Boeing’s conundrum

Let’s put some context into the latest news about the new round of expected delays of the Boeing 787.

When Richard Safran, aerospace analyst, wrote recently that he forecast another six month delay for the project, he wasn’t really denounced but he was dismissed by some, using the old “rumors and speculation” gig.

But when Steven Udvar-Hazy predicted another six month delay, people listened. Hazy is Boeing’s largest customer—as he is of Airbus—and his comments carry a lot of weight. Boeing had to walk a real tightrope with him: the company said Hazy is a valued customer, but his statement was just his opinion.

Hazy’s opinions are usually based on fact and his opinions matter. Just ask Airbus about Hazy’s opinions about the A350 two years ago. His opinions caused Airbus to redesign the Airbus, and sales took off.

Boeing has a real conundrum. Analysts, airlines, lessors, investors and the media are clamoring for information. Will there be another delay? How long? What’s the problem? Or problems?

For Boeing, the information is coming out in dribs and drabs, and not from their official sources. For long-term Boeing watchers, however, there has been subtle difference this time. Boeing is tending to confirm some detail this time that it didn’t in advance of the last go-around, and it’s leaving some wiggle room in its responses about delays.

This time, Boeing has confirmed there are wiring redesigns occurring (which the company says is part of the routine process in any new airplane program) and that a design changes on the wing box are underway, albeit adding that such things are routine in a new airplane program—as indeed, broadly, they are. Boeing also is sticking with the official line that power-on is set for April and first-flight for June but adds that the program reassessment continues. Previously, Boeing wouldn’t acknowledge issues and kept sticking to the timetable.

Why won’t Boeing be more forthcoming about the delay, people are asking? Probably because officials don’t yet know. And this time Boeing wants to get the story correct.

We talked to an aerospace analyst at ISTAT’s annual meeting last week, who said Boeing CEO Jim McNerney was pretty exercised over the creeping delays and this time wants his team to be sure there won’t be any more surprises after this next program update. McNerney, according to this analyst, said he can’t keep going back to shareholders with more delays.

His concern is obvious: look at the trend line on the Boeing stock since last October, when the first delivery delay was officially announced. Boeing stock is off more than 30% while the Dow Jones is off 14% from the October highs. (Some of Boeing’s decline is also due to the loss of the tanker contract.)

James Wallace of The Seattle Post-Intelligencer today had a similar report to what we heard a week ago.

“People familiar with the company’s thinking say Chairman and Chief Executive Jim McNerney, along with 787 program boss Pat Shanahan and Boeing Commercial Chief Executive Scott Carson, do not want anyone at Boeing to make comments about the status of the program until they are certain that the schedule will not be changed after the next program update in early April,” Wallace wrote.

Boeing is in the same predicament that Airbus faced with the A380. The creeping delays drove everyone mad, and Airbus had to stop and undertake a full program reassessment before finally saying it would take another year before its industrial problems were fixed. The consensus is the 787 will need another six months, but will this be all? Will Boeing be able to really convince the market it finally has a handle on the issues?

In addition to responding to all the stories now, these things are part of Boeing’s conundrum.

Update, 1155am PDT: Here’s a podcast in the 787 situation. It’s 11 minutes.

Update: 1155am PDT: James Wallace updates things on his blog.


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