Boeing shares slip as it addresses 787 issues
Boeing Co
Boeing shares were down 1.3 percent at $75.31 on the New York Stock Exchange. The company said the problem was not causing any immediate safety concerns and would not affect production rates.
But EarlyBirdCapital Managing Director Alex Hamilton said the problem could disrupt Boeing's effort to boost its 787 production rate to 10 planes per month by the end of 2013.
We don't know if this will impact production, Hamilton said. But if you have to go back and correct something and possibly change production going forward, it seems to have a good chance, in our opinion.
Boeing's 787 Dreamliner is the world's first commercial airplane made largely of lightweight carbon composites. The plane boasts greater fuel-efficiency than other airplanes on comparable missions.
Boeing, which is inspecting the airplanes, described the problem as incorrect shimming performed on a support structure on the aft fuselage. Shims are used to close tiny gaps in joints.
The plane, which entered service last year, is about three years behind its original schedule because of snags in the program's global supply chain. Nevertheless, it is a hit among customers. Boeing has taken 870 orders for Dreamliners.
Some experts doubt that Boeing can hit its production rate target for the 787 by the end of next year. The company currently makes 2.5 Dreamliners per month. Boeing expects to boost production to 3.5 per month in the second quarter and five per month by the end of 2012.
We have the issue well-defined and are making progress on the repair plan, Boeing spokesman Scott Lefeber said on Sunday. There is no short-term safety concern. Repairs, should they be needed, will be implemented in the most efficient manner possible.
Lefeber declined on Monday to say how many airplanes are being inspected, only that Boeing was working its way through the production line. A report from Flightglobal said three planes were affected.
Lefeber said that, in some instances, Boeing had discovered signs of delamination, which occurs when repeated stress causes laminated composite materials to begin to separate.
The problem occurred in the aft fuselage section of some planes. That part of the 787 is made at a Boeing plant in South Carolina, which is where Boeing has placed a second Dreamliner assembly plant. The first assembly site for the Dreamliner is in Everett, Washington.
We've already taken appropriate steps to address this issue there, Lefeber said, referring to the South Carolina factory.
Boeing has delivered five Dreamliners, all to its launch customer All Nippon Airways <9202.T>. ANA said is has inspected its Dreamliners and that they are operating normally.
Richard Aboulafia, vice-president at Virginia-based Teal Group, said problems related to the 787 are often magnified in the public eye because the plane incorporates new technology.
There are people who are concerned about the use of composites. It's a minority view, Aboulafia said.
Delamination, of course, goes to the very heart of the risk associated with this particular technology -- composite materials in primary structures, he said.
RBC Capital Markets analyst Rob Stallard said the shimming issue spoke to the integrity of the composites used to make the 787, but he did not think it was a serious issue that would disrupt the program.
When you think of the big problems we've seen on the 787 over many, many years, this just looks like noise, Stallard said. I'm sure these things happen in the development programs all the time.
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(Reporting By Kyle Peterson; Additional reporting by Timothy Kelly; Editing by Lisa Von Ahn and Gunna Dickson)
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