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Boeing 787 Dreamliner

Dreamliner turning into Boeing's nightmare

W.J. Hennigan  Oct 15, 2009

When Boeing Co. unveiled plans to build the 787 Dreamliner, the aircraft was touted as revolutionary, a major technological shift in the way a plane is made and in the way it operates.

But revolutions rarely come without a struggle.

The 787 is now more than two years behind schedule and by some estimates is costing Boeing $4 billion more to develop than planned. The troubled jetliner has also set back other Boeing projects, analysts say, and has left some suppliers financially strapped.

One major supplier, Vought Aircraft Industries Inc., initially projected it would spend $250 million for tools and machinery to make parts for the aircraft. By July, costs had ballooned to $600 million. The company this summer sold the 787 fuselage assembly operations to Boeing.

"Financial demands of the 787 program were beyond what the company's balance sheet could support," said Lynne Warne, a Vought spokeswoman.

Boeing's acquisition of Vought's factory -- completed so Boeing could have more control over a key aircraft part -- marked a major reversal in the company's strategy and highlighted the pitfalls of making planes that not only use new materials but also are assembled in a radically different way.

The 787 is the first large passenger jet to have more than half its structure made of composite materials (carbon fibers meshed together with epoxy) instead of aluminum sheets. Major parts for the plane would also be pre-assembled elsewhere and then shipped to Everett, Wash., where they would be "snapped together" in three days, compared with a month in the traditional way.

"Any time you're dealing with new material and new techniques, there's bound to be disruptions in development," said Richard Aboulafia, an aerospace analyst with Teal Group Corp., a Virginia-based research firm.

Boeing declined to comment for this article but has said that the delays are the inevitable result of developing an aircraft with a new manufacturing method. Once they work out the kinks, Boeing officials said, they have no doubt it would go down in history as one of the most successful airplanes.

But for now it appears that travelers won't be flying in the plane any time soon. Initially scheduled to fly passengers in May 2008, Boeing has said that won't happen until late next year.

The effect of the delay has been far-reaching, hurting 787 suppliers stretching from Southern California to Russia, Japan and Italy. There are about 50 suppliers in California alone.

"These companies haven't been paid, because Boeing has yet to deliver a plane," said Scott Hamilton, an aviation industry consultant and managing director of Leeham Co. in Issaquah, Wash.

Suppliers refused to talk about their predicament out of fear of hurting their relations with Boeing, but analysts said some parts makers that signed on for the project took on more risk than for any other aircraft's development.

In an unusual arrangement, major suppliers agreed to pay upfront costs for things such as labor and tooling. The risk was considered worth taking because the 787 was billed as the plane of the future, an aircraft that would be in service for the better part of the century. But some suppliers are facing escalating costs that have more than doubled in some cases.

Few disagree that when the 787 gets off the ground, it's a game changer for the aviation industry.

The plane's newly developed engine promises to burn 20% less fuel than jetliners of a similar size. It will seat about 250 passengers, compared with about 150 for Boeing's most popular 737 jet, and Boeing says it will require less maintenance than the current generation of aircraft because it has fewer parts and will sustain less corrosion. Boeing says the 787, which costs about $160 million each, will save airlines about 30% in maintenance expenses.

But the 787 has been delayed five times since October 2007. Many of the hitches have come because of a new production method.

Instead of workers fastening parts together and wiring the plane at Boeing's Everett factory, the bulk of the large components will arrive pre-assembled.

Before the 787, Boeing designed and assembled the bulk of its planes at its facilities. Suppliers made parts from blueprints handed to them by Boeing. For the 787, suppliers have been responsible for their designs and getting those designs approved by safety regulators.

In addition to growing pains from the new responsibilities, suppliers have struggled with dealing with various languages and cultures. Wings are made in Japan and center fuselage sections are made in Italy.

Boeing has tried to simplify the process.

The company bought Vought's 787 fuselage assembly operations in South Carolina after work at the facility continued to have problems. It also acquired Vought's 50% stake in Global Aeronautica, a joint venture with Alenia North America, which is a unit of Italy's Finmeccanica.

Even with all the hang-ups, Boeing is not alone, said Tom Captain, principal and vice chairman of Deloitte's aerospace and defense practice. Cost overruns and constant delays have become typical in the aviation business, he said.

Captain said aviation businesses' marketing and sales divisions are increasingly pressuring engineers to keep prices low. Engineers then try to cut back on production schedules, which put aircraft makers in a precarious position when plans don't go just right. Other projects such as Airbus' A380 super jumbo jet have faced similar development problems.

"The schedules are so aggressive that they assume nothing will go wrong," Captain said. "There is no wiggle room, and it's inevitable that some things will go wrong. Engineers have to plan for it."

Because Boeing is one of Captain's clients, he declined to speak directly about the 787 project.

"They have blown through cost estimates with this program," said Peter Arment, an analyst with Broadpoint AmTech in Greenwich, Conn., noting that Boeing will have racked up about $4 billion in extra costs on the 787.

He also said Boeing devoted a lot of engineering resources to the 787, which came at the expense of other programs. Last week, for example, Boeing said it would incur a $1-billion charge because of a delay in producing a new version of the 747 freighter jet.

Arment said this was a "direct result" of the 787. Many of the engineers were pulled off the 747 to address issues on the 787, he said.

If everything went according to plan, Boeing would be producing two 787s a week by now. But after a series of setbacks, Boeing is instead hoping it can perform its first test flight by the end of the year, with the first delivery to its first airline customer, Japan's All Nippon Airways Co., by the fourth quarter of next year.

Both the delays and the sagging economy have hurt air travel, which translates to lower demand for planes. Customers have canceled orders for 83 Dreamliners. But Boeing still has a healthy 840 orders, which speaks to the 787's potential, Aboulafia said.

"It may very well be revolutionary," he said. "The jury is still out. We just haven't seen whether it can perform as advertised."

Dreamliner turning into Boeing's nightmare
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