Airlines Calculate Boeing 787 Delay Damage

With airlines bracing for yet another slip in Boeing’s 787 delivery schedule, some of the program’s key customers are considering how much longer they can reshuffle their current fleets and what the damage will be to their long-term plans.

Boeing has yet to tell airlines how many months the latest delay will be after problems during flight-testing forced a timetable review. For every customer, the pain threshold is a little different. They can cope in the short term, but eventually the delays will severely cramp the growth plans that were based on the promise of the 787’s range and efficiency.

Three of the most important 787 customers spoke to Aviation Week about the program delays during a Star Alliance event here Dec. 13-14. All Nippon Airways is the launch customer of the initial 787-8 variant, United Airlines is slated to be the first North American operator and Air New Zealand is the launch customer for the 787-9.

ANA CEO Shinichiro Ito says the airline has contin­gency plans to cope with additional delays, but it will face serious headaches if the first handover is pushed into 2012.

The carrier has already taken “substantial measures” in case Boeing could not meet the current delivery target of the first quarter of 2011, says Ito. “We can cover their delay for one year [beyond the current target] without major damage” to ANA’s operations or plans, he says.

ANA has orders for 55 of the 787-8 and -9 versions. It was originally supposed to receive the first aircraft in mid-2008.

Ito is resigned to the fact that the latest technical issues will “most likely lead to another delay,” and he has been asking Boeing to present a revised timeline “as soon as possible.” He notes that ANA has endured six delays already, and a seventh will be “disappointing.”

The contingency measures ANA has put in place include postponing retirement of older Airbus A320s and Boeing 767s. The carrier has also acquired additional newer 767-300ERs to help fill the gap.

But the 767s “can’t cover everything” that the carrier intended for the 787, Ito notes. Another lengthy delay will affect its plans to launch new long-haul flights that were earmarked for the 787, such as new routes to the Eastern U.S. and Europe from Tokyo Haneda Airport.

Meanwhile, Air New Zealand CEO Rob Fyfe concedes it is “probable” that the delays to the 787-8 will spill over to the -9. Before Boeing’s most recent problems, Air New Zealand was facing a three-year delay in its eight 787-9 orders. They were originally scheduled for delivery in late 2010, but are now slated for late 2013.

“Clearly there is frustration for us in those delays, as it is restricting some of our plans in terms of retiring older aircraft and in terms of some of the new routes we’re interested in,” Fyfe says. While ANA is going ahead with its plans to phase out its last 747-400s from international service in March, the 787 delays have prompted Air New Zealand to purchase a 747-400 that it had wanted to return to its lessor. This goes against its plan to shrink the 747 fleet. Additional measures include extending 777-200 leases and retaining 767-300ERs longer than planned. As with the other 787 customers, there have been compensation discussions between Air New Zealand and Boeing, although Fyfe will not reveal details. However, he says no matter how much compensation is received, the delivery delays still create considerable strategic risk for the carrier. Many of the routes Air New Zealand targets are too thin to support more than one carrier. So if a further 787 delay results in another airline entering a market that Air New Zealand was contemplating, it could be locked out of that market. Overall, Fyfe is still convinced the 787 will be a “game-changer” for Air New Zealand. “There is no lack of enthusiasm [for the aircraft]; we just want to get our hands on it,” he says. Jeffery Smisek, CEO of United Continental Holdings, believes Boeing is being “purposefully cautious” in revising the 787 timetable. The stakes are high for the airlines, because they rely on the delivery schedule to plan expensive investments in training and equipment, Smisek says. The newly merged carrier has 50 787s on order, half from United and half from Continental. The most recent update had first delivery slipping from August 2011 into 2012, but Smisek says Boeing has yet to reveal the extent of the latest revision. Smisek says the continuing delivery delays create other major problems for United. The aircraft is a pivotal part of the carrier’s plans to open new routes and make its fleet more efficient, he says. “We’ve got a lot of plans for the 787, and every day of delay [represents] dollars that we could have made that we are not making.” For example, United has postponed plans to launch a route from Houston to Auckland in November 2011, which was to be one of the first to use the 787. This was “100% caused by the [787] delay,” Smisek says. United believes that being the North American launch customer will give it a competitive advantage in the region. “So we would like to start this competitive advantage as soon as possible,” says Smisek. Delays to the 787 program began in September 2007, shortly after rollout, when widespread issues with the supply chain became apparent. Bedeviled by persistent problems involving “re-work” on parts already delivered or in flow, Boeing announced additional delays in October 2007, as well as in January, April and November 2008. The latter hold-up was attributed to incorrect installation of fasteners and the knock-on effects of a debilitating machinists’ strike at Boeing. The sixth major delay came in June 2009, just as the aircraft was poised for first flight, when structural tests revealed the need to strengthen the wing-to-body join area. Although flight tests eventually began in December 2009, the planned first delivery slipped from late 2010 into early 2011 following more production and flight-test issues, culminating in problems with the Rolls-Royce Trent 1000 engine. An electrical fire last month on a test aircraft in Texas—and the subsequent suspension of flight tests and grounding of the fleet—is now set to trigger a seventh major delay. Boeing has acknowledged the systems redesign and certification issues caused by the Nov. 9 electrical fire have effectively rendered its current targets unachievable. The aircraft maker says it will announce a new schedule when that work is complete. Analysts predict the latest delay will be anywhere from 4-6 months.