WSJ: Boeing mulls further six-month delay in first deliveries of 787 Dreamliner - Update

(RTTNews) - The Wall Street Journal reported late Thursday that airplane maker Boeing Co. (BA | Quote | Chart | News | PowerRating) may delay first deliveries of its 787 Dreamliner due to the 58-day mechanists' strike that hit its factories as well as a supply chain delay. Boeing is said to be assessing the impact of the strike and is expected to delay first deliveries by a further six months to the summer of 2010, which if confirmed could mean the fourth time the company is delaying the delivery. The company is holding almost 900 orders from sixty-one customers around the world for its flagship fuel-efficient jet 787 Dreamliner aircraft.

The Chicago, Illinois-based airliner will be more than two years off its original delivery date of May 2008, with the most recent schedule announced in April 2008 calling for deliveries by third quarter of 2009. Reports suggest that a Boeing spokesman noted that it is currently reviewing the delivery schedule, which would be announced at a later date.

Since the mechanists' strike was called off of on November 2, Boeing has being grappling to get the production schedule back on rails. According to reports, the process, which calls for careful coordination among hundreds of suppliers and tens of thousands of workers worldwide, could take some more time.

Since September 2007, this is the fourth announcement of delay by Boeing on its 787 Dreamliner program launched in April 2004, as the schedule has slipped from the original plan to deliver the first airplane in May 2008. In October 2007, Boeing said that first delivery had been pushed until November or December of 2008. Again in January 2008, Boeing rescheduled the first delivery by three months to the first quarter of 2009. Later in late January 2008, Boeing postponed first deliveries to the third quarter of 2009.

The first delivery of the 787 Dreamliner will be made to Japan's All Nippon Airways Co. The Dreamliner program has been hit by a series of setbacks caused mainly by slower than expected completion of work from supplier facilities into the company's final assembly line, unanticipated rework, parts shortages, and fasteners that weren't installed correctly.

The continuous delay in deliveries may be seen as a boon to some of Boeing's customers, as the global slowdown eats away at air travel demand, and the credit crisis makes it hard to get financing for new planes. Recently, some of its jetliner customers like Southwest Airlines Co (LUV | Quote | Chart | News | PowerRating) and AirTran Holdings Inc (AAI | Quote | Chart | News | PowerRating) have already deferred deliveries of Boeing 737s they ordered.

In mid-November, Boeing was forced to rework on its delivery schedule for all 3,734 jetliners in its order backlog as it recovers from the strike. Boeing is said to have been looking at a 10-week delay from the original delivery date.

Earlier in November, Boeing also announced a delay in production and delivery of the 747-8 Freighter and Intercontinental airplanes, due to supply chain delays caused by design changes to the airplane, limited availability of engineering resources within Boeing, and the machinists' strike that stopped production. The delivery of the first 747-8 Freighter is now postponed to the third quarter of 2010 from late 2009. The first 747-8 Intercontinental passenger jet will be delivered in the second quarter of 2011 instead of late 2010.

In a similar situation in 1997, the company sought to speed up production more quickly than suppliers could make parts. The result was a month-long shutdown, a rare annual loss and $2.6 billion in charges over two years. However, later in 2005, Boeing refused to overload its factories to compensate for lost production after its machinists stopped work for almost a month.

Boeing in early October revealed that deliveries of certain models in the third quarter were affected by the labor strike. The company's delivery of commercial planes in the third quarter fell 23% to 84 commercial aircrafts from 109 in the year-ago quarter.

In October, Boeing announced a 38% drop in third quarter profit from a year-ago, hurt by the ongoing machinists' strike and supplier production problems. Quarterly earnings per share also missed the Street expectations. Quarterly revenues were $15.3 billion, down 7%. Additionally, the company said it will provide updated guidance after the machinists' strike ends. Commercial airplane deliveries dropped by about 35 units and net earnings by an estimated $0.60 per share. Boeing Commercial Airplanes segment revenues also fell 16% to $6.9 billion from last year.

BA closed Thursday's regular trading session at $39.19, down $1.28 or 3.16% on a volume of 7.25 million shares, lower than the three-month average volume of 9.50 million shares. In the past 52-week period, the stock has been trading in a broad range of $36.17 to $93.64.

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