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Boeing 787 delay gives customers breathing room
June 30, 2009 / 6:25 PM / 8 years ago

Boeing 787 delay gives customers breathing room

By Kyle Peterson - Analysis

<p>Invited guests for the world premiere of the Boeing 787 Dreamliner are reflected in the fuselage of the aircraft at the 787 assembly plant in Everett, Washington, July 8, 2007. REUTERS/Robert Sorbo (UNITED STATES)</p>

CHICAGO (Reuters) - Planemaker Boeing Co (BA.N), red-faced after delaying the test flight of its revolutionary Dreamliner 787, may inadvertently have staved off some order deferrals or cancellations by global airlines with sagging traffic.

Since the company announced the latest delay last week, its customers have voiced their disappointment and frustration. But only one carrier -- Australia’s Qantas Airways (QAN.AX) -- has canceled Dreamliner orders. Qantas ditched 15 787 orders, blaming the flagging economy, not the 787 delay.

Experts say it is entirely possible that behind their public displays of discontent, some airlines are secretly pleased they can put off taking delivery of expensive wide-body aircraft they may not be able to fill.

“In some ways, it might work to their benefit,” said Alex Hamilton, Jesup & Lamont Securities analyst. “Instead of making the cold, hard decision of having to defer it, certainly (Boeing) doing it kind of works. I absolutely think it could help.”

Boeing, the world’s No. 2 planemaker behind Airbus EAD.PA, said last week it would postpone the first 787 test flight, which was to occur in the first quarter. The company cited a structural flaw but did not say when it expected to fly or deliver the plane, which is already two years behind its original schedule.

The carbon-composite Dreamliner promises to usher in an era of lighter, more fuel-efficient aircraft. It is one of the most hotly anticipated planes in history as airlines grapple with soaring fuel prices.

Boeing data show 866 orders on the books from more than 50 customers. The company has reported 45 Dreamliner order cancellations so far this year -- including the 15 by Qantas.

Experts wonder if more cancellations might be on the way as the global economic recession grinds on and demand for international travel sags.

The International Air Transport Association said on Tuesday that the world’s airlines lost more than $3 billion in the first quarter of 2009. The trade group predicts full-year losses of $9 billion.

Given the industry weakness, the Qantas cancellations might have occurred even without the Boeing delay, said Richard Aboulafia, an aerospace expert at the Teal Group.

“You look at what’s been happening with traffic, especially premium traffic, especially premium Asian traffic, that really kind of gives this more of a context,” he said. “Traffic is just not making a recovery.”

“People sound almost relieved to not have to take planes right now,” Aboulafia said. Boeing collects payment only when deliveries are made.

Hamilton said Delta Air Lines (DAL.N), which bought Northwest Airlines last year and inherited 18 Dreamliner orders, may dump those orders to trim capacity and simplify its newly merged fleet. Delta has not commented on the possibility.

Despite the relief some airlines might feel at not having to decide whether to keep their 787 orders, others would rather be able to make that decision themselves, said airline consultant Robert Mann.

“From a capacity planner’s perspective, new delays on the 787 program move beyond frustrating toward incredulity,” Mann said. “And they raise new and more serious questions about program credibility -- its scalability, delivery pacing and performance benefits.”

Reporting by Kyle Peterson

Our Standards:The Thomson Reuters Trust Principles.
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