Boeing delays first delivery of 747-8 freighter

By Reuters
Posted Sep. 30, 2010 at 3:04 p.m.

747.jpg Spectators gather to watch the new Boeing 747-8 freighter during taxi tests for the new airplane. (AP)

Boeing Co. said Thursday it would delay first delivery of the 747-8 Freighter, its biggest commercial jet, but shares of Boeing rose on news that the delay would not hurt the company’s 2010 financial results.

The delivery delay to mid-2011 from the fourth quarter of 2010 is the third announced by Boeing, the world’s second-largest commercial plane manufacturer after EADS unit Airbus.

The widely expected setback follows an August announcement by Boeing that it would push back first delivery of its long-delayed 787 Dreamliner to the first quarter of 2011.

“We had assumed that a minor delay would cost Boeing $150 million, and so the lack of a charge is somewhat odd,” said Robert Stallard, an analyst at RBC Capital Markets, in a research note.

“Whilst the financial impact is minimal, we think this latest delay reinforces investor scepticism over Boeing’s ability to deliver the goods, with a read across to the 787,” he said.

Stallard reiterated RBC’s “outperform” rating on Boeing, noting the improving aerospace outlook. Shares of Boeing, a Dow component, rose as much as 3 percent on Thursday morning and were still up 1 percent at $66.63 in late morning on the New York Stock Exchange.

Boeing said it would add a fifth airplane to its flight test fleet to help ensure the company meets the new schedule.

Boeing took a $1 billion charge related to the 747-8 in the third quarter of 2009 because of high production costs and tough market conditions.

The plane flew for the first time in February. Since then, Boeing has discovered issues, including a low-frequency vibration in certain flight conditions.

Boeing says the problems require no structural changes to the airplane, but they have disrupted certification testing.

The delays to the 747 and 787 schedules have drawn criticism from customers, who are growing tired of the problems.

“We’ve expressed our disappointment to Boeing about this development and the situation,” said Dah Loh, director of investor relations for Atlas Air Worldwide Holdings, which has 12 747-8 Freighters on order.

“We’ll also be looking at the protection of remedies that we have in our contract with Boeing to make sure that we get the full benefit of our agreement with them,” Loh said. Boeing said it was working through the issues encountered during flight testing.

“We recognize our customers are eager to add the 747-8 Freighter to their fleets, and we understand and regret any impact this schedule change may have on their plans to begin service with the airplane,” said Pat Shanahan, vice president and general manager, Airplane Programs, at Boeing Commercial Airplanes, in a statement.

The 747-8 Freighter, about 18 feet (5.5 meters) longer than the 747-400, had been launched in November 2005 and was originally scheduled to start delivering in the fourth quarter of 2009.

Boeing has 76 orders for the freighter model of the 747 at list prices between $293 million and $308 million. Boeing gets paid by customers at delivery.

“The problem with the 747-8 delay, unlike the 787 is there are other aircraft that can fill the short-term needs of the customers,” said Alex Hamilton, managing director at EarlyBird Capital. “So every delay exponentially increases the chance of cancellations.”

The 747 family, Boeing’s biggest and most recognizable plane, has been in the air since 1969. The 747-8 uses new engine and wing designs, and boasts greater fuel efficiency and lower operating costs than the Airbus A380, its closest rival, Boeing says.

The Freighter model can carry 16 percent more cargo than the previous 747 model, while the Intercontinental passenger model can carry 51 more passengers.

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