Transcripts

The Boeing 787 Dreamliner Nightmare

PAUL KANGAS: It was first expected to fly last August, now Boeing says the 787 Dreamliner won't get off the ground until the end of this year. Deliveries won't start until the second half of 2009. Still as Scott Gurvey explains, the delays are not unusual for a new aircraft design.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is the third time in the last six months that Boeing has revised the delivery schedule for its new 787 Dreamliner. Boeing now expects to deliver the first 787 in the third quarter of next year, instead of the first quarter. It also expects to ship 25 planes, down from the 109 previously planned. Boeing isn't alone in setbacks. Manufacturing problems also delayed delivery of the most recent Airbus model, the 380 and are common in the industry. Analyst Brian Nelson of Morningstar says this latest schedule may not be the last for the Dreamliner.

BRIAN NELSON, EQUITY ANALYST, MORNINGSTAR: At this point, because Boeing has yet to power on the aircraft which means it has yet to perform basic, integrated functional testing of the aircraft and because Boeing has yet to perform the flight tests necessary to gain certification, I think it is impossible to be completely certain that this delivery schedule is going to be the last, the one that Boeing delivers upon.

GURVEY: The holding pattern was caused primarily by problems with Boeing's worldwide supply chain. The company outsourced a record amount of the production and some of those suppliers haven't met deadlines. Boeing must also redesign part of the plane's mid section to make it stronger. But Boeing shares actually gained on today's news because the delays in the schedule were no worse than industry analysts had predicted. The company also maintained its profit guidance. As Standard & Poor's analyst Richard Tortoriello notes, the Dreamliner is just one part of Boeing's vast revenue stream.

RICHARD TORTORIELLO, EQUITY ANALYST, STANDARD AND POOR'S: Fifty percent of its business is military. And I see that kind of as a steady, slow growth, high cash flow business and that is going to continue. Boeing also has a big commercial aerospace business, including the Boeing 737, the 777 and other planes that are not at all related to the 787. And there's been big demand for those other planes as well.

GURVEY: Boeing will incur additional research and development costs on the Dreamliner because of the design changes and also customer penalty costs because of the missed delivery dates. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.