Boeing announces executive shake-up

Boeing unveiled a management shake-up Thursday along with the expected six-month delay to its 787 Dreamliner, a combination that left industry watchers unconvinced.

The two executives now spearheading the drive to fix the problems at Boeing Commercial Airplanes, Pat Shanahan and Ray Conner, are positioned to eventually replace Chief Executive Scott Carson — provided they can make it all work.

Boeing said the first Dreamliner is now scheduled to fly sometime between April and June of 2009. The jet maker said it will stick to its aggressive nine-month flight test schedule, so the first delivery to All Nippon Airways can happen in the first quarter of 2010.

But on the occasion of the fourth major 787 delay announcement, both the new schedule and the management shuffle were greeted with understandable skepticism.

"Boeing's biggest problem at this point is credibility," said air-transportation expert Michael E. Levine, a former airline senior executive and now a law professor at New York University.

"To announce a new set of firm dates and along with it a major reorganization is, oddly enough, not all that confidence-building," Levine said. "It says, 'We are hoping this new organization will work.' But of course, they can't know."

Boeing released only bare details of its plans Thursday and did not make executives available for interview. Wall Street analysts were left guessing, with zero information on the financial impact of the delay.

"They haven't decided what to tell us," said industry analyst Joe Campbell of Barclays Capital. "There's lots of things going on, and they are flat not ready."

Boeing ascribed the extra delay to the two-month Machinist strike and the need to replace thousands of fasteners in early production airplanes. The latter problem arose because the technical specifications describing the preparation of the fastener holes were poorly written.

Boeing 787 spokeswoman Yvonne Leach said the integration of all the software that controls the airplane systems is also "definitely still a watch item for us."

Despite Boeing's travails, though, some large 787 customers still have faith.

Thursday Boeing posted on its Web site a new order for 15 787s, without identifying the customer. That brings total Dreamliner sales to 910.

American Airlines is close to finalizing an order for 42 Dreamliners originally scheduled for delivery in 2012, with options for 58 more later.

American spokesman Andy Backover said that, despite the near-term slowdown in air traffic, the Dreamliner remains a key part of the airline's long-term plan.

"We still expect the (787) to benefit the company for decades to come," said Backover.

And the head of fleet planning for a major international airline, who asked not to be identified, expressed confidence in Boeing along with impatience.

"We're sure Boeing will deliver," said the fleet planner. "There's nothing really terrible there. It's just taking a very long time."

Delivery slots

The dramatic slowdown in air traffic, driven by the worldwide economic crisis, clearly is mellowing the customer reaction.

"The world just slowed down a bit," Levine said, "Some people may be less impatient for their airplanes."

Toby Bright, formerly Boeing's chief salesman and now chief marketing officer with airplane-leasing company Sky Holdings, said he knows of only one airline that is seeking earlier delivery slots for the 787s it has on order.

"Customers are really beating up on Boeing about the extra delays, but very few really need the airplanes at this time," Bright said.

The restructuring of Boeing Commercial Airplanes has two major components:

• The 787 program, previously treated as a wholly separate unit, is now grouped with all the other airplane programs under a single executive, Pat Shanahan, 46.

• Various units that supply resources to the airplane programs — supplier management, the parts-fabrication division, propulsion systems and quality management — are brought together under another executive, Ray Conner, 53.

Shanahan is the troubleshooter brought in 14 months ago to fix the Dreamliner. Despite the new delay, he's clearly considered to have done well.

He retains overall responsibility for the Dreamliner, though day-to-day management of it now goes to Scott Fancher, 50, an executive brought in from Boeing's missile-defense unit in Washington, D.C.

Conner was formerly head of sales. Bright said his appointment "brings focus to the largest contributor to the 787 delays, managing the suppliers."

Conner is replaced as head of sales by Marlin Dailey, 52, who had headed sales in Europe. Carolyn Corvi, 57, previously in charge of airplane programs except for the 787, will retire.

CEO Scott Carson will be 63 next summer, two years shy of Boeing's mandatory retirement age for executives. Shanahan and Conner must now be favorites to succeed him.

But first, the 787 better take off and meet the new schedule.

Boeing's Leach said the new timetable doesn't build in any extra margin in case of future slippage and doesn't change the previous timing for ramping up production.

Previously, Boeing had said it will ramp up production to 10 Dreamliners a month by 2012. That's still the goal, although "It's not the exact same time in 2012," Leach said.

Nine-month deadline

The last new airplane Boeing built, the 777, completed flight tests in 11 months. But Boeing insists the Dreamliner can do it in nine.

"You have to stay aggressive for people to push hard to make a date," Leach said.

Aviation analyst Adam Pilarksi of consulting firm Avitas warned that in flight tests, more serious flaws sometimes become apparent.

Boeing is "failing on the supposedly easiest parts" of building an airplane, Pilarski said, and the tough parts still lie ahead.

"Once you get flying, that's when you see how things will go," he said.

"They need to get on the freeway," Pilarski said. "But they are still in the driveway and the car doesn't drive."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com