so it can win certification for the long-haul routes it was designed to serve.
The November fire called those operations into question, spurring John Hickey, the FAA’s deputy associate administrator for aviation safety, to meet with Boeing executives about the 787’s engine and electrical-system reliability the next month.
The FAA can’t discuss the certification program, though testing is “progressing according to Boeing’s schedule,” Alison Duquette, an agency spokeswoman, said this month.
The analysts in the survey estimated that Boeing would deliver six to 18 Dreamliners this year, with the tempo rising to a range of 45 to 110 in 2013. The 787 is more challenging than traditional aluminum jets because it’s the first airliner made from carbon fibers woven around a mold and baked. Boeing also relies more on suppliers in the manufacturing process.
Boeing’s January goal to ship 12 to 20 787s in 2011 is too ambitious, the Seattle Times reported today, citing an unidentified mechanic and engineer as saying the planes assembled so far need extensive reworking because of subsequent redesigns. Boeing is flying six 787s in tests and has built 29 more, the newspaper said.
“My sense is that Boeing leadership is far more focused on the ramp-up than on certification,” said Copeland, the Barclays analyst. “One can take that as a good sign that we’re approaching first delivery.”
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