22 September 2007

787 and the looming fastner crisis.

By now Boeing is having a very hard time explaining away the next delay. But as we have noted several times there are two major issues that Boeing is having with its 787 program. The most public is the Fastener issue. Yes folks there really isn’t a Home Depot aisle where you can go and get these things. They have to be custom built. Further - one heck of a lot of them need to go in the new plane.

So for the lay person - a fastener is the screws, nuts and bolts that put the plane together. After 9/11 many companies mistook the likely growth in the market for these services. This was indeed exacerbated by Boeing itself who declared they would need significantly less of them with a composite fuselage. See: (http://www.boeing.com/commercial/787family/programfacts.html ). It would have been natural to assume that there would be a significant downturn in aircraft building. As a result there was a general roll up of the players with Alcoa emerging as the big player. These 3 factors: down market, lower assumed activity, (including the drivers for innovation usually coming from the military) and the money guys taking over reduced the overall investment. Boeing is far from blameless in this affair. Their supply chain guys need to be given a royal kick for underestimating the challenge and the scale of this issue.

But it’s going to get worse before it gets better. The demand will undoubtedly drive up the price. And we know demand from the 787 camp is moving at scorching speed. Don’t forget we have seen only 3 sets of orders from the North American carriers, AC, NW and CO. What about DL and AA who both have "Preferred deals" with Boeing and large 767 fleets. And now perhaps even worse, Airbus has quietly confirmed that it s abandoning an Aluminum fuselage barrel for a full composite construction.

Our prognosis? Boeing will be hard pressed to make it fly in Q4. But they will do it. A token delivery subject to strict scrutiny of the Japan JAA and the EU/US players may mean it is only certified in Japan. But the fastener problem will persist into 2010 at least and cause delivery cut backs. Boeing's highly aggressive schedule cannot be met for at least the first 100 planes. Result - higher 767-300 rates. Better keep looking for late model 77-300ERs they are like gold dust.

At least this will mast the ther problem (software and wiring) which is not going too well either.


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