After Qantas, Are More 787 Dreamliner Order Cancellations Coming?

Boeing Co. (NYSE: BA) is leading the Dow Jones Industrial Average lower this morning after its shares are being hit due to an order cancellation by Australia’s Qantas Airways.  The order was supposed to be an $8.5 billion order for up to 35 of the 787-9 Dreamliner super-jumbo jets.

While Qantas did maintain an order for 15 Dreamliners, the blow is a psychological one because Qantas posted a loss due to higher fuel costs and international competition (and strikes).

With more than 800 orders for the Dreamliner, the real financial impact is probably small.  What matters here is that other airlines may start losing money if the economic picture gets any worse.  When airlines start losing money they tend to start cutting orders and initiatives left and right in order to save that much-needed cash.

Boeing shares are down 2.4% at $71.05 and the impact is also being seen in other aerospace parts and service providers who provide parts for the Dreamliner.

Spirit AeroSystems Holdings, Inc. (NYSE: SPR) is down 1.5% at $24.86.  B/E Aerospace Inc. (NASDAQ: BEAV) is down almost 2% at $39.26.

Triumph Group, Inc. (NYSE: TGI) is down 1.8% at $60.90 even though some no longer consider it integral in the 787. The company’s website notes, “For the 787 Dreamliner, Triumph Aerostructures – Vought Aircraft Division was responsible for engineering and building the first 19 aft fuselage sections for the program. The company sold its 787 operations to Boeing in South Carolina in July 2009 but remains a supplier to the program, providing various 787 fuselage components and engineering support services.”

Boeing’s actual damage from this contract loss will probably not be serious. What is serious is the risk that other airlines will follow suit in the coming months.

JON C. OGG