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Boeing To Delay 787 Deliveries By 6 Months

The first production model of the new Boeing 787 Dreamliner airplane is unveiled to an audience of several thousand employees, airline executives, and dignitaries during a ceremony Sunday, July 8, 2007, at Boeing's assembly plant in Everett, Wash.
AP
Boeing Co. is delaying initial deliveries of the 787 Dreamliner by six months due to continued challenges in completing assembly of the first airplanes, the company said Wednesday.

Boeing said deliveries that had been scheduled to begin next May will be pushed back to late November or December 2008.

The first flight, already pushed back once from the initial target of earlier this fall, now is anticipated around the end of the first quarter of 2008.

The delay highlights inherent problems in building new airplanes and could slow the momentum Boeing built up after years of lagging behind European rival Airbus in commercial airplane manufacturing.

The 787, Boeing's first all-new jet since airlines started flying the 777 in 1995, will be the world's first large commercial airplane made mostly of carbon-fiber composites, which are lighter, more durable and less prone to corrosion than aluminum.

But the company's effort has been shadowed by difficulty getting the right parts from its suppliers on time, among other issues, and is facing a global shortage of fasteners that hold large sections of the plane together.

Boeing said the postponement will not materially affect its earnings or guidance for next year.

"We are disappointed over the schedule changes that we are announcing today," said Chairman and CEO Jim McNerney. "Notwithstanding the challenges that we are experiencing in bringing forward this game-changing product, we remain confident in the design of the 787, and in the fundamental innovation and technologies that underpin it."

McNerney had publicly voiced confidence as recently as four weeks ago that the airplane maker would be able to deliver the first 787 on time next May to Japan's All Nippon Airways Co., despite skepticism among industry observers following the first postponement.

On Sept. 5, Boeing formally pushed back the first test flight to mid-November or mid-December due to complications with final assembly and finalizing flight-control software. That would have left the company just five to six months before the first delivery, or about half the time it took to test the 777 a decade ago.

The company first acknowledged problems meeting the original test-flight schedule in August when it cited ongoing challenges with out-of-sequence production work, including parts shortages, and remaining software and systems integration activities.

Airbus still hasn't recovered from its own problems introducing a new aircraft: the A380. Two years of delays, due largely to wiring problems, wiped billions of dollars off its parent company's profit forecasts for the coming years and sent many orders to Boeing.

The announcement Wednesday isn't likely to cause such turmoil for a highly anticipated plane that already has 710 orders and is sold out through late 2013. Airbus' planned A350 mid-sized widebody aircraft isn't due to hit the market before 2013.

But analysts cautioned another delay would be more troubling.

"Just because the delivery date has been changed, customers are not going to be canceling," said Morningstar analyst Brian Nelson. "It's not as difficult to build as the A380. ... If things extend beyond the six-month delay and we start getting closer to a year, then I start getting worried."

The delay won't affect the aerospace company's ratings, said Craig Fraser of Fitch Ratings.

"If we see further delays or there are some problems with the first flight, or the ramp-up in production after the initial deliveries, that could affect the positive outlook that we have on the company," he said.

All Nippon Airways did not immediately respond to a request for comment.

Boeing shares, which had moved higher before the late-morning announcement, quickly tumbled and shed $3.15, or 3.1 percent, to $98.30 in early afternoon trading.