Dreamliner 787: More orders coming, more cancellations, says Boeing

Dreamliner orders took a hit with one Chinese airline cancelling its order for 24 Dreamliners. But another Chinese airline said Wednesday it would not cancel its Dreamliner order.

Boeing Co stands to lose more orders for its 787 Dreamliner as airlines balk at delayed delivery dates, but the order book remains firm and demand for the fuel-efficient plane is likely to pick up, a Boeing executive said Tuesday.

"Frankly, as we look forward, we expect to see the Dreamliner order base increase, we expect to see more orders, we expect to see more cancellations, especially as we go through mitigation with our customers,'' Boeing Marketing Vice President Randy Tinseth told reporters in Seoul.

Hainan Airlines Co Ltd , China's fourth-largest carrier, said on Wednesday that it will stick to its aircraft order with Boeing Co , despite a growing number of cancelled or changed orders within the industry.

"The plan to introduce new aircraft will proceed as normal," a spokesman from the Chinese airline told Reuters. "At present, we don't plan to cancel our order or change aircraft model."
Earlier this week, China's third most valuable carrier China Eastern Airlines Corp Ltd said it had terminated an order for 24 Boeing 787 Dreamliners because of delivery delays and would instead spend $3.3 billion on 45 new Boeing 737 aircraft.

"This indicates that China Eastern is taking a bearish view on long-haul and believes the recovery in the United States and Europe won't come soon, so they don't want to invest so much on big planes for long-haul,'' said Kelvin Lau, an analyst at Daiwa Securities.

The Dreamliner is a light-weight, carbon-composite widebody that promises greater fuel savings and passenger comfort. It represents a huge leap in technology for the aviation industry, but the plane is also three years behind its original schedule because of kinks in the sprawling global supply chain.

Boeing still has more than 800 orders for the Dreamliner on its books. It made first delivery of the craft to All Nippon Airways last month.

IMPACT ON THE BACKLOG

Many in the industry believe the supply chain problems that plagued Boeing's development of the 787 could also slow production of the aircraft.

Boeing aims to increase the production rate from two a month to 10 a month by the end of 2013, but some analysts believe that is overly ambitious.

Boeing's Tinseth Tuesday reaffirmed that production goal, saying the company would ``slowly but consistently increase the rate until the end of 2013.''

One aerospace analyst, Robert Stallard of RBC Capital Markets, said cancellations by China Eastern could present a pricing benefit for Boeing.

``Boeing probably priced these 787s to China quite aggressively,'' Stallard said in a research note on Monday. ``If they are now able to resell some or all of these forgone slots for a better price, that would be positive for program margins.''

Other aviation analysts said Chinese airlines were more likely to reconsider their Dreamliner orders than many rivals elsewhere, because they had a more aggressive growth profile and were more sensitive to any downgrade to global growth.

Australia's Qantas Airways, struggling to revive profitability on its long-haul network, said on Tuesday it remained fully committed to its orders for 50 Dreamliners. Air New Zealand also said it was not reconsidering its orders.

Korean Air Lines said it would introduce 10 orders for the 787-9 Dreamliner from 2016 ``as planned.''

In Beijing, Boeing China said there was no sign of further cancellations of Chinese orders.

``The other committed Chinese airlines remain committed to the 787,'' Boeing said in a statement. ``The 787 is the right choice for these airlines' international expansion for a number of reasons, including unmatched passenger experience, fuel efficiency and environmental performance.''

Among Chinese airlines, China Southern has 10 Dreamliners on order, Air China 15, Hainan Airlines 10, and Xiamen Air 6. Hong Kong Airlines in March signed a preliminary deal to buy 32 of the aircraft.

Boeing said the 24 787s canceled by China Eastern were part of a deal with China's government for the purchase of 60 787s.

Globally for 2011, Boeing has seen 26 net cancellations for the Dreamliner, excluding China Eastern's decision. (Additional reporting by Kyle Peterson in CHICAGO, Tim Hepher in PARIS, Michael Smith in SYDNEY, Mantik Kusjanto in WELLINGTON and Alison Leung in HONG KONG; Writing by Mark Bendeich; editing by John Wallace)