Boeing says flaw could affect 55 Dreamliners
SINGAPORE (Reuters) - About 55 Boeing Co 787 Dreamliner jets may have a recently discovered flaw in the fuselage, the company said on Wednesday, while reiterating that the world's first carbon-plastic passenger plane is safe to fly.
The news bolsters a growing perception in the aviation world that the plane-maker will not be able to accomplish its plan to increase production on the airplane to 10 per month by the end of next year, although the company stands by its forecast.
Shares of Boeing traded slightly higher, with analysts noting that they have long expected Boeing to miss its production rate target and are not surprised by the latest news.
"Most people expected something like that. If it really is a
relatively simple fix, it's probably not going to be what derails the production plan. Something else will derail the production plan, but not this," said Richard Aboulafia, an aerospace consultant at Teal Group.
"It's tough to put it in isolation with everything else," he said. "It's emblematic of a broader problem on concurrency --making design changes and learning how to build something, while simultaneously building it in volume."
In the latest in a series of glitches in developing the revolutionary jet, Boeing earlier this month reported signs of "delamination" on a support structure in the rear fuselage. Delamination occurs when repeated stress causes laminated composite materials to begin to separate.
The company is examining a backlog of assembled Dreamliners to see whether they show similar signs of stress, which it has blamed on incorrect "shimming" -- a process planemakers use to fill tiny gaps when aircraft are built.
"All the airplanes that were built up to plane 55 have the potential for the shimming issue," James Albaugh, chief executive officer of Boeing Commercial Airplanes, told reporters during a media roundtable in Singapore.
Albaugh said the problem is "very fixable."
Boeing has made 55 Dreamliners, so far, but has delivered only five -- all to Japan's All Nippon Airways Co Ltd, ANA.
"We are in the process of fixing the airplanes that are in the (production) flow," Albaugh said. "There is no safety or flight issue on the airplanes that we have delivered."
Although composite parts have been in use for years, the 787 is the first airliner built mainly out of the new materials, which help airlines save fuel by reducing aircraft weight.
Albaugh said the inspections might affect delivery of the aircraft to customers in the short term, but Boeing still expects to meet its target for this year.
Analysts have said the discovery of the flaw after the first delivery of the aircraft last September had raised questions about whether Boeing could meet what many already saw as an ambitious plan to raise output to 10 Dreamliners a month by the end of 2013.
"People pretty much understood when the news came out initially that it would affect the majority of the Dreamliners that had been produced, because it was a workmanship issue. So I don't think this will be too much of an overhang on the stock," said Wedbush Securities analyst Kenneth Herbert.
Boeing currently makes 2.5 Dreamliners each month and expects to boost monthly output to 3.5 in the second quarter and to five by year-end.
Herbert said many aviation experts and stock analysts expect Boeing to miss its production rate target next year and have already priced that view into the company's shares.
Boeing stock was up 52 cents to $76.24 in afternoon trade on the New York Stock Exchange.
DECISION ON 787 STRETCH BY YEAR-END
ANA put the plane into regular passenger service starting on December 1. Due to production problems, that was three years later than originally planned.
ANA said Boeing had contacted the airline to say there were no safety issues involved in shimming and to give a general indication of the inspection procedure. ANA said its five Dreamliners are operating normally.
Japan Airlines Corp has already said it no longer expects its first Dreamliner by the end of February as a result of the manufacturing glitch.
The 787 problem comes as Boeing rival Airbus, an EADS unit, investigates the cause of cracks in part of the wings of its A380 superjumbo. It also insists its jets are safe.
Airbus Chief Executive Officer Tom Enders pledged last week the plane-maker would apply lessons from the A380 glitches to the development of the A350, which is the European company's carbon-composite answer to the 787 Dreamliner.
Boeing will decide whether to go ahead with plans to produce a stretched, or longer, version of the 787 Dreamliner by the end of this year, Albaugh said.
Most aircraft analysts have expected Boeing to push ahead with the 787-10, which would carry around 320 people, 40 more than the longest 787 version currently on offer, the 787-9.
The 787 and A350 address the mid-sized segment of the market, which is expected to number several thousand aircraft in coming decades as airlines renew fleets to save fuel and open up new routes.
Airbus and Boeing are also battling to maintain a roughly equal share of the single-aisle aircraft segment, the industry's largest by volume, after updating their best-selling 150-seat jets with new engines.
Airbus took the lead last year with strong sales of its A320neo, but Boeing is redressing the balance with its 737 MAX.
"We have over 1,100 commitments (for the 737 MAX), and our goal this year is to turn all of those into firm orders," Albaugh told reporters, adding that Boeing aims for a couple of thousand firm orders by the time the updated aircraft enters service in 2017.
"If there really is a softening in the economy, you could see some deferrals, you could see some people cancelling and you could see fewer orders," he said.
Underlining concerns about the economy, Singapore Airlines Ltd said on Wednesday it was cutting cargo capacity by 20 percent because of weak demand and high fuel prices.
(Aditional reporting by Tim Hepher and Kyle Peterson; Editing by Gerald E. McCormick and John Wallace)
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