Aerospace & Defense

Boeing cuts 787 Dreamliner production, delivery target after new flaw found

Key Points
  • Boeing has already paused delivery of its 787 Dreamliners as the FAA evaluates how the company inspects the planes.
  • Further delivery delays would deprive Boeing of cash since most of an aircraft's price is paid when they're handed over to customers.
  • The FAA said the issue "poses no immediate threat to flight safety."

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Boeing finds new 787 Dreamliner flaw, stalls production
Boeing finds new 787 Dreamliner flaw, stalls production

Boeing cut its delivery target for its undelivered 787 Dreamliner planes and said it will temporarily lower production rates after a new defect was detected on some of the wide-body jets.

Boeing said Tuesday it will deliver fewer than half of the Dreamliners it has already produced but has not yet delivered to customers.

CEO Dave Calhoun said at an investor conference last month that the company would deliver the "lion's share" of the roughly 100 Dreamliners in its inventory this year.

Boeing halted deliveries of the wide-body planes in May for the second time in less than a year as the Federal Aviation Administration reviewed the manufacturer's method for evaluating the aircraft. Last year, Boeing first disclosed incorrect spacing in some parts of certain 787 aircraft, including the fuselage, halting deliveries for five months.

The FAA said Monday the latest issue was related to that and was detected "near the nose" of certain 787 Dreamliners that Boeing has manufactured but not delivered.

Because most of an aircraft's price is paid when the plane is handed over to customers, further delivery delays would mean more financial strain for Boeing. Sales of 787 Dreamliners and wide-body aircraft in general have been weak during the Covid-19 pandemic as long-haul international travel demand plunged.

The new issue comes as Boeing is trying to regain its footing from the pandemic and two fatal crashes that grounded its bestselling 737 Max.

Boeing shares fell more than 4% to end Tuesday at $228.20, leading the Dow Jones Industrial Average lower. Parts supplier Spirit AeroSystems fell more than 3% to $44.31.

"This issue was discovered as part of the ongoing system-wide inspection of Boeing's 787 shimming processes required by the FAA," the agency said. "Although the issue poses no immediate threat to flight safety, Boeing has committed to fix these airplanes before resuming deliveries."

Boeing said it would reduce production to fewer than the current rate of five planes a month for a few weeks but declined to say by how much. The company will reassign staff on the production line to inspect planes and make any necessary repairs.

"The math on the 787 inventory liquidation was appearing to be very challenged, so the lower inventory reduction is not a surprise," Canaccord Genuity aerospace analyst Ken Herbert wrote in a note after Boeing's announcement. "However, this will contribute to what could be another quarter of accounting adjustments for Boeing, compounded further by the CFO transition."

Boeing CFO Greg Smith retired this month after a decade in the role. The company in June named former General Electric executive Brian West as its next finance chief.

The FAA said it is weighing whether modifications are needed on 787s that are already in service.

Boeing also said Tuesday it delivered 45 planes last month, 33 of them 737 Maxes. In the first half of the year the company handed over 156 planes, one fewer than its total for all of 2020, when the coronavirus devastated the industry.

Net orders in June totaled 146 planes, while gross orders of 219 were the highest in two years.

Those included an order for 200 Maxes to United Airlines, which the carrier announced last month along with an order for 70 Airbus narrow-body planes.