Boeing Announces New 787 Schedule and Third-Quarter Charge CHICAGO, Aug. 27 /PRNewswire-FirstCall/ -- The Boeing Company (NYSE: BA) today announced that the first flight of the 787 Dreamliner is expected by the end of 2009 and first delivery is expected to occur in the fourth quarter of 2010.The new schedule reflects the previously announced need to reinforce an area within the side-of-body section of the aircraft, along with the addition of several weeks of schedule margin to reduce flight test and certification risk. The company projects achieving a production rate of 10 airplanes per month in late 2013.
"This new schedule provides us the time needed to complete the remaining work necessary to put the 787's game-changing capability in the hands of our customers," said Boeing Chairman, President and Chief Executive Officer Jim McNerney. "The design details and implementation plan are nearly complete, and the team is preparing airplanes for modification and testing."
Based on the revised schedule and other assumption updates, the company has determined that the 787 program is not in a forward-loss position.
However, separate from the updated program profitability assessment, the company has concluded that the initial flight-test airplanes have no commercial market value beyond the development effort due to the inordinate amount of rework and unique and extensive modifications made to those aircraft. Therefore, costs previously recorded for the first three flight-test airplanes will be reclassified from program inventory to research and development expense, resulting in an estimated non-cash charge of $2.5 billion pre-tax, or $2.21 per share, against third-quarter results. This charge will have no impact on the company's cash outlook going forward.
The 787 team working the side-of-body reinforcement has completed initial testing and is finalizing design details of new fittings that are expected to ensure full structural integrity of the joint. The static test procedure that uncovered the issue will be repeated and the results fully analyzed before first flight is conducted. Fatigue testing also will be performed on stringer components to validate the long-term durability of the modification.
The first 787 test airplane and static test unit have been prepared for the new fittings. Installation is expected to begin within the next few weeks.
--
This is a breaking story and will be updated.
on August 27, 2009 9:53 AM | Reply
Yeah,right.
on August 27, 2009 10:19 AM | Reply
Haven't we been here before, wouldn't it be more prudent to get the first flight out of the way before promising deliveries?
Also am i the only one to be concerned with the fact, IF this does go to plan a new and radically different airliner will go into service with, at most, a year of flight testing?
on August 27, 2009 10:25 AM | Reply
Another 12 weeks....did they gve themselves enough of a window this time? What if the identified fix isn't the fix after all?
on August 27, 2009 11:06 AM | Reply
So what museums will be getting the "test" aircraft? Perhaps these will be sent off to Mojave but wouldn't it be great to see these somewhere - that is if the plane actually is a winner....
on August 27, 2009 11:27 AM | Reply
Hopefully this is the last delay. I have to say though I am not surprised that the 787 program has been so beleaguered. Given the amount of new processes and innovation involved in the project I never saw this being an on-time product. I can't wait until I can fly on one of these, they look amazing in the metal, sorry, composite.
on August 27, 2009 11:41 AM | Reply
Okay, I have been a huge fan of this aircraft the whole time, but I do laugh when I see the phrase "game-changing capability" used. It keeps getting heavier...so in the end, I wonder just how "game-changing" this will be.
Also, a charge of $2.5 billion? That makes my head spin. This whole process seems to be ill-conceived, or at least rushed such that there are too many changes late in the game. A good project management book will talk about how the s-curve is for cost versus changes along the time axis.
I hope this plane is indeed a game changer, but so far, the management of the process looks like a joke.
on August 27, 2009 11:53 AM | Reply
The above comments underline the lack of credibility that Boeing has at this moment.
I would really like to know what the current fuel burn projections are for the 787 compared to the A330.
on August 27, 2009 11:53 AM | Reply
Can someone explain what "the 787 program is not in a forward-loss position." means?
on August 27, 2009 11:55 AM | Reply
@Wes "another 12 weeks"
Make that another 12 MONTHS - That's the difference between reaching rate 10/month in 2013 instead of 2012.
on August 27, 2009 12:07 PM | Reply
@Yaz
I understand that to mean that at current order numbers and with current cost projections, the programme will not make a loss over its lifetime.
