Boeing confirms new 6 mo delay

Boeing confirmed a new delay of six more months for the 787 program. By now readers will likely have seen the press release. The update conference call begins shortly.

We’ve constructed this table below based on information in the press release and previous information available through Internet research.

Market reaction to the press release was good, with stock up $2.78 in the minutes before the conference call. As we noted yesterday, since the news of the six month delay had been “out there” for weeks, the stock was already beaten down.

The press release has a read of confidence this time that contains some firm delivery dates and definitive information about new timing for the 787-9 and 787-3 derivatives. All of this clearly reassured Wall Street in the lead up to the call.

(As an aside, the “elevator music” on the webcast while waiting for the call is pretty much a downer. It’s somber and plays more for a funeral. Boeing needs to put a more upbeat tune for those of us on hold. Maybe a little Jefferson Airplane would work better.)

The conference call begins:

From Scott Carson, president of BCA:

The 787-9 entry-into-service moves from late 2010 to early 2012. No new EIS of the 787-3 was announced from its original 2010 EIS.

From Pat Shanahan, program manager:

The interior on airplane #3 will be installed this summer, giving the first look at a nearly finished airplane.

The power-on reset changed from April 2008 to June because not enough progress has been made, with change orders and strengthening the center wing box.

Rework continues to impact the schedule. As luck would have it, the rework fell right in the path of wiring and other issues.

The more conservative approach extends testing period by two months, but if we don’t need the additional time we won’t use it.

Four months will separate power-own and first flight.

Current assessment assumes production rate to reach 10/mo by 2012. (Originally Boeing expected to be at 10 well within 18 months of first planned delivery (May 2008), or by the end of 2010–Ed.)

(Stock market responding positively–up $2.98 on heavy volume, nearly matching a full day’s trading by 11:20 EDT.)

Q&A begins:

Carson says Boeing is working with individual suppliers to ease cash pressures as a result of the delays, but he declined to go into details.

Carson terms the wing box weakness discovery “relatively routine” at this point in the program. Readers will recall that Boeing had to undertake some wingbox redesign, as revealed recently by Steve Hazy, CEO of ILFC–Boeing’s largest customer for the 787 and the entire 7-Series line.

Shanahan says there is 15% of the component testing remaining. When we look at the balance of tests to go, it’s our judgment that these are low risk. The test-to-destruction will be a “really great” demonstration of our design. Structure testing will be this summer, flight testing 4Q08/1Q09 will be key time periods. All six test airplanes will be flying by early 2009.

(Stock up $3.25 on volume surpassing the average daily volume at 11:40 am EDT.)

Shanahan says that Boeing has more confidence in this schedule because it’s added more time into the schedule, progress on problem-solving and resolving supply-chain issues. The inherent risk remains in the capability of the supply chain to get things done, however. Until we demonstrate performance, it will be difficult to eliminate skepticism in the program.

Carson says Boeing is not at the stage to discuss penalties–discussions are just getting underway with customers. Carson ducked a question whether reserves have been set aside until the earnings call in late April.

Shanahan expects to have 24 airplanes built prior to certification, including the six test airplanes. He said there are four months in the third and fourth quarter to deliver these airplanes, which suggests the first delivery will be in September 2009.

Carson says that it’s too soon to say when Boeing will catch up delivery dates on all 892 outstanding orders. Assessments are underway when Boeing could go beyond 10/mo production rate.

Carson said we have had a lot of discussion with customers who have ordered the 787-3 and at this point it’s our intention to execute program with two derivatives (as opposed to canceling the -3).

(Stock up $4.17 as the conference call closes on 26% more than average daily volume at 1200 n EDT.)

Podcast Commentary

Here is a 7 minute podcast with commentary on the conference call, offered by AirInsight.

Item

Original Schedule

Revised Schedule (April 9, 2008)

Delay

Power On

April 21, 2007

June 2008

14 months

Roll-Out

July 8, 2007

First Flight

August 27, 2007

4Q08

+12 months

First Flight #4

Sept. 30, 2007

Certification

April 30, 2007

3Q09, likely August

16 months

Delivery

May 31, 2008

3Q09, likely Sept.

14-16 months

Service Entry

June 21, 2008

3Q09 or 4Q09

+14-16 months

One Comment on “Boeing confirms new 6 mo delay

  1. Looks a little better, but if first flight slips into 2009, the cold soak test could again be an issue.

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