Boeing races for 787-delivery goal as luxury seats run behind

Chicago-based Boeing Co. is at risk of missing its 2014 delivery target for the 787 Dreamliner, the jet plagued by development delays, as it awaits luxury seats that are as costly as a Ferrari and as complex to build as a small car.

Engineers at France's Zodiac Aerospace are struggling to meet demand for the custom berths, and a Texas strike also slowed output, Chief Executive Officer Olivier Guy Zarrouati said Thursday on a conference call. Those woes stalled a handover of American Airlines' first 787s this month, he said.

Boeing is trying to show it has fixed the production snags on the first jetliner made chiefly of composite materials. The company needs 14 December deliveries, one shy of its monthly record, to meet its annual forecast for 110, and will keep its delivery center near Seattle open during the year- end holidays to handle an anticipated late-month rush.

“Our guidance has not changed for 110 deliveries,” Doug Alder, a Boeing spokesman, said in a telephone interview.

Getting the premium, lie-flat seats on time from manufacturers is crucial for Boeing because they can require extensive rewiring, ductwork changes and reinforced cabin floors. Units arriving out of sequence may also have to be disassembled to fit through the doors.

Boeing hasn't reported any new factory issues on the 787, like the hairline cracking that crimped deliveries earlier this year. The 787's commercial debut came more than three years behind schedule after multiple development delays, and regulators temporarily grounded the global fleet in 2013 after its lithium-ion batteries smoldered.

Progress Seen

Aside from the seats, Boeing is making progress reducing assembly hitches as it works to a goal of becoming cash-positive on the Dreamliner program in 2015, according to Douglas Harned, a Sanford C. Bernstein & Co. analyst in New York who rates the shares as outperform.

“Management expressed confidence that the delivery process is on track even if there may be a slippage of a few deliveries as seat installations are completed,” Harned said in a note to clients. “We do not see slight delays related to seats as a major issue for the stock.”

Boeing fell 1 percent to $123.37 at the close in New York, the most among the 30 companies on the Dow Jones Industrial Average. That dragged the stock to a 9.6 percent decline this year, while the Standard & Poor's 500 Index rose 10 percent.

Airbus Seats

Zodiac is also behind schedule on deliveries of luxury seats for Airbus Group NV's A350 jet, CEO Zarrouati said on the conference call after the Plaisir, France-based company reported earnings. He blamed a monthlong strike in Gainesville, Texas, that ended Oct. 25 and engineering teams stressed by heavy workloads as airlines seek to put their stamp on the angled, lie-flat seats in an effort to attract business travelers.

The seatmaker is working through its backlog of delayed shipments and should be back on schedule by mid-2015, Zarrouati said. “We're still late with some deliveries and we're still in a scenario where we are recovering, getting back to normal,” he said.

Premium seats can cost airlines more than $200,000 each, because expensive finishes and development costs for complex motors are spread over relatively few units, said Robert Mann, an aviation consultant based in Port Washington, New York.

“It's not like you're churning out tens of thousands of coach 777 seats,” Mann said in a phone interview. “These are Ferraris versus Fiats.”

Airbus is working to ensure that there is no effect on deliveries from “any supply-chain issues,” Mary Anne Greczyn, a spokeswoman, said by e-mail.

Multiple Positions

The Dreamliner seats, similar to those American designed for its updated Boeing 777-200, allow for separate adjustments for the seat back and head and leg rests. Position options on the 777-200 models include a zero-gravity, Z-shaped lounge position the airline says reduces pressure points.

American, a unit of American Airlines Group Inc., now expects to receive its initial 787 during 2015's first quarter instead of 2014, said Matt Miller, a spokesman. The world's largest airline also needs U.S. Federal Aviation Administration approval to use the patented lie-flat seats on the 787.

“It's not uncommon for this type of thing to happen,” Miller said in a phone interview. “The seats being custom- designed and custom-built did add a layer of complexity to the process, but there are a number of different things that have to be coordinated before we can introduce a new plane.”