Supply chain concerns Boeing

While Boeing's new 787 Dreamliner program progresses steadily toward first flight next month, the jet maker is still working to ease remaining supply-chain bottlenecks, executives said Thursday.

At the same time, overall jet sales for the year are way down.

Boeing's tally of commercial-airplane orders for 2009 climbed out of negative territory to zero this week.

An update to the company's Web site Thursday showed one 737 ordered by South American airline Aerolineas Argentinas and one 777 sold to an unidentified customer, as well as one 737 cancellation.

That adds up to precisely 60 new orders and 60 cancellations for the year so far.

In dollar terms, the tally remains negative. Most of the new orders are for smaller 737s, while all but one of the cancellations are for more expensive wide-bodies, including 57 of Boeing's 787 Dreamliners.

The market value of the new orders for the year, based on pricing estimates by aircraft-valuation firm Avitas, is about $4.4 billion.

The corresponding value of this year's cancellations is about $6.6 billion.

Rival jet-maker Airbus had won 30 new orders and canceled 19 previous orders for a net total of 11 as of the end of last month.

At an investor conference Thursday in Washington, D.C., Boeing CEO Jim McNerney said the Dreamliner is Boeing's "Priority No. 1."

Boeing started the engines of the first 787 Thursday after the plane was moved to the tarmac last weekend outside its Everett factory.

The "intermediate gauntlet test," simulating flight conditions, will begin in about two weeks.

The 787 is running about two years behind schedule after four delays, prompting penalty payments to customers.

Now, however, there are "no major issues that we can see impacting first flight," 787 program chief Scott Fancher told investors.

Asked to identify the remaining critical points of concern in the supply chain, Fancher singled out the Global Aeronautica plant in Charleston, S.C., a joint venture between Boeing and its Italian partner Alenia that is the 787's major assembly site outside the Puget Sound region.

Global Aeronautica assembles the 84-foot-long midsection of the Dreamliner fuselage, joining together pieces from Japan and Italy.

Fancher said Boeing is studying the design of the tooling used to hold the pieces in place as those complex joins are made, and has seven distinct improvement plans under way to improve the work flow in Charleston.

He said Boeing has had to help out 787 suppliers that were failing to perform, either because they were financially stressed or else unable to handle the technical demands.

Sometimes that has meant providing money, but more often it's a question of sending in Boeing technical help, he said.

And as a result of the unprecedented delays to the program Boeing is re-evaluating its approach to the supply chain for the future.

"Only in an extreme case of true nonperformance do we really look at switching suppliers," Fancher said. "Now, it does happen. And clearly as we go forward, we'll look at some re-balancing of work scope as we sort through where work is most efficiently and cost-effectively done."

Chief Financial Officer James Bell said there's no reason to believe that the 787 won't be at least as profitable as other Boeing wide-body jets, such as the 777 and the 747 jumbo jet.

Boeing has said repeatedly, without giving specifics, that the first deliveries will be at zero margin, or unprofitable, because of the delays and penalties.

Bloomberg News contributed information on the investor conference to this report.

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