A bit more on that here: http://leehamnews.wordpress.com/2009/08/25/split-view-on-787-forward-loss/
No wonder nobody wants the first three aircraft. At US$833 million a copy they seem rather expensive. :)
on August 27, 2009 12:13 PM | Reply
"The company projects achieving a production rate of 10 airplanes per month in late 2013"
I wonder how realistic this is considering even the well established widebody programs are not at 10/month. Let's hope the "plug and play" 787 assembly line can crank out these babies at such a high rate
on August 27, 2009 1:13 PM | Reply
It's about as realistic as SpaceX launching 6 Falcon flights next year, DX. My shoes are soaked from Boeing PR telling us that it's actually raining.
on August 27, 2009 1:41 PM | Reply
FlightGlobal's front-page story on the Boeing announcement
http://www.flightglobal.com/articles/2009/08/27/331569/boeing-plans-first-787-flight-by-year-end.html
says (paragraph 2) that "The 787's first flight was originally planned for the end of June, ...". I sense goalposts being moved here -- I'm not sure what the original plans were, but I have copies of online news stories from 2006 quoting planned *delivery* in 2008. That makes the 787 about 2-3 years late,
not 6 months as today's news story suggests.
on August 27, 2009 2:11 PM | Reply
On the bright side, if this is the annual "wipe out the earnings" issue, at least it comes in the 3rd quarter instead of the 4th. Unless there's another one, of course.
on August 27, 2009 2:36 PM | Reply
@ Jonathan Thornburg: ''"The 787's first flight was originally planned for the end of June, ...". I sense goalposts being moved here -- I'm not sure what the original plans were, but I have copies of online news stories from 2006 quoting planned *delivery* in 2008. That makes the 787 about 2-3 years late,
not 6 months as today's news story suggests.''
........I believe that the original target date for first flight was 28 August 2007.
on August 27, 2009 2:44 PM | Reply
DX7, regarding production rate: See
flightglobal.com/blogs/flightblogger/2009/04/breaking-boeing-to-cut-777-out.html
According to that, the 777 is at 7 a month, and should go down to 5. So these numbers are not limited by Boeing's ability to make airplanes fast. There's just no point in burning through the backlog in those cases. If the backlog gets small (like with the 767 and C-17) or if customers defer orders and/or if the backlog looks like it won't be growing for a while (like with the 777 and 747) then wouldn't it make sense for Boeing to slow the rate of production? It would make sense to make 737s as fast as possible (huge backlog and always growing, few to no deferrals) but other than that, production needs to be throttled. Given the 777's current rate, it seems reasonable to expect that Boeing could easily make seven 787s a month once things are up and running (even on just one assembly line), so 10 doesn't sound like much of a stretch.
Mark, Boeing's past airliner prototypes were used by the USAF (and possibly NASA, I forget) for testing all kinds of systems; missile-tracking sensors, mid-air refueling gear, systems for tactical aircraft, aerodynamic refinements, etc. Some were also used by Boeing itself and by the engine makers to test new hardware. I expect that the 787 test fleet can expect a similar future. And someone once suggested that they could end up as BBJs, which are typically not purchased by the most thrifty people. What personal jet could be more prestigious than the very first 787?
Andreas, there are 6 or 7 test airplanes, not 3. So they cost more like 400 million each. Which, yes, is still ridiculous. But they would never be sold for that much anyways, I don't think.
on August 27, 2009 2:59 PM | Reply
Here is how some previous Boeing prototypes ended up:
747 #1 testing tanker system:
freerepublic.com/focus/news/1183185/replies?c=11
Currently at the Museum of Flight.
757 #1 testing F-22 sensors and other systems:
boeing.com/defense-space/military/f22/f22ftb.html
Currently still at Boeing Field.
