First B787 Dreamliner handed over - and now the work begins warns analyst

The first 787 Dreamliner was today handed over to launch customer ANA during a ceremony adjacent to the factory near Seattle where the airplane was assembled. More than 500 employees representing the 787 program walked alongside the all-new jetliner to present it to ANA executives as a crowd of thousands looked on.

"Today we celebrate a significant moment in the history of flight," said Jim McNerney, Boeing chairman, president and CEO. "The 787 Dreamliner is the biggest innovation in commercial aviation since the Boeing 707 introduced the world to passenger jet travel more than 50 years ago. I want to thank ANA and all the employees of Boeing and our partner companies for the talent, technology and teamwork that have brought this game-changing airplane to life."

During the ceremony, Boeing Commercial Airplanes President and CEO Jim Albaugh presented a ceremonial key to Shinichiro Ito, president and CEO of ANA.

"It's not often that we have the chance to make history, do something big and bold that will change the world in untold ways and endure long after we are gone," said Albaugh. "That's what the 787 Dreamliner is and what ANA and Boeing have done together – build what truly is the first new airplane of the 21st century."

"We are delighted to be taking delivery finally of our first 787. ANA is extremely proud to be the launch customer for the Dreamliner and to have helped Boeing so closely in the development of this state-of-the-art aircraft," said Ito. "The Dreamliner will enable us to offer unrivalled standards of service and comfort to our passengers and will play a key part in ANA's plans for international expansion."

Made from composite materials, the Boeing 787 Dreamliner is the first mid-size airplane capable of flying long-range routes and will allow airlines to open new, non-stop routes preferred by the traveling public. In addition to providing airlines with unprecedented fuel economy and low operating costs, the 787 features a host of new technologies that greatly enhance the passenger experience.

"Today you join the ranks of the legends of our industry," said Pat Shanahan, Boeing Commercial Airplanes vice president and general manager, Airplane Programs. "I have no doubt that 30 or 40 years from now another outstanding Boeing team will be celebrating a new version of the 787 Dreamliner. They will struggle to find the words to express their deep respect and admiration for the hard work you have done in getting us to this day and laying the foundation for a strong future for Boeing and for our industry."

"I've been inspired by your passion, your commitment and your dedication. You made the 787 Dreamliner a reality," said Scott Fancher, Boeing Commercial Airplanes vice president and general manager, 787 program. "Your achievement we celebrate today is extraordinary, and it will be remembered for years to come."

But industry analyst Saj Ahmad says the real challenge is only just about to begin.

"In delivering the first 787-8 Dreamliner to launch customer All Nippon Airways, Boeing's vision of creating airplanes using carbon composite materials has now become a commercial reality. After the fanfare of the delivery celebrations whittle down and All Nippon Airways flies off with its shiny new 787, the legacy of Boeing's difficulties into getting to where it is today on the project are still evident for all to see.

All Nippon Airways puts the 787-8 Dreamliner into revenue service at the end of October as Boeing and other 787 customers watch closely as to how the airplane performs in real-world airline operations. In certifying the 787, over 5000 flight hours have been accumulated since the maiden flight of 15 December 2009 under many thousands of varying test conditions. The three years worth of delays has crippled the program, hurt airlines ability to grow, particularly as fuel costs continue to escalate and the backlog for the 787 program will take years to deliver and the billions paid out by the US jet maker in delay-related compensation has led to tough relations between the company and many of its customers.

"With risk-sharing partners spread across the globe, Boeing lost oversight of its production system, leading to a string of embarrassing delays and increased project costs. Some estimates put the 787 program at over $14bn, including continued penalty payments to airlines whose deliveries have shifted further and further away from the original delivery date of May 2008. Boeing's saving grace is that the fuel efficient 787 family represents a stunning technological breakthrough unseen in the history of aviation and lays the foundation for the way in which all future generations of airplanes will be built - using more stronger, lighter materials such as composites rather than traditional aluminium, steel and other metals," Ahmad said.

"Bringing cleaner operations, butter fuel burn, better comfort for passengers on board and more revenue raising possibilities for customers, Boeing has over 800 firm orders from over fifty customers. The real key to the 787s success is attaining the 10-per-month target that Boeing envisions by late 2013. Production at present is running at around 2.5 airplanes a month and only a handful will see delivery by the end of the year, given that many of the airplanes parked outside Boeing's factory still have hundreds of hours worth of re-work and other changes that need to be made before they can be signed off and delivered to customers.

"What makes this task more onerous for Boeing is that it is also developing the stretched, longer range 787-9 variant, whose service entry is poised for late 2013 with Air New Zealand. Again, this model too has been delayed as a result of the 787-8 woes and with Boeing making very little money on initial deliveries, eking out production efficiencies from a fragmented supply chain remains a difficult task. Boeing has already had to stump up hundreds of millions of dollars to buy out two suppliers and as the company gears up to its first all new jetliner factory outside of Washington State in Charleston, South Carolina, the risks for the 787 seem to be as vivid today as they were when the program kicked off in April 2004.

"Make no mistake - handing over the first 787 does not in any way mean or represent Boeing turning a corner in its troubled flagship program. Rather, the focus now is on how Boeing coalesces the diverse supply chain across several countries in tandem to support the planned rise in deliveries towards the ten-per-month goal. With economic uncertainty scaring markets all last week, airlines know only too well that the economic meltdown during the fall of September 2008 led to many business customers curtailing their flying activities and in some cases, not flying at all. This led to a string of high profile airline collapses, led in part by high fuel costs and this time around, airlines are not immune. Airlines needing credit to pay for the airplanes is something that should be worrying both Airbus and Boeing. The strength of the 787 backlog, despite three years of delays means very little if airlines are unable to pay for them, particularly as most of an airplane is paid for upon delivery.

"And if airlines start reeling in their capital expenditure on fuel efficient airplanes like the 787, then Boeing will no doubt have to go back to the drawing board in relation to how it manages the 787 program, deliveries and its supply base.

"This isn't the first time Boeing has seen a new airplane enter service against a difficult geopolitical and economic backdrop - back in the 1970s, the iconic 747 saw similar woes when the oil crises struck. But for now, Boeing and the eyes of the world will be fixed on delivery of a truly remarkable airplane that will define the way we fly for decades to come. The spotlight may indeed be that of the 787s today, but behind the smiles, champagne and glistening airplane paintwork lies a future with irony - on the one hand, the economic uncertainty coupled with Boeing's difficulties on the 787 show a risk that no one can mitigate against and on the other lies the most revolutionary products ever created with such strong demand, Boeing couldn't have wished for a better start for this all new airplane.

"While the Dreamliner may indeed be a dream for passengers to fly aboard in the coming weeks, for Boeing, the nightmare of the last several years has yet to bear the fruits it dreamt up when creating the 787."