Boeing's 787 Dreamliner faces new challenge: slow sales

Mon May 16, 2016 1:13am EDT
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By Alwyn Scott

SEATTLE (Reuters) - Boeing Co's (BA.N: Quote) high-tech 787 Dreamliner has had its share of trouble, from early production delays to batteries that smoked and burned, grounding the worldwide fleet for months in 2013.

Now the company's flagship plane is facing a new challenge: slowing sales. Boeing needs to sell dozens of 787s to help recover nearly $30 billion it has spent on production and not yet accounted for in its earnings. But the industry is in a sales slump. Sales of Boeing and Airbus wide body jets have fallen 51 percent since 2013, and some analysts and investors predict that without more 787 sales in the near term, Boeing will have to take a sizable charge to write off some of the 787's deferred costs. (Graphic:

The 787 remains popular. Its lightweight composite airframe and new engines cut airline fuel costs as much as 20 percent compared to a conventional, aluminum plane. It can fly longer routes than previous jets its size, and offers passengers large windows, less noise and a more comfortable cabin environment.

Boeing has sold 1,154 so far, making it the fastest-selling wide body plane when it came to market. However, the tally falls short of the 1,300 planes Boeing is using as the basis of deferring the charges in its accounting.

Many airlines stocked up on 787s before the 2008-2009 financial crisis and do not need to order more now. Airbus's cheaper A330 has also chipped away at 787 sales and low fuel prices have allowed airlines to keep flying older, less efficient planes.

"Airlines are coming back to us and saying they would like to extend their leases for two or three years" on older planes, said Aengus Kelly, chief executive of AerCap Holdings (AER.N: Quote), which has the world's largest leased wide body fleet. "That's a direct result of low oil," he told Reuters.

Boeing has not commented on a report earlier this year that the Securities and Exchange Commission is looking into its accounting for 787 costs, but says it stands behind its numbers.

"Our accounting is compliant with GAAP," Chief Financial Officer Greg Smith said last month, referring to generally accepted accounting principles.   Continued...

The logo of Dow Jones Industrial Average stock market index listed company Boeing (BA) is seen in Los Angeles, California, United States, April 22, 2016. REUTERS/Lucy Nicholson