Boeing lines up buyers for old, overweight Dreamliners

The first commercial Boeing 787 Dreamliner aircraft run by China Southern Airlines lands in Auckland last year. Photo / NZ Herald

Boeing has lined up buyers for 10 of the early, overweight 787 Dreamliners whose years in storage made them emblems of the jet's factory woes and a drag on profit, say people with knowledge of the plans.

The planes, dubbed "terrible teens" for their assembly struggles and their places near the start of the production run, have an assessed value of roughly US$1 billion, or less than half the catalog price. The original customers balked because the aircraft were too heavy, limiting their range.

Ethiopian Airlines is in advanced discussions to buy eight of the early-build 787s, said four people who asked not to be identified because they weren't authorised to speak publicly. Air Austral, based on France's Reunion Island in the Indian Ocean, has already ordered two of the jets, the people said.

Unloading the 787s would be a boost after the aircraft sat outside Boeing's largest Seattle-area factory for about five years. They were visible symbols of the delays on the Dreamliner program, with black plastic shrouding their windows and 7,700kgs counterweights dangling from the wings in place of engines to keep the jets balanced.
"We continue to see interest in the early-build 787s," said Marc Birtel, a spokesman for Boeing, when asked about the status of negotiations for the teens. He declined to comment on specific contacts with airlines.

Air Austral is buying two 787-8 Dreamliners, said Laure Marsac, a spokeswoman for public-relations firm Expression in Paris, who had no details about which planes were involved. Addis Ababa-based Ethiopian didn't respond to requests for comment about the planes.

Together, the deals would be worth about US$1 billion, based on estimates of the planes' assessed value by Virginia-based aviation consultant Avitas. All the Dreamliners are the 787-8 model, which has a list price of US$218.3 million before the discounts typical in the aerospace industry.

Boeing stock gained 19 per cent this year through to Tuesday, the most among the 30 members of the Dow Jones Industrial Average.

The 787 is the world's first airliner built mainly from composites instead of traditional aluminum. The jet ran more than three years late while Boeing worked out kinks with the carbon-fibre materials, onboard systems and a manufacturing process that relied more heavily on suppliers.

Eager to convert a record order backlog into cash, Boeing stepped up production before the Dreamliner was certified as airworthy. The planemaker wound up having to retrofit about 60 of the first jets to match design changes made during flight testing.

The teens required the most extensive work, including heavy structural reinforcements to bolster their composite shells, and were set aside while Boeing focused resources on later models that it could get more quickly to customers. Carriers including ANA Holdings' All Nippon Airways and Transaero Airlines eventually opted to take other aircraft.

Boeing has never disclosed the weight difference for the teens. Once the modifications are done, their range will be about 1,000 nautical miles shorter than later 787s, Avitas has estimated. Boeing advertises a range of 7,850 nautical miles for the 787-8, which seats 242 passengers.

"Not all planes have to have the longest legs in the world to solve a problem" for carriers deciding which jets to buy, said Howard Rubel, a New York-based analyst with Jefferies LLC. "The company said there's a market for these aircraft, and it looks like they're going to prove it."

Ethiopian considers more Dreamliners

Ethiopian, the 787's first African customer, is considering ordering more Dreamliners and other Boeing twin-aisle models as it expands its wide-body fleet, two of the people said. Airbus, Boeing's rival based in France, countered with an offer for discounted A330 jets, the people said.

Airbus had no immediate response to requests for comment.

For the Dreamliner teens, the loss of performance undercut a central part of the model's appeal. Boeing has wooed airline customers with a promise that the 787 would deliver a 20 per cent boost in efficiency over planes of comparable size.

Selling and delivering the teens would reduce Boeing's 787 backlog, which stands at about US$7 billion, according to a report from David Strauss, a New York-based UBS analyst. Ballooning inventory and production costs have left the Dreamliner unprofitable and a drag on Boeing's cash flow.

Strauss expects the 787 program to use US$2 billion in cash during 2015, an improvement from the US$5.5 billion consumed last year, in part because of a decline in 787 inventory.

"We're working through them in a prudent fashion," chief financial officer Greg Smith said of the teens' issues during a earnings call last month. "We do expect to deliver three or four this year."

Besides the 10 teens now being readied for sale, Boeing has one other plane from that production batch now in flight tests. FAA documents show that it is configured as a VIP aircraft.

Boeing has begun work to make three other teens flight-worthy, said Uresh Sheth, who tracks Dreamliner production for the All Things 787 blog.

The planemaker has space available at its factory in Washington to repair additional teens if customers want to speed delivery, Sheth said. He reported the Air Austral order earlier this month, without saying where he got the information.