April 10, 2008 / 12:37 AM / 12 years ago

Airlines lining up for Boeing 787 compensation

WELLINGTON/TOKYO (Reuters) - Airlines lined up on Thursday for compensation after Boeing Co (BA.N) announced a further six-month delay for its new 787 Dreamliner plane.

A Boeing 787 is seen as its unveiled in Everett, Washington in a 2007 handout photo. REUTERS/Boeing/Handout

Air New Zealand (AIR.NZ), Air India AI.UL and Japan’s two big carriers, All Nippon Airways (ANA) (9202.T) and Japan Airlines (JAL) 9205.T, were among those eyeing redress along with Virgin VA.UL and British Airways BAY.L.

The U.S. plane maker announced the third major delay for the revolutionary plane on Wednesday, promising first delivery in the third quarter of 2009, more than a year after the original target of May this year — with an indefinite delay for a short-range model favored by the Japanese carriers.

“The 787 is an extremely fuel-efficient aircraft,” said Japan Airlines’ chief executive Haruka Nishimatsu. “A delay will impact us significantly.”

More than 50 airlines are waiting for 892 Boeing 787s, worth a combined $145 billion at list prices.

Despite the problems, Boeing shares jumped 4.8 percent on Wednesday and shares in most of its U.S. parts suppliers for the airliner also rose, with the delay much shorter than Wall street had expected.

The problems at Boeing mirror embarrassing and costly delays at rival Airbus, a unit of European aerospace group EADS EAD.PA, which was two years late with its A380 super jumbo.

If delays on the plane get even longer, airlines might postpone or cancel orders, which would likely boost sales of Boeing’s established 767 and 777 models and increase interest in Airbus’s competing A350 XWB.

Virgin, which has ordered 15 Dreamliners, and British Airways which had hoped to start receiving its 24 new 787 aircraft in August 2010, said on Thursday they were in compensation talks with Boeing amid the latest setback.

Australia’s Qantas (QAN.AX), the plane’s second-biggest buyer ordering 65 planes, said it had already put in a claim for redress after previous delays and was due substantial damages.

“We did anticipate a further delay and have been working on contingencies for some time,” Chief Executive Geoff Dixon said.

Northwest Airlines Corp NWA.N said it would fly older planes for longer, while waiting for Boeing to address problems with the carbon-composite Dreamliner, which the Chicago-based firm had touted as a breakthrough that would change aviation.

“We are disappointed by the latest delays, but we still believe the 787-8 will be a game-changing airplane for our fleet,” spokeswoman Tammy Lee said.

Bahrain’s Gulf Air GULF.UL, which has ordered 16 of the 787s, said it was unaffected by the delay as it is not due to take delivery until 2016.

Other Middle East buyers of the 787 include Qatar Airways, Kuwait Aviation Lease and Finance Co (ALAF.KW) and state-owned Dubai Aerospace Enterprise.


Japan Airlines and ANA, the two customers for a shorter-range 787-3 variant of the Dreamliner, will be among those waiting longest for their orders to be filled.

Boeing indefinitely delayed deliveries of the 787-3 model, saying it would focus on the standard 787-8 and then a larger, stretched 787-9 variant.

JAL and ANA would have to overhaul plans based on the more efficient planes, said Fitch Ratings analyst Satoru Aoyama.

“They will have to rethink their entire strategy of coping with fuel costs in this day and age, when oil is costing $110 per barrel,” he said.

ANA spokesman Shinichi Shinkawa said the company would decide the size of compensation to seek once the overall impact from the delay on its business became clear.


The 787 has been held up as Boeing makes slow progress on assembling the plane and struggles to make suppliers perform.

Its had planned to outsource almost all major manufacturing to outside companies and then assemble the plane itself but found this makes it hard to monitor mistakes and delays.

A spokesman for state-owned Air India said it would seek compensation, but had not yet received details from Boeing on how much longer it would have to wait for its 27 Dreamliners.

Airlines lined up on Thursday for compensation after Boeing announced a further six-month delay for its new 787 Dreamliner plane, with Air New Zealand, Air India and Japan's two big carriers eyeing redress. REUTERS/Graphic

Derek Sadubin, with Sydney-based think tank the Centre for Asia-Pacific Aviation, said the delays were particularly painful for the Indian airline as it needed new planes to rebuild its international market share in the face of strong competition.

But he added that other airlines, facing a faltering U.S. economy and an industry downturn, may not be too worried.

“Carriers are outwardly expressing disappointment but inwardly they could be quite relieved,” he said.

Additional report by Ben Wilson in SYDNEY, Bill Rigby in NEW YORK, Deena Beasley in LOS ANGELES, Kyle Peterson in CHICAGO; Edwina Gibbs in TOKYO, John Irish and Ola Galal in DUBAI, Jonathan Saul and Marc Jones in LONDON; Writing by Rodney Joyce; editing by Elaine Hardcastle

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