787 Seat Supply Delays Continue But Solution Is Close

Boeing Commercial Airplanes and French seat supplier Zodiac have not settled all the problems that led to Dreamliner delivery delays in the first quarter, but Boeing CEO Jim McNerney expressed confidence on Wednesday that the partners will resolve all of what remains largely unnamed “issues” by the end of this year’s second quarter. Speaking during the company's first quarter earnings conference call, McNerney also echoed assurances from CFO Greg Smith that the delays of shipments of the first class seats will not disrupt Boeing’s production plans, which call for deliveries of some 120 Dreamliners this year.

“All the problems are not resolved; we do have a high confidence in the plan to resolve them,” said McNerney. “It’s because our people are deeply involved with them in the resolution...We’ve all figured out a way to work together...and we’re pleased to see their response now to getting this fixed.”

Both Boeing and Airbus have sent engineers to Zodiac production facilities in an effort to speed deliveries, addressing delays Zodiac has blamed on its own deficient production processes. In March Boeing had to place a pair of 787s destined for American Airlines into desert storage in Victorville, California, due to its inability to complete the airplanes’ first-class cabins.   

Although Boeing managed to deliver thirty 787s during the first quarter, Smith conceded that the cabin disruptions had placed additional pressure on the company’s deferred production costs, notwithstanding a decline in unit costs for the 787-8 of some 30 percent over the last 190 deliveries.

Still, 787 deferred production costs increased $793 million, to $27 billion in the first quarter. “We continue to anticipate 787 deferred production to grow at similar levels for the next couple of quarters before seeing a healthy decline in the growth later this year,” said Smith, who reiterated previous projections that the program will reach “cash positive” by the end of this year.