By Jon Ostrower
Boeing Co. said U.S. and European regulators approved its larger
787 Dreamliner model for commercial service, a milestone for a
plane that the company hopes will bolster the profitability of its
flagship jetliner program.
The approval by the U.S. Federal Aviation Administration and the
European Aviation Safety Agency clears the way for the first
deliveries of the long-range jet, whose passenger cabin is 20 feet
longer than the current Dreamliner and seats about 40 more
passengers, with a total of around 290.
Boeing said on Monday that it is now in the final stages of
preparing the first 787-9 for delivery to Air New Zealand Ltd., the
jet's launch customer. The plane was originally due to be delivered
to the Auckland-based carrier in 2010, but Boeing had to push back
its development as it completed the first Dreamliner model, the
787-8, and significantly refined plans for the larger version.
The larger Dreamliner is designed to fly to destinations as far
as 8,300 nautical miles away, or on routes as long as 15 hours to
16 hours. The jet is scheduled to make its commercial debut on Oct.
15, flying between Auckland and Perth, Australia, and later to
Shanghai and Tokyo.
The 787-9's list price, now $249.5 million, has risen more than
40% since it was first disclosed in 2006, driven by increasing
demand for the fuel-efficient jet and the steeper cost to build the
Dreamliner. Airlines regularly negotiate discounts.
Boeing has delivered more than 150 Dreamliners since 2011.
Analysts say it still costs the company tens of millions of dollars
more to build each plane than they sell for. The company has been
aggressively trying to reduce its costs with suppliers and make its
factories more efficient to ensure its sale price exceeds its
costs, which it forecasts will happen later this year. The
Dreamliner program is profitable by Boeing's accounting standards,
which allow it to spread its forecast costs over 1,300 deliveries,
effectively booking future profit in today's earnings.
Dennis Muilenburg, Boeing's president, said recently the company
had reduced its unit costs by about 30% over its first six 787-9
airplanes that came through its factories.
Boeing Chief Executive Jim McNerney in 2010 called switching
customers to the larger Dreamliner "the single biggest opportunity"
to bolster the program's profitability.
The larger 787-9 now accounts for 40% of Boeing's orders for the
Dreamliner, with 413 reserved by airlines, many of which have been
shifting to the larger model. The company launched a third,
even-larger model, called the 787-10, last summer with seating for
around 320 passengers. It is due in 2018.
The new 787, known as the 'Dash Nine,' completed its testing
with little fanfare or drama, after Boeing reorganized its airplane
development unit to avoid the delays suffered by the first
Dreamliner, which was stalled 3 1/2 years by design and supply
chain issues.
Rival Airbus Group NV is considering how to counter Boeing's
787-9. It is weighing putting new engines on its long-range A330
jetliner or proceeding with development of a smaller version of its
A350, the first model of which is now in testing.
A Boeing spokeswoman said the new U.S. and European approvals
cover only the 787-9s powered Rolls-Royce Holdings PLC engines.
Similar clearance for planes with General Electric Co. engines
awaits additional testing.
United Continental Holdings Inc. will be the first U.S. operator
of the larger 787-9, taking the first of 26 it has ordered and is
slated to begin service connecting Los Angeles and Melbourne,
Australia, starting in late October. American Airlines Group Inc.
has 30 on order as well. The Boeing spokeswoman added that the
787-9 has been granted similar approval as its smaller sibling that
allow it to fly up to 330 minutes or 5 1/2 hours from a suitable
diversion airport during long overwater or polar flights.
With its certification granted, Boeing hopes to avoid the public
teething issues of the 787-8 that weighed on the jet's in-service
reliability, frustrating customers. The Dreamliner was grounded for
3 1/2 months last year, following two incidents with the jet's
lithium ion batteries. The aircraft was cleared to return to
service after Boeing redesigned the battery and developed a
containment-and-venting system to mitigate the risk of a fire. The
787-9 incorporates all of those changes and other improvements
gleaned from the airline's operations with the smaller
Dreamliner.
Write to Jon Ostrower at jon.ostrower@wsj.com
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