LEX Plane delays are rarely cause for joy. But Boeing’s latest postponement of the 787 Dreamliner prompted the stock to jump about 6 per cent.
Confidence restored? Not quite. Boeing’s shares had already taken a tumble in mid-March when its largest customer, International Lease Finance Corp, raised doubts about the Dreamliner’s timetable. Going into Wednesday’s update, Boeing’s management had an unpalatable choice. It could have taken an aggressive stance. That risked being greeted with outright scepticism.
In the end, Boeing opted for caution. First delivery has been shifted back again by up to six months, including some extra wiggle room to deal with any issues that may arise. That will slash aircraft deliveries in 2009 from the original 112 to just 25. It was the sensible thing to do. And more detail on the project’s progress was given. Most notably, there is only 15 per cent of the 787’s component testing left to go, providing some comfort that the window for further foul-ups is closing.
Unfortunately, management’s provision of such detail – more than when the last delay was announced in January – highlights the bind Boeing is in. Now on to its fifth 787 schedule in less than a year, credibility has dropped along with its share price, down 17 per cent since the first delay was confirmed in September. The recent loss of a major US defence contract has not helped. A little more clarity still leaves plenty of issues unresolved. Analysts estimate the extra costs due to the delays at $3bn-$4bn, but the timing of any impact from these is uncertain. At just 11 times 2009 earnings, Boeing’s stock might look cheap. But then buying on the dips has not exactly been a great moneyspinner over the past six months.
