Boeing puts off 787 delivery to Japan by six months; setbacks cause problems for airlines, cancellations
Buyers worldwide, enticed by promises of the most advanced, fuel-stingy passenger jet ever made, have ordered 847 of the jets with a price tag of about $200 million each.
Once expected by May 2008, delivery has been delayed seven times, with the latest delay coming this week. Boeing said Tuesday that its first delivery, to Japan’s All Nippon Airways, will be pushed back by six months to the third quarter.
The string of delays has caused airlines to put off opening new routes, to keep older planes in the air longer and to buy other aircraft to fill the gap. Passengers, eager for wider aisles, more legroom and faster flights, also must wait. And major parts suppliers had agreed to pay upfront costs for things such as labor and tooling but now find the delays increasingly costly.
“The program has been a huge headache,” said Scott Hamilton, an aviation industry consultant in Issaquah, Wash. “It has been a mess for everybody involved.”
Early problems intensified, and by 2007, the successive delays began. Boeing’s share price began to drop, and since then the price has fallen more than 25 percent. By comparison, the Standard & Poor’s index of 500 large company stocks fell about 14 percent during that time.
The company’s continuing struggle to contain costs was to blame, experts said, including a massive $2.5 billion write-off that the company incurred in the third quarter of 2009. “There is a huge cloud over the Boeing stock until the 787 enters the commercial market,” said Peter Arment, an analyst with Gleacher & Co.
Boeing declined to comment on the Dreamliner’s problems. The plane will be the first new class of aircraft launched by the company since the 777 in 1995.
Boeing is now more than a year into test flights on a fleet of six Dreamliners to earn the Federal Aviation Administration’s official certification before the jets can be delivered to airlines. But in November, an electrical fire broke out on one of the test planes as it flew over Laredo, Texas, causing Boeing to halt flights for more than six weeks.
Although the commercial aircraft manufacturing industry is notoriously plagued by delay, the confluence of problems is unprecedented for Boeing, including faulty parts from suppliers, a labor strike and design flaws.
The design has proved difficult because it is the first large passenger jet to have more than half its structure made of a high-tech blend of lightweight composite material instead of aluminum. The new material is more durable and less prone to corrosion.
Boeing has promised airlines that the use of composites and a newly developed engine will result in a plane that burns 20 percent less fuel than jetliners of a similar size. A typical 5,500-mile flight from Los Angeles to Tokyo now costs carriers an estimated $3,000 for fuel on a similar-size 767 jet. A Dreamliner would cut that cost by $600.
And that’s just for one flight. Throw in lower costs for maintenance and repairs, and airlines are looking at estimated savings of about $5.4 million a year per next-generation aircraft such as the Dreamliner, said Tom Captain, aerospace analyst with Deloitte.
Long-haul flights will be speedier. The flight from L.A. to Tokyo, 14 hours on a 767, would be almost an hour less on a Dreamliner.
Passengers will see wider cabins, which translates to more leg room than in previous twin-aisle planes. The cabin is taller, with “vaulted” ceilings that are more than 1 foot higher than those in the 767. Instead of harsh white fluorescent lights, the Dreamliner has softer “blue-sky lighting.”
The plane has bigger, drop-down overhead luggage bins and larger windows that by the touch of a button can adjust the light coming into the cabin – rather than by raising a solid window shade.
It was these sorts of selling points that persuaded Houston-based Continental Airlines to become the first U.S. carrier to order the 787 when Boeing started taking orders six years ago, in 2005. The carrier expected its first Dreamliner in March 2009.
Still waiting, Continental announced last month that it had to suspend opening up a route from Houston to Auckland, New Zealand.
Frustrated with the setbacks, Dreamliner customers have canceled about 100 orders, and analysts estimate that Boeing has spent as much as $10 billion in cost overruns and in penalties paid to airlines for the delays. The exact cost is unknown; the company does not have to disclose it.
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