Sunday 25 September 2011

Long-delayed Boeing Dreamliner ready for prime time (Reuters)

CHICAGO (Reuters) – Boeing Co's (BA.N) 787 Dreamliner, the world's first commercial airplane made largely of lightweight composite materials, is set for first delivery to a customer next week, the pinnacle achievement in the life of one of Boeing's most challenging airplane programs.

It has been a rocky road for the Dreamliner program, which is more than three years behind schedule and several billion dollars over budget by some estimates.

But with Japan's All Nippon Airways Co Ltd (9202.T) set to take delivery of the first 787 on Sunday, payday is almost at hand for the storied plane, which has been in development since 2003.

"It represents a new era for aircraft in terms of manufacturing and in terms of consumer use," said Alex Hamilton, managing director of EarlyBirdCapital.

"Now the conversation among the industry is that it truly is an amazing plane and a lot of people can't wait to be in it," he said.

Boeing, which competes for plane orders with EADS (EAD.PA) unit Airbus, has planned three days of celebrations to commemorate the delivery.

Contractual delivery, a technical step in which payment for the plane changes hands, occurs on Sunday. But Boeing plans to trumpet the delivery again on Monday with a party at its assembly plant in Everett, Washington, near Seattle. The airplane leaves for Japan on Tuesday.

The 787 festivities may help Boeing overcome some of the gloom inflicted last week when another major first delivery -- the 747-8 Freighter -- was abruptly postponed because of a contract dispute with the customer.

Despite seven embarrassing delays for the program, the 787, which competes with the Airbus A350, has proved popular with airline customers. The company had taken orders for 821 Dreamliners as of September 23.

Boeing has said it faces financial headwinds for the Dreamliner but has not disclosed how much it spent on development or when it expects to make money on the program.

The company now faces the daunting task of working through the enormous order backlog and getting its production rate up to the promised 10 a month by the end of 2013.

"I'm very skeptical that they're able to do that by 2013," Hamilton said. "That's a very short timeline. Look how long it took them to get it out the door. I would assume they could get there if there were no hiccups, but I think the expectation of having no hiccups is a little naive."

WHAT IS A DREAMLINER?

The 787 Dreamliner, which costs between $185.2 million and $218.1 million, is a mid-sized widebody plane with an airframe made largely of lightweight carbon composites.

The airplane promises 20 percent greater fuel efficiency than similar-sized planes. The use of carbon composites allows a higher cabin humidity for a more comfortable ride.

Boeing also attempted to revolutionize the development and assembly of the airplane, making greater use than ever of an extensive global supply chain and relying less on its traditional workforce in Washington state.

The goal of the global supply chain was to spread financial risk among more participants and to find the best possible talent to design and build the components. But supply chain glitches rippled through the system and led to program delays.

Boeing has said that for future programs it would bring more of the work back in-house. Boeing Chief Executive Jim McNerney has said the program "may have been overly ambitious, incorporating too many firsts all at once."

ELEPHANTS IN THE ROOM

Looming large over the 787 festivities is the postponement of another first delivery, the superjumbo 747-8 Freighter, which was to occur this week.

Boeing had planned an elaborate celebration for its largest, most recognizable airplane, but had to cancel after its launch customer, Cargolux, refused at the last minute to accept the plane.

Boeing blamed a contractual dispute for the cancellation and said it was working with its long-time customer to resolve the matter and set a new delivery date.

Cai von Rumohr, an analyst at Cowen and Co., said he did not necessarily expect the 747 disappointment to taint the 787 triumph.

"This first delivery has more meaning than a than a normal first delivery would," he said. "It is a bigger deal."

Meanwhile, as Boeing celebrates the first delivery of the 787, the company remains locked in a legal dispute with one of its top labor unions in Washington state, where it has traditionally built its commercial aircraft.

The International Association of Machinists and the National Labor Relations Board have accused Boeing of illegally punishing the union for past strikes by building a nonunion 787 assembly plant in South Carolina.

Boeing has blamed one of the Dreamliner delays on a 58-day labor strike in 2008, but it rejects the charge that its decision to build a second assembly line elsewhere was retaliatory.

Another matter likely to be in focus while Boeing cheers its newest plane is its plan to put new fuel-efficient engines on the current design of its best-selling narrowbody 737.

The new plane, dubbed the 737 MAX, will compete head-to-head with the Airbus A320neo. It will be several years before either plane is brought to market, and Boeing has not yet said where it will make the MAX.

(Reporting by Kyle Peterson, editing by Gerald E. McCormick)

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