Boeing 787 still on track but not out of woods

Boeing took steps to restore its damaged credibility this week by declaring its 787 Dreamliner is on track to meet revised delivery targets, but the aerospace giant has a long way to go to prove the jet will meet lofty expectations.

The airplane is still six months late. Boeing’s weak supply chain is still struggling to recover. And nobody except Boeing’s top brass seems to be buying into the company’s confidence that it will meet its aggressive schedule of delivering 109 airplanes by the end of 2009.

“It’s a Herculean goal,’’ says aerospace analyst Richard Aboulafia with the Teal Group, echoing  comments that analysts have been making for weeks.

In a conference call with analysts and reporters Tuesday, Boeing officials reaffirmed that they expect to meet newly revised production and delivery milestones including to “power on” the first plane in January, to fly it around the end of the first quarter of 2008, and to begin deliveries in late November or December.

“We are still ironing out significant supply-chain wrinkles,’’ said Scott Carson, head of Boeing’s Seattle-based commercial airplane manufacturing division. “Clearly risks remain. but it is a plan we believe we can achieve.”

Boeing earlier this year delayed the first flight by three months and the first delivery by six months, largely due to parts shortages and kinks in its outsourced and overburdened supply chain. But the Chicago-based manufacturer has barely cut its production schedule, which previously called for 112 planes to be delivered by the end of 2009.

Even if all the stars are aligned, analysts didn’t hear anything from Boeing officials during Tuesday’s update to assuage their doubts with regard to the production ramp up. Boeing shares dropped about 4 percent Tuesday amid a broad market downturn.

“It sounds more like an aspiration and less likely to be concrete reality,’’ says Aboulafia. “They didn’t make any compelling arguments as to how they can do it.”

Boeing cannot afford any more mistakes on the Dreamliner program. Its airline customers are anxiously awaiting their airplanes and have put Boeing on notice that if delays continue, the company could face millions of dollars in penalty payments. Boeing has already said it expects a $2.5 billion hit in 2008 to cover customer late fees and increased costs to keep its suppliers on track.

While airline customers are nervous, the orders keep coming in. Boeing has 762 orders from 52 carriers for the plane. Its extensive use of plastic composite materials, as opposed to aluminum and other metal alloys, is expected to make the Dreamliner 20 percent lighter and more fuel-efficient than comparable jets. Boeing says it has sold out delivery slots until almost 2014.

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