08 April 2008

Another 6 Months for 787 possibly longer

Bowing to pressure and reality - Boeing will tomorrow (Wednesday) announce a further delay to the 787 program. The Seattle newspapers are predicting a further 6 months. Unfortunately we think it will be longer.

Boeing's problems with the plane should not detract from the final product but there will continue to be issues during the early build run. Boeing is going to be under a lot of pressure to open up the key milestones to public scrutiny for the 787 program.

Specifically the following issues will be with the program:

1. Fully automated production services will not be effective until long into the first year of production.
2. There will be a slower ramp up of the production line than was anticipated. This BTW is very wise.
3. Boeing will be bringing more and more of the integration services in-house
4. Fabrication issues remain with key parts of the plane. The most noticeable issue is the wingbox strengthening
5. Weight will be a problem restricting range for ultra long haul traffic.
6. 787-3 will be pushed to the background while more -8 and -9s are added. This means a major headache for ANA. The Japanese airline may indeed start looking at Airbus products to replace its aging 767 fleet. It is the leading contender for the A380 in Japan.
7. Design freeze for the -10 model will be pushed back until the existing major version -8 and -9 are stable.

The cost to Boeing will be significant in penalties and delayed revenue. However in the longer term this should not be an overall issue when considered in the overall scheme of things. For short traders they can make money out of Boeing's near term misfortunes.

As a frame of reference the A380 took an 18 month delay. So far (assuming the 787 is delayed 6 months) and I think my calculations are correct - it will be 14 months in total. If I am right and the delay goes a little longer then we will have a similar situation of overall late delivery for both the Airbus and Boeing flagship programs.

There is a lesson here. The 777 was an aberration rather than the pattern for production and delivery timings. Bear that in mind Airbus and Boeing next time you set dates.



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