On June 23, Boeing Co. executives confronted two problems with the much-anticipated but troubled 787 Dreamliner jet development program. One, involving problems where the plane's wings join the body, Boeing announced, drawing world-wide attention. The other, involving a problem on the 787's composite fuselage, the company kept silent about.
When news of the second problem surfaced late Thursday on an Internet blog that follows the aviation industry, it raised new questions about Boeing's public disclosure policies on the 787 program, which is the Chicago-based aerospace giant's most important development project.
Boeing on Thursday night confirmed that it had ordered some work stopped in late June at an Italian factory. Weaknesses identified on two areas of the fuselage barrels produced at the factory could cause significant damage if they weren't repaired, the company found.
Boeing and its Italian subcontractor, Finmeccanica SpA's Alenia Aeronautica, said the problem is relatively minor, and a fix is already under way. "This has in no way affected the Dreamliner's first flight or the plane's production time or costs," Giovanni Bertolone, Alenia Aeronautica's chief executive, said in an interview Friday.
Boeing officials say they have followed the legal and financial requirements for disclosing information about the 787 program. Lori Gunter, a Boeing spokeswoman, defended the company's decision not to announce the fuselage problem in June. "This is fairly normal for a new development program. These issues come up and we deal with them and move on," she said.
A person familiar with Boeing's operations said stoppage orders like the one that occurred at the Italian plant happen often and usually involve minor matters.
They represent "a daily, common occurrence at major companies," this person said. But the Italian situation "was not a safety issue [and] not a flight issue," making prompt disclosure unnecessary.
Boeing's stock price has been sensitive to developments in the 787 program[no kidding]. On Friday, Boeing shares fell $1.75, or 3.8%, to $44.87 in 4 p.m. composite trading on the New York Stock Exchange.
Nearly two years of delays on the Dreamliner program have put investors and customers on high alert.
A week before Boeing disclosed in June that it was again delaying flight tests and 787 deliveries, Boeing executives said at the Paris Air Show that the plane was on track to make its maiden flight by end of June.
In the weeks following, including on the company's July 22 quarterly earnings call, the company made no mention of the Alenia factory problem.‹
[Buried amid the news on the revised timetable is the fact that BA has been unable to sell the first three Dreamliner test planes, which will cause BA to incur a $2.5B non-cash write-off in the current quarter. How can the non-sale of three planes that list for $160-170M each cost BA $2.5B? If anyone knows, please post.
›After Delays, New Schedule Pressures Company to Test 787 in Short Order
AUGUST 28, 2009 By PETER SANDERS
Boeing Co. said its 787 Dreamliner would make its first test flight by year-end -- two years behind its original schedule -- and the first aircraft would be delivered by the end of 2010, ending months of speculation.
But a string of delays have already strained Boeing's credibility with airline customers and the new schedule renews pressure on the company to get its new marquee commercial airliner airborne in short order -- even as news of problems with Boeing's global manufacturing system have leaked out in recent weeks.
"We understand the need to make the best and safest aircraft possible," said All Nippon Airways Co., which is slated to receive the first Dreamliners. "However, as launch customer and future operator of the 787, the length of this further delay is a source of great dismay." The Japanese carrier has a total of 55 of the aircraft on order.
Chicago-based Boeing also said it would take a $2.5 billion charge this quarter.
Boeing investors, however, signaled confidence that the new schedule would mark an end to the years of costly delays that have plagued the Dreamliner. The aircraft was originally scheduled to make its first flight in August 2007. The postponements have cost the company millions of dollars in penalties and concessions to airlines that have been forced realign their fleets and schedules. Boeing's shares were up 8.5% in late trading on the New York Stock Exchange.
Scott Carson, chief executive of Boeing's commercial-airplane unit, said the company is working with customers on adjusting delivery schedules. Australia's Qantas Airways Ltd. earlier this year canceled some 787 orders and deferred others.
Germany's Air Berlin PLC said Thursday it is in negotiations with Boeing about the delivery schedule for its 25-plane order. Other airlines, including Qantas and Virgin Atlantic Airways Ltd. have decided to buy Airbus 330 aircraft from European Aeronautic Defence & Space Co. while awaiting their Dreamliners.
"We are very disappointed at this latest setback to Boeing's 787 program and await to hear what implications this will have for our first deliveries, currently scheduled for mid-2013," U.K.-based Virgin said Thursday.
But even with roughly 60 cancellations, Boeing has booked 850 Dreamliner orders.
Boeing booked the third-quarter, noncash $2.5 billion dollar charge for the first three of its six test aircraft, which customers have balked at purchasing because of frequent fixes. Boeing executives said they hope to sell the other three test aircraft to VIP customers.
Chief Financial Officer James Bell said on a conference call that the Dreamliner program remains profitable and that the company would update its 2010 financial projections in January.
Thursday's update on the 787 program comes more than two months after Boeing officials abruptly postponed the plane's already delayed first flight and disclosed a structural flaw where the wings meet the plane's body, which is made of composite materials.
The announcement stunned the industry and called into question the credibility of top Boeing executives, who just days before had said the plane remained on track to fly by June 30 of this year.
Since then, Boeing engineers have been working to find and implement a solution to the flaws found during May ground tests. Boeing is making fixes on six test aircraft and the first 15 production airplanes and will incorporate those fixes into the design of future aircraft, executives said on the conference call.
"We have a high degree of confidence in the fix and the time it will take," said Jim McNerney, Boeing's chairman and chief executive. The new testing and production schedule includes "some cushion...against the possibility of unknowns," he said.
Over the summer, Boeing halted work at a supplier's factory in Italy because of manufacturing difficulties. Boeing officials played down those problems, describing them as a routine part of developing a new airplane.
Though Boeing has had little difficulty selling airlines on its fuel-efficient plane, the program has been plagued with delays stemming from a parts shortage, major hiccups with its global supply chain, and a two-month strike last fall by machinists at the company's assembly facilities near Seattle.
Boeing said Thursday its manufacturing system is back on track and that it plans to produce 10 Dreamliners a month by late 2013.‹
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