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Airlines Line Up for Boeing Compensation

Airlines started lining up on Thursday for compensation after Boeing further delayed its new 787 Dreamliner plane, with Air New Zealand first to seek redress and Japan's two big airlines likely to follow suit.

In this hand hout computer-generated image provided by Boeing shows the company's new series Boeing 787 Dreamliner, Wednesday, April; 27, 2005.  A senior Boeing Co. official on Wednesday brushed off the threat of European rival Airbus SAS's "superjumbo," saying orders for Boeing's smaller, more fuel-efficient Dreamliner were robust. (AP Photo/Boeing) ** EDITORIAL USE ONLY **
AP
In this hand hout computer-generated image provided by Boeing shows the company's new series Boeing 787 Dreamliner, Wednesday, April; 27, 2005. A senior Boeing Co. official on Wednesday brushed off the threat of European rival Airbus SAS's "superjumbo," saying orders for Boeing's smaller, more fuel-efficient Dreamliner were robust. (AP Photo/Boeing) ** EDITORIAL USE ONLY **

The U.S. plane maker announced the third major delay for the revolutionary plane on Wednesday, promising first delivery in the third quarter of 2009, more than a year after the original target of May this year -- with an indefinite delay for a short-range model favored by the Japanese carriers.

All Nippon Airways (ANA), due to receive the first plane, and Japan Airlines said they were assessing the cost of the delay and planned talks on compensation, while Australia's Qantas and Northwest Airlines also expressed disappointment.

More than 50 airlines are waiting for a combined 892 of the Boeing 787s worth $145 billion at list prices, with Qantas already seeking compensation for previous delays on its order for 65.

The New Zealand carrier will also begin compensation discussions with the plane maker, Chief Financial Officer Rob McDonald said. "While disappointed, Air New Zealand has retained sufficient flexibility in its existing portfolio of leased and owned aircraft to ensure no capacity
shortfall arises during this period," McDonald said in a statement.

Japanese airlines are also likely to seek redress from the Chicago-based plane maker, which has touted the carbon-composite Dreamliner as a breakthrough that would change aviation.

ANA spokesman Shinichi Shinkawa said the company would decide the size of compensation to seek once the overall impact from the delay on its business became clear. Its shares fell 1.7 percent.

Shares in JAL, which has 35 of the planes on order, fell 2.3 percent. Spokesman Hirokazu Inoue said it would start talks with Boeing about compensation once the impact became clear.

Mirroring Airbus

The delays for the Boeing 787 mirror the costly and embarrassing problems at archrival Airbus, a unit of European aerospace group EADS, which was two years late with its A380 super jumbo airliner.

The Dreamliner is now about 15 months behind schedule as Boeing makes slow progress on assembling the revolutionary plane and struggles with underperforming suppliers.

Boeing's plan was to outsource almost all major manufacturing to outside companies and then assemble the plane itself. It has since found that such a decentralized structure makes it hard to keep a check on suppliers' mistakes and delays.

However, shares in most of the U.S. suppliers of parts for the plane rose on Wednesday, with the delay much shorter than investors had anticipated. Boeing shares jumped 4.8 percent.

If delays on the plane get even longer, airlines might postpone or cancel orders, which would likely boost sales of Boeing's established 767 and 777 models and increase interest in Airbus's competing AA350 XWB.

Air New Zealand has eight of the planes on order, originally scheduled for delivery from 2010 to 2013, with the first ones now likely to arrive in 2012.

Shares in the largely state-owned airline, which is looking to build capacity and establish new routes into Asia and North and South America, were down 2.2 percent.

Longer For Some?

JAL and ANA, the only two customers buying the shorter-range 787-3 variant of the 787, may be among the hardest hit.

Boeing indefinitely delayed deliveries of the 787-3 variant, saying it would focus on the standard 787-8 and then the larger, stretched 787-9 variant.

JAL, one of the earliest and biggest customers for the 787, said the delay would cost the airline more in extra fuel.

"The 787 is an extremely fuel-efficient aircraft," said Japan Airlines' chief executive Haruka Nishimatsu, on the sidelines of a press conference in Los Angeles. "A delay will impact us significantly."

Qantas, the second-biggest Dreamliner customer behind a leasing firm, said it had made leasing arrangements to alleviate any capacity constraints caused by the further delay.

"We did anticipate a further delay and have been working on contingencies for some time," Qantas Chief Executive Geoff Dixon said in a statement, adding the airline now expected to receive its first aircraft 15 months after the original delivery date.

Qantas was entitled to substantial damages, which would be used initially to offset the cost of lease agreements, he said.

Northwest Airlines , the fifth-largest U.S. airline, which is buying 18 of the planes, expected to get an updated delivery schedule from Boeing in the next couple of weeks, said spokeswoman Tammy Lee.

"We are disappointed by the latest delays, but we still believe the 787-8 will be a game-changing airplane for our fleet," Lee said, adding that Northwest would initially use Boeing's older and larger 747-400 jumbos for international flights where it had planned to introduce its 787s.