Yet another 787 delay puts Boeing's credibility at risk

Boeingba calls its much-anticipated new 787 the Dreamliner, but the hot-selling, revolutionary jet looks more like a public relations nightmare after Tuesday's decision to delay the first flight for the fifth time.

The company's shares fell 6.5% to $43.87 Tuesday after Boeing said a design weakness discovered recently will force an indefinite delay of the first flight while engineers evaluate and test possible fixes.

The stock had been rising for most of the past month as investors bid up the price, encouraged by top Boeing executives' repeated vows that the plane would fly by next Tuesday, the last day of the second quarter.

Those expectations were dashed on a conference call Tuesday morning when Scott Carson, head of Boeing's Commercial Airplanes division, told analysts and reporters that a problem first noticed in ground testing last month proved to be a bigger issue than initially thought.

"We're all anxious to see this airplane fly," Carson said. But, "It's important that it flies when it's ready to fly."

That's a big turnaround from Carson's assertion a week earlier at the Paris Air Show that he was certain the 787 could fly before July 1 but that Boeing decided not to rush its ground-testing program just so the Dreamliner could put in an appearance at the prestigious biennial air show.

Carson isn't the only Boeing executive who had pumped up expectations. Boeing CEO James McNerney vowed publicly early this year that the 787 would fly before the end of the second quarter and repeated that vow as recently as last month.

This new delay in the 787 program reinforces a perception that Boeing's management either is unrealistic in setting ambitious production goals or is incapable of meeting those goals as it tries to develop a plane that could change the economics of air travel more than any plane since the introduction of commercial jets in the late 1950s. In cutting by 20% the amount of fuel needed to fly international routes — and emissions by a corresponding amount — the 787 could reduce airline operating costs and, in theory, the prices passengers pay.

But creating such a breakthrough aircraft has proved to be a bigger challenge than Boeing officials expected, and that's damaging the company's reputation and credibility. Not only is Boeing creating a plane in which half of its structural weight comes from composite materials instead of conventional aluminum, it is attempting to radically change the way planes are made.

Conventional planes are built on an assembly line, where pieces supplied by subcontractors are attached using hundreds of thousands of rivets. With the 787, Boeing has turned subcontractors into "risk-sharing partners" that assemble large sections of the plane or components all over the world. Those big sections are then shipped to Boeing's final assembly line in Everett, Wash., where they are pieced together using a new technique that requires fewer than 10,000 holes to be drilled into the plane, compared with hundreds of thousands in other models. Eventually, once workers get the hang of it, Boeing officials say, the final assembly of pieces built elsewhere should take just three days.

The first timetable

The original plan was for the 787 to make its maiden flight in 2007 and to enter service in 2008. But vexing manufacturing problems, a management shake-up and a strike have all taken a toll. The most recent schedule had the 787 on what many experts said was an unrealistically short timetable: the first flight by the end of this month with first delivery in March 2010 to Japan's All Nippon Airways.

Now, it'll be several weeks before Boeing officials announce yet another new schedule.

It's not clear yet that the 787's first flight will happen this summer. There's no indication as to how long it will take to come up with a way to reinforce 18 small spots on each side of the plane where the fuselage meets the wings. Those spots — each less than 2 inches and located where the top of the wing joins the fuselage — will have to be reinforced before the aircraft can go through its flight-testing program. Ground testing, including high-speed-taxiing tests, will continue while engineers address the side-body problem.

Tuesday's announcement came as a shock to analysts and investors, many of whom had believed Boeing officials' recent assertions that this time the company would achieve, at a minimum, its goal of getting the 787 into the air by June 30.

Aerospace manufacturing analyst Richard Aboulafia of the Teal Group in Fairfax, Va., said his level of surprise registers at "somewhere between very and extremely."

"I knew there'd be further delays in the program, but not preflight," he said. "Their flight-test schedule and delivery schedule looked way too ambitious. But it looked like they had a clear path to first flight. So I'm shocked by this."

Others who follow the industry were more annoyed than shocked because of what they said was Boeing's lack of credibility on the 787 program schedule even before this latest delay.

"Boeing has this habit of saying, 'Everything is fine, everything is fine, everything is fine,' until it isn't," said Seattle-based aviation consultant and blogger Scott Hamilton. "When you don't have any credibility, how much lower can it go?"

On July 8, 2007 — 7-8-07 in calendar shorthand — when the 787 made its public debut at its high-profile official rollout, Boeing officials insisted that it would be ready for its scheduled first flight late that summer, Hamilton recalls. But, "Everybody who was there at the rollout, from the representatives of the airlines buying it to people from all the suppliers, knew that it was just a model airplane …" he said.

Aboulafia, who is widely followed within the aviation and investment communities, said the latest setback is "pretty serious," because "this has broader implications for the whole U.S. aerospace business."

"Boeing can still recover," he added. "But they have to be extremely proactive now about what they're going to do, how they're going to do it and when they're going to do it. And then they're actually going to have to do it. But this is getting close to the nightmare stage. People are going to start calling this plane the 'Bad Dream-liner.' "

The 787 is the hottest-selling commercial jetliner ever, but the production delays and the global recession have whittled down its order book. Boeing says 56 airlines have placed 866 orders for Dreamliners, 44 fewer than it claimed at one point last year. Plus, some carriers have deferred deliveries of some or all of their 787s to slow their growth and capital spending during what is expected to be a prolonged period of weak demand.

The 787 costs about $200 million on average, not counting its massive twin engines.

In addition to the 787's efficiency, Boeing promises it will be the most passenger-friendly commercial jet, with more headroom, fresher air in the cabin, better lighting and more carry-on-storage space than conventional airliners, plus state-of-the-art passenger entertainment and communications systems.

A planned replacement

The 787 is planned as a replacement for aging Boeing 767s and Airbus A300s and for the more-modern-but-less-efficient A330. Those planes are used on international routes where demand won't support the use of larger-capacity planes such as the Boeing 747 and 777 or the Airbus A380.

Eventually, the 787 will come in three different sizes, flying 210 to 330 passengers up to 8,200 nautical miles, a range made for serving routes such as Los Angeles-Bangkok and New York-Hong Kong, rather than domestic U.S. routes.

Northwest Airlines was the 787's North American launch customer, but Northwest was acquired last year by Delta, which has not yet confirmed its intent to acquire 787s. Spokeswoman Betsy Talton said Delta officials were in negotiations with Boeing about those orders before Tuesday's announcement. That leaves Continental as the only U.S. airline with a firm order for 787s.

"We're disappointed" by Boeing's latest delay, spokeswoman Julie King said Tuesday. "But we're committed to the 787. We still believe it will be a game-changer whenever it arrives on the scene."