As Boeing's earnings impress, another delay for its Nightmareliner?

Boeing (BA) delayed its 787 Dreamliner for a fifth time last month when it announced on June 23 that there was a wee little problem with the part of the aircraft where the wing connects to the fuselage. At the time, I questioned whether the 787 would ever be safe to fly since it seemed as though Boeing's computer models were unable to predict the physical behavior of the aircraft in the real world. Now, as Boeing reports its quarterly earnings, two of its engineers admit that the 787 will be delayed at least another six months.

Since July 8, 2007 (7/8/7), when the 787's first program chief decided to present to the public a crippled version, the Dreamliner has proven to be much more of a marketing success -- with 850 orders -- than a real aircraft in which people can fly. The Dreamliner has been delayed five times and it appears poised for at least a sixth delay.

That's because the 787 concept -- a fuel efficient, passenger-friendly aircraft -- is better than the way it's been designed and built. And that's because Boeing outsourced 60 percent of the 787's design and manufacture and then failed to supervise those contractors tightly enough -- leading to unpleasant surprises such as design and manufacturing problems and schedule delays.

But the Dreamliner has turned into a Nightmareliner. Two Boeing engineers expect that fixing the problem of carbon-fiber delamination at the wing-fuselage connection could take six months to fix. They believe that the fix will require a thorough redesign of the plane's wing-to-body join, and the necessary parts will be very difficult to install on the test airplanes that have already been built. The retrofit will require mechanics to drill holes through titanium and composite material in the wing -- a very difficult fix in a confined space.

This news about the bigger-than-expected delay comes as Boeing announced its earnings, which beat expectations. Analysts polled by Thomson Reuters expected second-quarter earnings of $1.21 per share and revenues were estimated to be $17.15 billion. This morning Boeing reported EPS of $1.41, up 22 percent, and revenues of $17.2 billion.

Boeing reported an outlook for 2009 that is essentially unchanged. It reaffirmed its revenue guidance at $68 billion to $69 billion and maintained its expectation of 2009 EPS between $4.70 and $5.00 per share.

But the big question for investors and airlines is how much the latest Nightmareliner delay will cost Boeing. More details will emerge this morning. Meanwhile, Boeing stock is trading up 1.9 percent in pre-market.

Peter Cohan is president ofPeter S. Cohan & Associates. He alsoteaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.

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