Qantas has a lot riding on the overnight announcement of a six-month delay in deliveries of the “plastic fantastic” Boeing 787 Dreamliner. It is the biggest customer for the jet, with 65 on order and another 50 optioned or available under purchase agreements. The first 15 of its order were supposed to go to Jetstar from next August.
The Qantas statement should actually moisten the eyes of shareholders with tears of joy not pain. The pain is all Boeing’s, especially if the revised delivery schedule doesn’t materialise the way Qantas CEO Geoff Dixon spelled it out a short while ago.
Qantas did handsomely out of the cumulative two years of delays to the giant Airbus A380. Like the 300 seat Dreamliner, it scored a deep discount for being an early customer for the 450 seat A380. Then it picked up nearly $200 million in penalties from the Europeans, and gouged further discounts from them for other smaller Airbuses. In effect it bought the big Airbus dirt cheap, used it to leverage other orders, and was then compensated for having its bargains turn up late.
Late Airbuses can be argued as generating well over $500 million in benefits to Qantas if compensation is added to reduced unit costs which in turn yield savings on operating costs and finance charges all in less than a decade.
Will history repeat with the 787s? However much Qantas might wring its hands over the delays, it can’t lose. It will have 787s before all of its competitors, and pay less for them. But for Boeing, there are two sets of urgent challenges now that the hype of marketing is being dragged down by the realities of production and testing.
One is getting a very ambitious and complex global risk and work sharing plan to actually come together in finished high quality 787s in Seattle. These jets are in part pre-fabricated on giant loom like mandrils in Japan around which sheets of reinforced carbon fibre are wound and stuck together with glue and baked to perfection in a very big oven.
The other set of challenges is getting the highly advanced design to work as intended, delivering significant fuel and maintenance savings. So far the 787 has needed more titanium and steel to make the plastics actually work than was originally intended, and a shortage of metal fasteners, which the design was supposed to avoid using in large quantities, has been blamed for much of the delays.
And while this is going on, the airlines themselves are asking Boeing to stuff so many extra seats into what was intended to rival the A380 in terms of individual passenger amenity that the next casualty of the program may be the term “Dreamliner” itself.
“Stuffyliner” doesn’t sound nearly as attractive.