Boeing 787: A Paradigm Shift or Just a Nice Airplane?

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Despite "teething problems," customers have been happy with the 787, said aviation consultant Scott Hamilton. "I haven't heard of any airline having any particular problems with the airplane once it entered service," he said. ANA and Air India briefly grounded aircraft due to engine problems.

Like many major construction projects, the 787 arrived late and over budget. The first delivery was three years late and, even last week, questions arose about how quickly the next three United 787s will arrive. Boeing long ago admitted to major flaws in its execution of a plan to outsource key components to an array of vendors around the world. In setting up a second 787 plant in Charleston, S.C., Boeing stepped into the hornet's nest of Congressional anti-labor hysteria, which the company reeled in by negotiating a new contract with the International Association of Machinists in 2011. Now, the IAM is seeking to organize the Charleston plant.

In August, Australia's Qantas Airways said it would cancel orders for 35 787s; the airline still has options for 50 of the planes. In March, China Eastern cancelled an order for 24 aircraft. But orders come and go. Boeing once had about 860 orders. Now, it has orders for 805 after delivering 33.

So far, Boeing shares have not benefited from the start of 787 deliveries. From Jan. 1, 2011, the shares are up 5%, while the S&P 500 is up 12%. This year, Boeing is down 6% while the S&P is up 12%. Analysts have consistently suggested, over the past two years, that Boeing shares would gain once deliveries began, but that is not what has occurred.

According to Aboulafia, "The sad truth in this business is that, since the dawn of the jet age, you cannot say that any single aircraft has revolutionized anything." The advent of twin aisle jets and of the high bypass turbofan are considered similar events in the development of jet aircraft, he said, and yet world airline traffic grew 309% in the 1960s, before the two "revolutions," and 214% from 1970 to 1980.

Hamlin said the 350 and the 787 represent a major shift in terms of materials used in airplanes. "The first paradigm shift was from wood to metal, and now we are shifting from metal to composites," he said. Does that matter to carriers who fly the aircraft? Yes, in terms of fuel efficiency, but in terms of passenger growth, "everything is structured around hubs now," Hamlin said. "Customer loyalties are already lined up."

-- Written by Ted Reed in Charlotte, N.C.

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