Qantas keeps a close eye on Boeing's 787

After being singed by the two-year delay of the world's largest jetliner, Qantas Airways Ltd. is taking steps to make sure it's not burned by production problems plaguing the Boeing 787 Dreamliner.

Sydney-based Qantas says it has placed staff in the Seattle area to closely monitor the 787's assembly and Boeing's progress in untangling problems that have delayed delivery of the first aircraft by six months, to late 2008, Geoff Dixon, chief executive and managing director of Qantas told the Tribune.

The Australian carrier is protecting an investment that will make it the largest Dreamliner customer when the final paperwork is completed. It has 65 of the planes on order, worth more than $12 billion at list price.

Qantas took similar measures as the second-largest purchaser of the A380 superjumbo jet, assembled by Airbus SAS in Toulouse, France. It is due to take delivery of the first of its 20 A380s, worth about $6.4 billion, in August.

"We monitor this in Toulouse and in Seattle all the time," Dixon told the Tribune in an interview late last month from his office overlooking Sydney Harbor. "Boeing has been quite open with us. They do appear confident that there will only be a six-month delay. But I'd be lying not to say that we have our concerns."

Yvonne Leach, a spokeswoman for Boeing's 787 program, said it was common for key customers to place engineers on site to monitor assembly.

"They, like other airlines, are here as part of our natural process for starting up a production line," Leach said.

Still, Qantas' presence in Seattle only puts more heat on Chicago-based Boeing Co.

Qantas is slated to take delivery of 15 Dreamliners by the end of 2009, aircraft that it plans to use to speed the international expansion of Jetstar Airways, its low-cost subsidiary.

But those expansion plans could be at risk if Boeing fails to meet its aggressive production schedule for the 787, building 109 planes between the late-autumn 2008 delivery of the first 787 to Japan's All Nippon Airways and the end of 2009.

Boeing has said that production of the 787 has been fouled by a shortage of fasteners needed to attach the aircraft's composite components, as well as by work done out of sequence. By delaying delivery, Boeing hopes to give its major suppliers more time to learn how to make and assemble composite parts that have never been constructed on so large a scale.

But the aerospace giant plans to quickly ramp up production of the hot-selling jet even as the first 787s are completing the rigorous flight tests needed to pass muster with federal regulators. It essentially plans to condense 18 months of manufacturing into little more than a year.

\ A difficult schedule

The odds of Boeing keeping to this latest timetable? "Minimal," said Richard Aboulafia, aviation analyst with Teal Group, a Fairfax, Va.-based market research and consulting firm.

To do so, Boeing would have to manufacture more wide-bodies than it ever has done in a single year, "all the while figuring out the learning curve, production curve. I think it's a little tough to believe in," Aboulafia said.

"It's a very, very quick wind up," noted Dixon, who added that Qantas is drawing up contingency plans in case production delays plaguing the groundbreaking new jet prove to be worse than Boeing has disclosed.

"That shouldn't be read as the fact that we do think there will be delays," Dixon said. "But we would be remiss not to have contingencies."

Analyst expect Qantas and other early customers of the 787 to postpone sales or extend leases on midsize jets in their fleets and to explore short-term arrangements to land Boeing 767s and Airbus A330s to take up any additional slack.

As such, anticipating the timing of the deliveries of the new aircraft is crucial. Airlines don't want to be caught off guard with the 787 as they were with the A380, whose delivery date slipped by months and then years, leaving customers like Qantas and Emirates Airline scrambling to find enough long-range jets to keep expansion plans on track.

"Six months we can deal with," said Dixon of the 787 delay announced by Boeing officials last month. "Anything longer will certainly make our life more difficult."

Anything longer is certain to be costly for Boeing, as well. Qantas and other major 787 customers are expected to seek compensation.

"If there's going to be further delays, undoubtedly there would be further penalties involved," said Paul Nisbet, aerospace analyst with JSA Research Inc., based in Newport, R.I.

Boeing's Leach termed any talk of concessions "premature."

\ A350 gaining favor

Dixon, meanwhile, said Qantas is in "serious discussions" with Airbus for a large order of A350-XWBs, largely composite aircraft built to hold upward of 350 passengers. Qantas officials plan to visit Toulouse this fall for a detailed look at the new aircraft, which has been redesigned multiple times after customers complained that it didn't match the technical breakthroughs of the 787. They expect to decide on an aircraft next year, Dixon said.

But the Airbus jet, which aims to fill a niche between the 787 and larger jumbo jets, is finally winning kudos from customers. International Lease Finance Co. last month announced an order for 20 of the jets, an important endorsement for Airbus. And analysts expect other larger orders for the plane to be announced at next week's Dubai Air Show, giving Airbus additional momentum.

Dixon praised the new Airbus model and sounded impatient with Boeing's reluctance to unveil firm specifications for a stretch version of the Dreamliner, tailored for the same niche.

"Everything points to it being an aircraft with enough size and range to be very important for not just us but quite a number of airlines," Dixon said of the A350.

Boeing doesn't plan to firm up design specifications for the next 787 model "for a couple of years," Leach said.

"That said, we're working with all of [our airline customers]," she said. "We're very engaged with them, getting a feel for their needs and what they'd like with that airplane."

jjohnsson@tribune.com


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