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Hot Jet Puts Boeing in a Bind

Posted on: Friday, 23 December 2005, 00:00 CST

By John Gillie, The News Tribune, Tacoma, Wash.

Dec. 22--The unprecedented popularity of Boeing's newest airliner, the superefficient 787 Dreamliner, is creating a dilemma for the aerospace company's executives:

Should the company increase early production rates to satisfy the hunger for the new aircraft -- but risk investing in production capacity that could go unused when demand returns to more normal levels?

The revolutionary composite-bodied airliner is scheduled to enter commercial service in 2008. High fuel prices and pressure to lower operating costs have made the 787 a hot item among the world's airlines.

The Boeing Co. has booked firm orders for 254 of the new jets as of Wednesday and has secured commitments from airlines for more than 100 more.

No other Boeing jetliner ever secured so many orders and commitments 21/2 years before its introduction into service.

And Mike Bair, head of the 787 program, said Wednesday the company could snag even more orders if it could guarantee airlines early deliveries.

"We could sell a lot more airplanes for 2008 if we could just manufacture them," Bair said.

The company has tweaked its early production schedule to deliver an estimated 112 787s a year in 2008 and 2009.

To meet that goal, the company will begin producing 787s at a slower rate in 2007 and parking those early planes until the aircraft passes its certification tests in 2008 that will allow Boeing to deliver the aircraft into airline service.

The company has essentially sold out its 787 production through early 2012 if the company can turn all of its airline commitments into solid orders, Bair said.

Some wiggle room remains to get later buyers into the early year production schedule if early buyers shift their delivery times, he said.

Getting ambitious with its production schedule could yield Boeing even more orders, but at considerable risk to the company and its suppliers:

--New methods: Committing to a fast-paced production schedule with such a revolutionary aircraft could backfire if Boeing or its suppliers encounter unexpected glitches in producing the plane.

The aircraft is the first large airliner to be produced largely of composites rather than metal. Boeing also plans to use a new production scheme that calls for suppliers to produce large pieces of the plane that can be simply bolted together in three days at Boeing's final assembly site in Everett.

--New delivery: Large modules -- such as the wings, tail and fuselage -- will be transported to Everett aboard enlarged 747 freighters. The airborne delivery system, which will gather parts of the 787 from suppliers' factories in Europe, Asia and the United States, is new to Boeing.

--New versions: Boeing already plans to produce three versions of the 787 of varying capacities and ranges, and the company is considering creating a fourth, the 787-10, that would carry 300 or so passengers in a three-class configuration.

The 787-10 would be the largest of the 787 models. Major airlines such as Emirates and Qantas are pressuring Boeing to build the bigger model to suit their routes.

In the past, Boeing has begun production of new models with only one model and added variations after the plane was in production for years.

--New investment: Investing in tooling, creating facilities and training workers for a higher production rate could be uneconomic if the company had to throttle back production once the initial high demand was satisfied.

In the late '90s, Boeing attempted a relatively abrupt acceleration of its production rates, but the change created red ink for the company and unhappy customers because of huge overtime costs, missed delivery dates and airliners that stood unfinished for weeks because they were missing critical parts. Bair said he doesn't want to see the company repeat that experience.

--No new timetable yet: Bair said he doubts an airline would buy Airbus' rival A350 airliner just because Boeing couldn't offer early delivery of its 787.

Airlines, he said, normally consider a decision on a new airliner to have long-term effects on the company's bottom line. An airline is unlikely to buy an inferior aircraft just because the manufacturer could offer earlier delivery, he said.

Boeing contends the 787 will be superior to the A350 because it offers better fuel economy, requires less maintenance and offers passengers amenities the A350 can't match.

So, for now, Boeing will stick with its schedule. There's risk enough in that.

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Copyright (c) 2005, The News Tribune, Tacoma, Wash.

Distributed by Knight Ridder/Tribune Business News.

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Source: The News Tribune

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