767 #1 Airborne Surveillance Testbed:
airliners.net/search/photo.search?&keywords=N767BA&sort_order=datestamp+desc
Currently in... desert storage?
I think the very first 777 went into passenger service with United and is still hard at work, let's see if I can look that up...
on August 27, 2009 3:03 PM | Reply
777 #1:
airliners.net/search/photo.search?regsearch=B-HNL
on August 27, 2009 3:16 PM | Reply
Boeing's credibility on the 787 is an endangered species and has the most precious value for its company. I am surprised at this kind of self-assured program assesment without a definitive wing test completed. One would think Boeing would not want to spend the last piece of goodwill it has in its treasury without really knowing if the 787 will fly prior to wing test, unless they really do know but won't disclose this at this time. Fool us the first time shame on Boeing. Fool us the second time shame on me. Fool us the third time we have OCD.
on August 27, 2009 3:37 PM | Reply
I was only having fun, but somebody better tell Mr. Ostrower then.
"Therefore, costs previously recorded for the first three flight-test airplanes will be reclassified from program inventory to research and development expense, resulting in an estimated non-cash charge of $2.5 billion pre-tax, or $2.21 per share, against third-quarter results."
on August 27, 2009 3:46 PM | Reply
I fully agree with the previous post; Obviously, this is once again PR ("game changing aircratf" and so on) aimed at reassuring incompetent financial analysts and gregarious brokers. And, how surprising it might be, it seems to work (Boeing's stock raised 8% this afternoon!). Personnaly, I'd remain pretty concerned if I were a Boeing investor...
on August 27, 2009 4:25 PM | Reply
The 787 program is reminiscent to the adoption of carbon composites in the bicycle industry. It took a long time to perfect the technology. But gradually the industry was able to bring the weight of a medium frame mountain from 1500 grams to sub 1000 grams.
As everyone can see Boeing is going through a similar learning curve of integrating advanced carbon composites into the 787 air frame. Boeing had no choice, they had to adopt the new carbon technology or else they faced the consequences of being a market trailer instead of a market leader. Sure the labor pains and birth of the Boeing 787 has been a rough trip through the delivery room. But as the saying goes it is better to be walking through hell then towards it like the Airbus A350 program is about to do.
on August 27, 2009 4:44 PM | Reply
@ DX7
Boeing may plan on being at 10/mo 3 years after EIS, but Airbus on A350 plans to be at 13/mo in that same time frame. Of course, nobody asks does the market need ~35 wide bodys entering the market per month in that time frame, when you consider A330, A380, A350, 787, 777, and 747 all together.
on August 27, 2009 5:14 PM | Reply
Oh my. So much chatter in here.
on August 27, 2009 6:01 PM | Reply
The 787 will never be !!!
Long live the A350
.... (the A400M will never either)
on August 27, 2009 6:26 PM | Reply
"The 787 will never be !!!"
L545.10435, I'll take a piece of that action if that is putting money where you mouth is.
on August 28, 2009 3:18 AM | Reply
Before this announcement, First flight was targetted late Q2 2009, EIS was targetted at Q1 2010, giving 9 months for flight testing.
After this announcement, EIS is given at Q4 2010. There are now 12 months of flight testing if first flight occurs by end 2009. The overall first delivery delay is now at 2 years 7 months, if it is delivered in Dec 2010. Delays to customers are unknown, but could be substantial if ramp-up proceeds slowly. They could be offset by further cancellations too.
I wish Boeing all the best, and have no doubt they'll try as hard as they can to stick to the schedule – but here's why I refuse to believe Boeing can achieve this:
1. The flight testing is still assumed to be performed in record time.
2. The flight test planes differ substantially from the first planes to be delivered.
3. Still a lot of known-unknowns (pending wing/wingbox join design/build/fit/test, wrinkle solution, brake software, unknown weight gain)
4. Where's the time needed for unknown-unknowns? (which have got us to the 2 year 7 month delay) and the plane still hasn't flown.
5. It's a composite airline! The first large passenger plane with primary construction material composites. Still so much to learn...
