Updated! 787 facing another delay

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James Wallace on Aerospace

« Boeing says tanker protest is "uphill battle.'' | Main | UPDATED: Boeing says wing box fix won't affect first flight »

Updated! 787 facing another delay - Steve Hazy

Steve Hazy of International Lease Finance Corp. told a JP Morgan investment conference that Boeing's 787 is facing another long delay. ILFC is Boeing's biggest customer for the 787. Hazy said Boeing must make structural design changes to the center wing box.

Critical "power on" won't come until June, Hazy said. That's when first flight had been planned.

Hazy is quoted as saying the state of the 787 program is "not pretty" and that he doesn't expect the first plane to be handed over until the third quarter of next year, Joseph B. Nadol, an analyst at the bank, wrote in a note to investors.

"The changes will require retrofits of the first several 787s produced," Nadol said in a note to clients.

Nadol cut his 2009 delivery forecast for the twin-aisle, long-haul jetliner to 30 planes from 60 and reduced his earnings estimate for the year by 30 cents to $6.85 a share.
"We are mainly concerned with two issues," Nadol wrote. "The certification timeline is still uncertain, as the first plane has yet to fly, and the large number of 787s sold at low prices, combined with rising recurring costs, are steadily eating away at program margins and long-term program profitability."

Boeing e-mailed me the following statement in response:

While we respect Hazy and he is a valued customer, he was sharing what is his opinion.

We are definitely focused on our near-term milestones of power on and first flight. And as you know we are working on completing our assessment so we can give our customers new delivery schedules. We will share the details of all of this when we are ready. That will likely be a program update call but we haven't made a decision on timing for that yet.

The assessment work is complex and very time-consuming. We want to get it right. So until then it isn't prudent for us to talk about specific issues (like the wingbox) or status on certain milestones.

UPDATE:

Boeing has added to its earlier statement:

It is normal during the development of a new airplane to discover the
need for design enhancements. We are working with our partners to
address the need for design changes in some areas. While these changes
are not good for final assembly because they are dealing with traveled
work at this time, the design changes are not the sole pacing item.

UPDATE 2:

My story below will be posted online soon.

By James Wallace
P-I aerospace reporter

The biggest customer for The Boeing Co.'s 787 Dreamliner has a blunt assessment of the state of the troubled program � "not pretty.''

Steven Udvar-Hazy, chairman of International Lease Finance Corp., used those words at an investment conference in saying the 787 will be delayed by several more months.

He said the main reason for the delay � it would be the program's third � is that Boeing must make structural changes to the massive center wing box, which is where the plane's wings attach to the fuselage.

The center wing box also holds fuel.

If Hazy is right, the development means the 787 problems go beyond the production and supply chain issues that Boeing has said are mainly responsible for delays that now stretch about nine months.

"It does sound more serious, but we just don't know,'' said Scott Hamilton of the Leeham Co. consulting group.

He said the design changes may be fairly minor, or much more significant. But until Boeing explains publicly, outsiders can only speculate, Hamilton said.

Boeing declined Wednesday to specifically address what Hazy said about the wing box, which is made by Fuji Heavy Industries at a plant in Nagoya, Japan.

But Boeing did acknowledge some design changes are being made and these are complicating final assembly of the first two 787s at the Everett plant.

"It is normal during the development of a new airplane to discover the need for design enhancements,'' Boeing said in a statement. "We are working with our partners to address the need for design changes in some areas. While these changes are not good for final assembly because they are dealing with traveled work at this time, the design changes are not the sole pacing item.''

ILFC has ordered 74 Dreamliners and Hazy has said he is in talks with Boeing for 26 more, underscoring that he believes the super-efficient plane will be a huge success despite the on-going problems that have centered around the new global production system that Boeing is using.

Boeing has nearly 900 orders for the 787, which will be the first large commercial jetliner with a composite airframe.

Hazy's comments about a possible design problem with the center wing box were made Tuesday, when he spoke at JPMorgan's aviation and transportation conference in New York. He also said that first flight of the Dreamliner is likely to be delayed from June until the fall, and that he does not expect initial deliveries until the end of the third quarter of next year.

His luncheon address was not covered by media and reports of what Hazy said did not become widely known until Wednesday, when JPMorgan analyst Joseph Nadol sent a note to clients.

"Although we believe another delay is expected, Hazy's comments would seem to confirm investor concerns,'' he wrote.

Boeing's stock dropped $3.08 a share Wednesday, to close at $73.45.

