Boeing Delays Dreamliner Again, Management Under More Pressure

Boeing (NYSE: BA) announced that the delivery of its 787 Dreamliner would be delayed until the mid-first quarter of 2011, the 8th delay since the aircraft’s creation was announced more than five years ago. The company said in a statement that “The delivery date revision follows an assessment of the availability of an engine needed for the final phases of flight test this fall.” A Rolls Royce test engine for the plane recently exploded. The company added in its announcement that “While Boeing works closely with Rolls-Royce to expedite engine availability, flight testing across the test fleet continues as planned.”

Boeing first showed plans for the airplane in 2005. The first version of the aircraft was shown to customers on July 8, 2007. During the event, the company reported that “To date, 47 customers worldwide have ordered 677 airplanes worth more than $110 billion at current list prices, making the Dreamliner the most successful commercial airplane launch in history.” By the time of the announcement the release of the product has been affected by labor stoppages, troubles with the composite materials used to build the airframe, weight problems, and issues with on-board computers.

Boeing faces several issues regarding the late launch of the 787. The most immediate is that contracts for the delivery of the plane often include penalty clauses for late delivery. It is not clear what the total of those claims may be because Boeing has not disclosed them.

The setbacks could also cause customers to consider planes from rival Airbus. If so, Boeing’s sales could be hurt. Airbus and Boeing are fierce rivals when it comes to the sale of large aircraft to the world’s major carriers.

Boeing’s earnings could also be effected by more delays. For now, the company is sticking to its earnings forecasts. More delays could change that.

And, the delay could cause casualties in the Boeing executive suite, and perhaps it should. CEO W. James McNerney, Jr. has been the company’s CEO since July 1, 2005, about the same time the 787 program was announced. All of the trouble with the project has happened on his watch which investors and board may consider more than a coincidence.

Douglas A. McIntyre