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Boeing's Turbulence: More Dreamliner Delays

CNBC.com with wires
Wednesday, 9 Apr 2008 | 9:02 AM ET

Boeing is announced that it is delaying the production of its 787 Dreamliner by a little more than a year.

The aircraft, the manufacturer's push into a new realm of aviation technology and construction, will likely force the company to pay billions of dollars in compensation to its airline customers.

The U.S. plane maker, which vies with EADS unit Airbus for dominance of the commercial airplane market, pushed its target for the first test flight of the new plane to the fourth quarter of this year, as opposed to its last target of end-June 2008.

Boeing said the first 787 delivery, to Japan's All Nippon Airways Co, would take place in the third quarter of next year, as opposed to its previous target of early 2009. The first 787 delivery was originally planned for May 2008.

Full production of the Dreamliner wasn't expected until 2009, with relatively few deliveries expected in late 2008. So the delays' financial impact, while significant, is somewhat muted. Still, the setbacks remain a serious problem for the aircraft maker.

The Dreamliner Nightmare
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"I think Boeing has definitely gotten to the point where it's a 'show me' story," said Brian Nelson, Morningstar Defense Analyst, in an interview on CNBC. "Management's credibility has been called into question here. Because they've yet to power on the aircraft or have done the flight testing for the aircraft. I don't think Boeing can guarantee that the schedule won't experience further revisions going forward."

The Dreamliner has taken orders worth more than $150 billion. It was scheduled to enter commercial service next month but this initially slipped to early 2009 and has now been delayed again.

"Over the past few months, we have taken strong actions to confront and overcome start-up issues on the program, and we have made solid progress," said Boeing Commercial Airplanes President and CEO Scott Carson, in a press release. "Nevertheless, the traveled work situation and some unanticipated rework have prevented us from hitting the milestones we laid out in January. Our revised schedule is built upon an achievable, high-confidence plan for getting us to our power-on and first-flight milestones. Also, while the fundamental technologies and design of the 787 remain sound, we have inserted some additional schedule margin for dealing with other issues we may uncover in testing prior to first flight and in the flight test program."

-- With reporting from Reuters and CNBC's Phil LeBeau.

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