Boeing Buys Breathing Room, Delays 787 Dreamliner Six Months

Not surprisingly, Boeing Wednesday announced a six-month delay in shipments of the 787 Dreamliner, blaming primarily out-of-sequence work caused by parts shortages in the first airplane’s production.

“While we made some progress on early production planes and improving parts of availability, the pace (of improvements) has not been sufficient,” Boeing CEO Jim McNerney said in a conference call this afternoon. He was alluding to problems that had already been raised in a Sept. 5 announcement where the first 787 flight was being pushed back from late summer to between mid-November and mid-December. Now the first flight is slated for the end of the first quarter at which time airplane one will fly shortly followed by airplane two assuming no more major problems arise.

McNerney said none of the problems causing the delay – shortages of smart parts and assemblies, maturing of avionics software code and building planes in the correct sequence – are related to the plane’s design or engineering. “We remain confident about the design of the 787 and the fundamental (technologies) that underpin it.”

Clearly, Boeing is buying breathing room. The last delay left no “margin” for slippages and given the rigidity of that schedule, Boeing was willing to take a hit today and announce a major delay instead of the two small ones that preceded today’s announcement. The margin promises to give Boeing time to fix problems found in flight testing without causing more schedule slippages.

Also, 787 Chief Project Engineer Tom Cogan did not sound optimistic that the schedule made public on Sept. 5 would stick when he was awarded DN Engineer of the Year two weeks ago at National Manufacturing Week.

While airplane one “came off its jacks last Sunday,” the acceleration in the production schedule announced Sept. 5 was not sufficient, according to President and CEO of Boeing Commercial Airplanes Scott Carson. He said work on airplane two is progressing and that once airplane one is complete, production on subsequent airplanes will accelerate. Work has begun up through airplane 10, according to Carson.

Boeing is largely sticking to its original forecast that more than 100 planes will be built by the end of 2009 – 109 to be precise, three less than planned. Orders stand at 710 for 50 customers. McNerney estimated about 15 customers will be affected by the delays.

As for the software coding problems, Carson welcomed the time to allow for more testing and software.

“On the issue of systems coding and integration, we have made some but not all of the milestones, (but) this activity is no longer pacing as the critical path item. The software will be more mature, reducing chances of issues coming up during flight test. We expect to have it fully loaded in next several weeks. The final (software) was loaded (into simulators) in September and is working well,” Carson said.

Analysts expressed skepticism that the new schedule could be met and wondered why Boeing was sticking with the 109 planes by the end of the 2009.

“(The problems are) tied to production problems in airplane one. We don’t think we are inducing any risk letting production stay the way it was. (Out of sequence work was) the kind of trap we found ourselves in and mostly on airplane one.”

He also said he while he wished training and production had started earlier at partner Vought’s new Charleston, S.C. plant where the 787’s aft fuselage sections are manufactured, he said the facility has no “fundamental flaws.”

“I think we will continue to have growing pains on the front end of this,” Carson said.

McNerney said the delay will neither slow down any other projects at Boeing nor materially affect company earnings. The biggest cost Boeing could incur is delivery delay penalties it has to pay to customers. McNerney said the purpose of today’s announcement was to let customers know as early as possible about the six month delay. He said several times that Boeing was very “disappointed” that it could not keep it commitments to customers.