Boeing 747-8 faces further delays, first flight slips to 2010, EIS now 4Q 2010

Boeing today announced that it expects a pre-tax charge against third-quarter results, of approximately $1 billion due to difficulties it is facing with the 747-8 program. With this they also announced that the 747-8 Freighter’s first flight will slip into early 2010 and Entry Into Service will slip into 4Q 2010 . This represents an almost three month delay to the program.First flight was previously scheduled to November, 2009 and EIS was set for 3Q 2010.

It is likely that the EIS will be very late 2010 since the EIS was previously scheduled for July or August.

Cargolux is the launch customer for the 747-8 and placed their order in November, 2005.
The latest order for the 747-8 from an airline came in November, 2007 when Cathay Pacific ordered 10 firm and 14 options for 747-8 Freighter .

Official Boeing press release is given below.

CHICAGO, Oct. 6 /PRNewswire-FirstCall/
– The Boeing Company (NYSE: BA) today
said it expects a pre-tax charge against
third-quarter results of approximately
$1.0 billion due to increased production
costs and the difficult market
conditions affecting its 747-8 program.

Approximately $640 million of the charge
reflects higher estimated costs to
produce 747-8 airplanes at both Boeing
and supplier facilities. As the program
assembled major components of initial
747-8 Freighters during the third
quarter, it became clear that late
maturity of engineering designs has
caused greater than expected re-work and
disruption in manufacturing. This is
resulting in additional resources being
applied on the program and higher
supplier expenses, which are the primary
cost drivers.

The remaining $360 million of the charge
relates to challenging market conditions
and the company’s decision to maintain
the 747-8 production rate at 1.5
airplanes per month nearly two years
longer than previously planned,
deferring an increase to 2 per month.
Higher allocation of fixed expenses and
volume-based penalties to suppliers are
the main drivers of the additional
costs.

Because the 747 program is in a loss
position, costs associated with the
factors above will be immediately
recorded in the third quarter for future
747-8 deliveries.

The company now expects first flight of
the 747-8 Freighter to occur by early
next year with the flight test program
taking place in 2010. First delivery of
the 747-8 Freighter is now expected in
the fourth quarter of 2010. First
delivery of the Intercontinental
passenger variant remains scheduled for
the fourth quarter of 2011.

The third-quarter tax benefit related to
the 747 charge and the previously
announced 787 charge is expected to be
approximately 31 percent. The full-year
tax benefit for both charges is expected
to be approximately 37 percent. Boeing
will update its 2009 financial guidance
on October 21 when it reports
third-quarter results.

Photo by moonm .