On the Economy
Boeing damages credibility with decision to delay first flight of 787 Dreamliner
News that Boeing is postponing the first flight of the 787, the Dreamliner, has badly damaged Boeing's already-dented credibility. It raises questions about its reliability compared with Airbus. And it sets the company up for a much tougher financial climb.
Special to The Seattle Times
|First flight||First delivery|
|Original timeline||Aug. 27, 2007||May 2008|
|Revised (Oct. 2007)||March 2008||Nov.-Dec. 2008|
|Revised (Jan. 2008)||June 2008||Left open|
|Revised (April 2008)||Oct.-Dec. 2008||July-Sept. 2009|
|Revised (Dec. 2008)||April-June 2009||Jan.-March 2010|
The words "much delayed" are beginning to attach themselves to the Boeing 787 as if they are part of the brand name. On Tuesday came perhaps the most stunning delay of all: postponement of a first flight intended to show the world that the much-delayed Dreamliner was finally ready for prime time.
Yet it's not.
The latest bungle has badly damaged Boeing's already-dented credibility. It raises questions about its reliability compared with Airbus. And it sets the company up for a much tougher financial climb.
More and more, the idea of a global supply chain to cut costs and gradually replace those testy, expensive workers in Everett seems like a really dumb idea, especially for what is billed as the most sophisticated and complex commercial aircraft in history, one based on composites. So does the trial balloon of moving production to beautiful but backward South Carolina.
There's a reason why seasoned Boeing workers in one of the world's top aerospace clusters are worth good money. Compare a two-month labor showdown to a two-year Dreamliner delay and there is indeed an issue with the "workforce reliability." Unfortunately it's the workforce in the executive suites.
After replacing top executives in the commercial-airplane division twice since the 787 project began, Boeing may face pressure for new candidates to walk the plank. A more pertinent question is why the executive changes have still not produced a turnaround. That should bring calls for accountability in the highest echelons of Chicago.
Investors are not amused. Boeing shares had been rising since March, partly on confidence that the Dreamliner's problems were behind it. On Tuesday, they fell 6.5 percent. Surprising Wall Street isn't nice.
Neither is the renewed sense of uncertainty. Apparently the problem, a structural weakness in the body where the wings join, is serious enough that Boeing executives can only say the first flight will be some weeks away. Boeing executives will face tough questions about how the latest delay will affect earnings going forward, now that the 787 won't be flying this quarter.
Some cash-strapped buyers may be relieved by the delay. They may not be in a position to pay for Dreamliners for several years. And, with the price of airline fuel moderating, airlines are catching a break on the urgency of fuel-efficient planes.
But the Dreamliner mishandling comes amid the worst recession since 1982, possibly since the Great Depression. Aircraft orders have plummeted and cancellations have risen. The consequences so far are the loss of 10,000 jobs, including 4,500 in the commercial-aircraft unit.
These jobs produce among the highest economic multipliers in the region, supporting as many as three other jobs in other sectors, far more than jobs in retailing or other service sectors. Their loss comes on top of the dreadful losses at Washington Mutual and Safeco.
Add in the Dreamliner, and the stakes become much higher. The delays have already cost Boeing orders. In other cases, it has been forced to give customers concessions because of the postponements of deliveries. We may never know how costly those concessions were since Boeing negotiates individually with its buyers and does not disclose financial details of purchases.
Just last week, Boeing and first customer All Nippon Airways held a ceremony that involved the breaking open of a sake barrel with wooden mallets. It was, the airline said, "a traditional Japanese way of marking auspicious occasions."
Nobody's celebrating today.
You may reach Jon Talton at email@example.com
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About On the Economy
Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest