787 R&D spend ramped up, but company insists twinjet will beat performance targets

Warnings of increased research and development (R&D) costs on the Boeing 787 programme sent jitters through the investment community last week, despite the fact that Boeing is predicting the aircraft will perform better than expected and is playing down potential weight and schedule problems.

Boeing now forecasts it will add a further $450 million in R&D spending on commercial products this year, an increase of about 60% on its original estimates for 2006, given as recently as May. Projected R&D spending for 2007 has also increased by about $500 million as part of an overall projected growth in company-wide research to $3.2 billion this year and $3.4 billion in 2007. About 50% of the commercial R&D rise is being attributed to the 787, and the balance will be spent on the 747-8.

Boeing chief executive James McNerney acknowledges the 787 weight question is a "dogged issue", adding: "I would characterise what we're doing here as pretty aggressive contingency planning." Boeing says the weight problem is in "low single [percentage] digits. Even at our current weight status, the 787 operating cost is around 2% lower than what we originally offered to the marketplace because we are meeting or exceeding our original plans on aerodynamic efficiency."

Contingency plans include moves to offset the impact of out-of-sequence work, which virtually crippled the company during the chaotic production crisis on the 737 Next Generation in the late 1990s. Although suppliers are playing a part in setting up system and parts assembly lines around Everett and Wichita, Boeing is also preparing to undertake some final assembly work on wiring and other systems that, under the envisaged production plan, will eventually be performed by suppliers.

Although Boeing's share price dipped after the R&D revelations, most analysts say schedule and performance remain the key watch items. Bernstein Research says: "The additional R&D is negligible in what we estimate will be an $8 billion development programme for Boeing." It adds that, historically, Boeing has "typically been over budget", but on time and performance, and "all the evidence suggests the 787 will be no different".

Source: Flight International