Yet Another Delay By Boeing

Problems with supply chain and parts shortages have caused Boeing (NYSE: BA) to yet again delay building  some of its 787 Dreamliners . The company said it would halt the building of the 23rd and 24th airplanes for a month and the shipment of fuselages would be kept in abeyance. The estimate of a month may turn out not to be true. Most other forecasts from Boeing about 787 schedule have been wrong.

The plans for the 787 were first announced in 2005. Boeing said the aircraft would be in production in May 2008. In the meantime, problems with unions at Boeing and issues with parts for the plane have caused a series of delays that at one point knocked the company’s stock down to $31 in early 2009 from over $100 in September 2007. The stock has never fully recovered and trades now at just over $70.

In the meantime, the Boeing board has not taken any meaningful actions about the delay. James McNerney, Jr. has held his job as CEO since mid-2005.

Several airline customers have asked for restitution because of the delays.  A number of them planned to dump old, less fuel-efficient aircraft for the 787. Whether these customers have received consideration is not clear. Last year, the Wall Street Journal wrote “Boeing is coming under pressure from its customers to offer fresh concessions. Industry officials say that Boeing has recently stopped discussing compensation terms for delays to the 787 and they speculate the company is waiting until its actual delivery schedule is clear.” That almost certainly means that the delays will cost Boeing shareholders something.

The other and perhaps most severe by-product of the tardiness is that airlines may be turning increasingly to Boeing’s arch-rival Airbus, which may be able to market itself based on reliability. It has had delays in releasing some of its own aircraft, but nothing like the 787 problems.

Boeing has hurt its own prospects again, and management will probably not pay for the delay, but shareholders probably will.

Douglas A. McIntyre

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