Boeing is conducting a top-to-bottom review of the 787 program, including the test flight and delivery schedules. It expects to have the review finished around the end of March and will then hold a 787 program update with media and analysts before first-quarter financial results are released April 23.

People familiar with the company's thinking say Boeing Chairman and CEO Jim McNernery, along with 787 program executives, do not want to comment about the status of the program until they are certain that the schedule will not be changed after the next program update in early April.

Boeing has already announced two embarrassing delays for the 787. The much-expected third delay has to be the last or Boeing's credibility will be damaged far more than it already has been, these people said.

Yvonne Leach, Boeing's chief 787 spokesperson, said Wednesday that Boeing wants to get its on-going 787 assessment "right'' before it talks in detail about the status of the program.

"While we respect Hazy and he is a valued customer, he was sharing what is his opinion,'' she said in an e-mailed statement to the P-I when asked for comment.
"We are definitely focused on our near-term milestones of power on and first flight. And as you know we are working on completing our assessment so we can give our customers new delivery schedules. We will share the details of all of this when we are ready. That will likely be a program update call but we haven't made a decision on timing for that yet. The assessment work is complex and very time-consuming. We want to get it right. So until then it isn't prudent for us to talk about specific issues (like the wingbox) or status on certain milestones."

So-called "power on" is a key milestone, when the first 787 will have enough systems installed that it can operate under its on electrical power.

Boeing had said in January, when it announced a three month delay, that power on had been postponed form the end of January to early in the second quarter.

But Hazy told the JPMorgan conference that power on likely won't happen until June, with first flight pushed back from late June until September.

Since Boeing will need about a year to complete the 787 test flight program, initial deliveries won't be made until the end of the third quarter of next year, Hazy said.

Boeing had said in January that deliveries would start in early 2009.

Nadol said the design changes in the wing box, according to Hazy, means the first 787s will have to be "retrofitted'' with the changes after they are built.

Hazy also told the conference that the 787-10, a stretched version of the plane that

Boeing eventually plans to develop, will require a new center section, a redesigned wing and higher thrust engines as well as stronger landing gear.

Boeing has not yet started development of the 787-10.

"Because design changes are adding weight to the 787-8 and �9 models, Hazy believes that a much anticipated stretched �10 variant is increasingly challenging and not on the near-term agenda,'' Nadol wrote.

Boeing has acknowledged that the base plane, the 787-8, is overweight.
The center wing box was the first large part of the 787 to be assembled, in June 2006 at the Fuji 787 plant in Nagoya. It has a composite skin and is roughly 17.5 feet long and 19 feet wide.

As part of the 787 assembly process, the center wing box is attached to the main landing gear well made in a nearby plant in Nagoya by Kawasaki. The completed assembly is then flown from Nagoya to Charleston, S.C., the fuselage assembly hub for the 787.

The Japanese structures, including a section of the forward fuselage made by Kawasaki, are integrated in Charleston with two center fuselage sections made by Alenia of Italy. The entire fuselage section is then flown to Boeing's Everett plant for final assembly.

The first 787 was unveiled to the world at the Everett plant on July 8, 2007. But it was far from complete. The wiring and systems were missing. Thousands of temporary fasteners held the plane together. After the public ceremony, Boeing workers began the task of completing work that was supposed to have been done by Boeing's partners.
That "travel" work is continuing and the first plane remains in the factory. The second test-flight plane has since joined it in final assembly.

First flight of the Dreamliner was originally set for late August of 2007, with delivery of the first planes in May of this year.

In October 2007, Boeing announced what the industry had been expecting � a serious delay. First flight, Boeing said at the time, would likely be in March of 2008, with first deliveries not until late November or December 2008.

A week after that announcement, Boeing replaced 787 boss Mike Bair with Pat Shanahan, who has a reputation for fixing troubled programs at Boeing.

But that schedule did not hold. In January, Boeing announced the second delay, this one of three months. Boeing said at the time it would not deliver109 planes by the end of 2009 as it had forecast, but it would not update the actual number until its 787 assessment was finished at the end of the first quarter.

A number of industry analyst now expect Boeing to deliver fewer than 50 jets by the end of next year.

In his note about Hazy and the 787, Nadol said he is cutting his 2009 delivery forecast by half � to only 30 planes.

Posted by at March 19, 2008 9:38 a.m.

Comments

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#109515

Posted by Hammtime at 3/19/08 10:31 a.m.

Geee, what a surprise. A company whose nickname is "The Lazy-B" having problems delivering a product on time.