Déjà vu All Over Again: Boeing Delays Dreamliner for Sixth Time

In what seems like a never ending saga, The Boeing Co. (NYSE: BA) postponed delivery of its 787 Dreamliner for the sixth time, promising now to finally hand over the first plane to customers in the middle of the first quarter of 2011.

The latest delay came after Rolls-Royce Group PLC told the world's largest aircraft maker it would be unable to supply an engine needed to complete flight testing, Boeing said in a statement Friday. Rolls said the delay wasn't related to a 787 engine blowout on a test bed in Derby, England, which this month forced it to shut the site for repairs.

The composite-plastic plane is already more than 2 1/2 years late following delays caused by working with new materials, parts delays from suppliers and redesign work involving an Italian sub-contractor.

"Airlines just keep waiting and waiting," Ryota Himeno, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo told Bloomberg News. "This new delay will force some tough changes to carriers' operations."

Rolls-Royce and General Electric Co. (NYSE: GE) have been selected by Boeing to provide engines on the new wide-body jet. According to a statement released by Boeing early Friday, the latest delay "follows an assessment of the availability of an engine needed for the final phases of flight test this fall."

The latest troubles came after a major failure of a $17 million Rolls-Royce Trent 1000 test engine in England earlier this month. Early customers, including Tokyo-based All Nippon Airways Co. (ANA), have selected the Rolls engines for their aircraft. Until now, both Rolls and Boeing have said the engine failure had not impacted the delivery timetable.

"Given the success of the flight-test program so far, it is regrettable to hear of the delay," Megumi Tezuka, a spokesman for ANA, the Dreamliner's launch customer, said in a statement. "However, we trust that the time will be used to deliver the best possible aircraft in the shortest possible timeframe."

Rolls-Royce said Friday it was working with Boeing to support its test-flight program.

"We have been informed by Boeing that the currently planned dates for Trent 1000 engine deliveries will now not support their latest flight test program requirements," a spokesman for the U.K.-based engine maker said. "We are working closely with Boeing to expedite delivery in support of their program schedule."

Since June, Boeing has been wrestling with manufacturing flaws found in the plane's horizontal stabilizers, manufactured in Italy by Alenia Aeronautica SpA, a major Boeing supplier.

Those flaws have required significant inspections on the fleet of six Dreamliner test planes, as well as a number of production airplanes that have already been built and sit outside Seattle awaiting their engines.

Boeing had insisted all year that the first production Dreamliner would be delivered by the end of 2010, but in the past six weeks Boeing executives have been bracing customers and investors for another delay, The Wall Street Journal reported.

The Dreamliner already has cost Boeing billions of dollars in penalties to its airline customers and damaged the company's credibility in the marketplace.
National Aviation Co. of India Ltd., Air India's state-owned parent, said this month that it will seek about $840 million for a delay of almost three years.

Despite the numerous delays, most customers have chosen to stick with the Chicago-based plane-maker through the 787 difficulties. There are more than 850 of the twin-engine wide-body jets on order from 56 customers worldwide, accounting for a $150.6 billion backlog.

Penalties to the plane-maker's 787 customers may reach about $5 billion, Myles Walton, an analyst at Deutsche Bank AG (NYSE: DB) in New York, told Bloomberg before the latest delay. The company will probably seek to satisfy those claims through discounts, maintenance agreements, options, purchase rights, delivery-slot availability and other means instead of cash payments, he said.

Boeing said the schedule revision won't affect its financial guidance but the series of delays could drive business to EADS NV, the European consortium that builds the Airbus fleet of airliners.

The Dreamliner's introduction prompted Airbus SAS to produce the A350, a wide-body jet also made of composite materials. But Airbus, citing sub-contractor estimates, has slashed its A350 production targets compared with those set in 2007, Bloomberg reported.

The Toulouse-based company now plans to make 10 A350s in 2013, compared with a previous target of 18, the newspaper said. Airbus cut forecasts for 2014 and 2015 to 40 and 60 from 51 and 83 respectively, according to the report.

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