Boeing Co said on Thursday that issues raised in its 787 Dreamliner flight tests could delay first delivery of the long-awaited carbon-composite aircraft into the first part of 2011, but the company also expects an uptick in new plane demand over the next two decades.

Speaking on a conference call with reporters, Scott Fancher, general manager of the 787 Dreamliner Program, said the world's second-largest plane maker has not yet made a decision to move the first delivery to Japan's All Nippon Airways Co Ltd <9202.T>. First delivery is currently scheduled for the end of 2010.

We've seen some issues recently that have pushed our schedule margin a bit, Fancher said.

The issues relate to instrument configuration and inspection work, Fancher said. He said the possible delay is not related to airplane operations.

News of the potential delay comes ahead of the world's biggest air show next week at Farnborough near London. Boeing plans to display a Dreamliner at the air show. (Graphic http://link.reuters.com/huk57m)

The Dreamliner is already more than two years behind its original schedule. Production of the airplane was delayed five times in three years, and the first flight was postponed six times, because of parts shortages, design problems and a two-month strike at Boeing's factory in 2008.

Last month, Boeing temporarily stopped flying its test Dreamliners after identifying a problem affecting the horizontal tail.

We wanted to give a little bit of a cautionary note that things could push into the first part of next year, Fancher said on Thursday. Our schedule still shows delivery for the end of the year. [nN15198067]

Airbus, a unit of Europe's EADS , is the world's largest aircraft manufacturer and Boeing's chief competitor.

CK Cooper & Co analyst Alex Hamilton said the delay is not surprising, but the news triggered a brief sell-off in the stock. Shares of Boeing, a Dow Jones industrial average component, were down 30 cents or 0.5 percent at $64.45 in afternoon trading on the New York Stock Exchange after dipping as low as $63.37 earlier.

I think anybody who bought the stock based on fourth-quarter delivery is fooling themselves, Hamilton said.

You're buying the stock for the first year of a multiyear upswing, he said.

Boeing said on Thursday it has chosen North Charleston, South Carolina, as the location to build a new facility to make parts of the Dreamliner interior. [nWNAB6024]

The factory will be 10 miles from Boeing's 787 final assembly and delivery site in North Charleston. Construction is expected to begin in the fourth quarter of 2010.

Also on Thursday Boeing raised its forecast for new plane demand on the growth of low-cost carriers, the replacement of less efficient aircraft and economic recovery. [nLDE66D1KS]

The company said in a report on Thursday it expects 30,900 new planes to be ordered worldwide over the next two decades, up 6.5 percent from last year's forecast of 29,000.

Boeing said the new orders would be worth $3.6 trillion, up 12.5 percent from the $3.2 trillion forecast a year ago.

(Additional reporting by Nina Chestney in London)

(Reporting by Kyle Peterson; Editing by Tim Dobbyn and Gerald E. McCormick)

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