6. And dare I say it, the track record of these announcements. Management don't seem capable of making good estimates with so many unknowns and arguably a flawed program design. What has changed between the last delay and this one to allow this to start happening now?
on August 28, 2009 4:27 AM | Reply
“…Boeing says that separate from that profitability assessment, the initial flight test aircraft have no commercial market value beyond the development effort…”
Damn this must be an expensive program by now.
on August 28, 2009 9:48 AM | Reply
I've heard of estimates from $6 billion to $11 billion. Either way,it's alot of moolah.
on August 28, 2009 3:35 PM | Reply
Sure they are going to run into a lot of problems with the A350 design. But I think the learning curve will be a lot less steep.
Don't forget Airbus carries a lot more composite experience into the project than Boeing did with the 787.
At least they already have a plane in the air with a CFPR wing box which doesn't buckle or delaminate.
on August 28, 2009 3:40 PM | Reply
Just between 6 and 11 billion? That's all? Heck the A380 is blundering away at 20+ billion, the A350 is already at 17 billion. Even if your high figure is correct the 787 is a bargain comparitively.
on August 28, 2009 8:37 PM | Reply
@DarkHorse @Howard @just wondering
$6-11B is definitely too low.
At the start of program people were saying Boeing would shoulder $6B and suppliers $4B. Others put the total cost at $9-$13B.
Since then there has been an estimated $5-$10B extra spent by Boeing, on e.g. travelled work, additional design, reworking (fastener replacement), advance payments to suppliers who were expecting to be earning by now. Unknown how much airline compensation will cost but so-far estimated several billion. Still a long way to go and expected to go northwards. I have heard total costs around $19B and counting.
It's worth noting these expenditures will benefit follow-up programs at Boeing. In the same way that the a380 spend up is benefiting the a350 (lots of technology is being utilized in a350 from a380, common cockpit, nose gear design, some electrical system commonality etc.) so it's naive to look at these numbers in isolation.
on August 29, 2009 7:19 AM | Reply
That utility is independent of of cost overruns,
isn't it?
The missmanagement is actually burning manpower,
as we could see with the a380 ( A380F canceled
until further notice), that is not available for
productive work.
And it could hinder the competitor too via
workforce binding and financial problems at
the partner sites ( which do manufacture for Airbus
as well) .
uwe
on August 29, 2009 8:26 PM | Reply
Yes I suppose by traditional measure the utility is independent of cost overruns on individual programs. I would still make the observation that some of the utility wouldn't be there if it weren't for the losses. I.e. in a broad sense, many lesson's learned and their solutions manifest on the balance sheet as unforseen losses, and become important IP to apply to other programs.
Generally any profitable business unit can be carved up such that at least one sub-unit is loss-making. So taking a step back, looking at the viability of Airbus/Boeing as a whole, these individual lossy endeavours don't necessarily have to become company-threatening problems.
However in Boeing's case, the 787 program seems close to threating the company as they burn through cash reserves. Let's hope there are no more mistakes or unforeseen problems.
on August 30, 2009 1:34 PM | Reply
Anyone seen Doug McVitie’s “analysis” of this entry? http://www.glgroup.com/News/Airbus-Lost-$7.5bn+-Trying-to-Flog-the-A350XWB-42822.html
Why do I think of Baghdad Bob?
on August 30, 2009 5:36 PM | Reply
Ann Coulter for the Aerospace Industry ;-)
He must have felt extremely underappreciated
at Airbus during his tenancy there.
uwe
on August 30, 2009 9:33 PM | Reply
"He must have felt extremely under appreciated
at Airbus during his tenancy there." about Doug McVitie
UWE I thought McVitie was a little too inflamed also. He didn't sound very objective. It reminded me of some who work at Boeing and post on this blog. I wish they would move on to Microsoft or go up into the mountains and cut trees. It would be a positive change of mind for them and Boeing, a win, win solution. Then perhaps the stock holders would feel better too.