Boeing Co. (NYSE: BA) announced yesterday that an order for 24 of the company’s new 787 Dreamliners was cancelled by China Eastern Airlines Corp. (NYSE: CEA). A company spokesman also said that the company expects to see more cancellations as Boeing ramps up production and shifts delivery dates around. And as much as Boeing tried to play down the importance of this cancellation, it could be the harbinger of more bad news to come.

The three-year delay in getting the Dreamliner out the door has forced Boeing to re-schedule deliveries in order to accommodate customers. When that sort of thing happens, better customers move to the head of the line. Sometimes that’s Boeing’s choice and sometimes it’s not.

In this case, China Eastern is apparently re-thinking its long-haul plans and has replaced its order for the Dreamliners with an order for 45 Boeing 737s and 15 Airbus 330s from European Aeronautic Defence and Space Co. NV (OTC: EADSY). That doesn’t sound too bad until one compares prices.

The list price for the 787-8 is $193.5 million, compared with a list price for the 737-900ER of $89.6 million. But based on an announced total of $3.3 billion for the 737s, China Eastern is paying about $73.3 million for each 737. That change cost Boeing $1.3 billion.

Besides the loss of income, though, China Eastern’s change in plans could also indicate skepticism about Boeing’s ability to get production ramped up quickly enough for the airlines to make timely purchases of the airplane. China Eastern’s expansion plans probably had a window of opportunity that is either closing or is about to close. Had Boeing been able to get its 787 out the door on time, those 24 aircraft might have remained on the company’s order books.

Boeing is currently producing the 787 at the rate of about 2 per month, with a total of 10 per month expected to come off the line by the end of 2013. Manufacturing was to have been done in a new, non-union plant in North Carolina, but that plan has been challenged by the union and is currently under review by the National Labor Relations Board.

Another problem Boeing could face is the lack of capital available to the airlines. A weak global economy is not good for the airlines. Seats don’t get filled, routes get cut, and coupled with high fuel prices, this makes it tough for the airlines to get credit at a reasonable price.

Bloomberg has a report on the difficulty of Airbus’s smaller suppliers getting credit. The same problem could affect Boeing as well, creating further delivery delays.

Boeing’s share price fell more than -2% yesterday. Shares are down less than -1% in the pre-market this morning, at $61.60, in a a52-week range of $56.01-$80.65.

Paul Ausick

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