The delays in the Boeing (BA) Dreamliner were bound to cause its customers to take actions against the airplane manufacturer and that has happened.
The Wall Street Journal reports that British Air is seeking to delay payments for the plane. It is a convenient time for the UK carrier to make the move. Its margins and cash position are bad.
Boeing management made a series of tremendous mistakes as the company worked to get the Dreamliner off the ground. It allowed disputes with key unions to slow the process of assembling the aircraft. It then failed to monitor suppliers for the quality and inventory of key components. Each time a new problem emerged, Boeing pushed back the launch date of the plane.
Boeing’s customers would probably ask for payment concessions in a good economy, one in which the industry was doing well. But, rising fuel costs and dropping passenger demand have put a number of carriers in dire financial conditions. The chance to delay paying Boeing offers the carriers a chance to preserve precious cash.
Boeing, on the other hand, is faced with several quarters of losses and a balance sheet that is bound to be damaged by the Dreamliner delay. Shareholders have watched the Boeing stock drop by 60% during a period of less than two years, and that is probably just the beginning.
Douglas A. McIntyre
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