The Boeing Company (BA) announced further delays in the production of its 787 Dreamliner yesterday (Wednesday), but there still may be ample opportunity to bury its competition, notably Airbus SAS.

The Dreamliner is Boeing’s most successful new airplane program in terms of sales. It ranked second in commercial orders last year, behind the 737 narrow-body model.

Made almost entirely out of plastic, the plane will use 20% less fuel than today’s similar mid-sized airplanes. It will also travel at speeds equal to the fastest wide-body aircraft and provide airlines with more cargo and revenue capacity according to the company’s web site.

So far, Boeing has landed 817 orders for the model, valued at more than $120 billion.  Unfortunately, production has suffered repeated setbacks. The 787’s first test flight, originally expected to take place in August 2007, has been moved all the back to June 2008.

In September, Boeing assured its customers and shareholders that delays would not affect scheduled deliveries. Boeing reneged on its promise a month later, saying deliveries would be delayed six months. But yesterday, Boeing pushed delivery dates back even further, from December 2008 to early 2009.

“We are deeply disappointed by what this delay means for our customers, and we are committed to working closely with them as we assess the impact on our delivery schedules,” Scott Carson, chief executive of Boeing’s commercial aircraft business, said in a statement.

Boeing shareholders have been disappointed as well, as the stock dropped more than 5% Tuesday, as investors anticipated the announcement.

The company is on the hook for the delivery of 109 Dreamliners in 2009. Continued production delays could smother the expansion plans of major airlines counting on the planes’ delivery and cost Boeing millions of dollars in penalty payments.

“Investors are likely to require clear signs that this is the last of the delays, which will take months to prove out,” Morgan Stanley (MS) analyst Heidi Wood wrote in a research note. “A delay of first flight to June adds to the cost of up-tick in customer penalty payments.”

Meanwhile, Airbus, which suffered setbacks from production and design delays associated with its A380 superjumbo jet and A350 widebody, is regrouping to again challenge the world’s largest airplane manufacturer. And instead of taking advantage of Airbus’ tarnished reputation when it had the chance, Boeing flew nose-first into delays of its own, leaving its competitor an opportunity to fight its way back.

Airbus actually topped Boeing in 2007 deliveries, and it narrowed the disparity between orders as well. Chief Executive Officer Tom Enders announced yesterday that Airbus sold 453 aircraft in 2007, 19 more than the year before and 12 more than Boeing. However, net orders totaled 1,341, short of Boeing’s 1,413.

Regardless of this success however, it may not be too late for Boeing to exploit potential weaknesses within Airbus. While orders for the company are up 80%, Airbus says it will likely post a loss for 2007, resulting from production delays and a weak dollar. [Industry purchases are denominated in dollars, which means the Toulouse, France-based Airbus is hurt by the exchange rate.]

Airbus has already put into action a plan to cut $3 billion from its annual costs by 2010 to improve its bottom line. The company will cut jobs and consider the sale of six manufacturing plants, Bloomberg News reported.

News and Related Story Links:

• Boeing:
  The Boeing Company
• NYTimes:
  Boeing Delays Dreamliner Again
• Bloomberg:
  Airbus Beats Boeing on Deliveries, Narrows Order Gap
• BusinessWeek:
  Dreamliner, Where Are You?
• Money Morning:
  Boeing and Vietnam have the Billion Dollar Deal

By Jason Simpkins
Staff Writer

A lengthy investigation by French regulators suggests that "massive insider trading" took place at Airbus SAS parent EADS, the Associated Press reported yesterday (Wednesday). Louis Gallois, EADS Chief Executive, pointed out that the findings were preliminary. But if confirmed, it would be a devastating blow to both EADS and Airbus, the world’s second largest plane-maker.

The Financial Markets Authority (AMF) and Paris prosecutor Xaviere Simeoni are conducting separate inquiries into alleged wrongdoing by executives at both EADS and Airbus.

Judicial officials contacted by The AP said the preliminary report indicated "massive" insider trading by 21 top managers at European Aeronautic Defense & Space Co. NV, or EADS, between November 2005 and March 2006. The report referenced an announcement in March 2006 by major EADS shareholders, Lagardere SCA and DaimlerChrysler AG, that they would reduce their stakes, according to a report in the French daily, Le Figaro.

Allegedly, both groups forward-sold their shares so the sale would take place in 2007 at the 2006 share price. This suggests they anticipated share prices would fall.

The AMF is also trying to determine what executives and board members knew about profit-damaging technical problems with the A380 super-jumbo and mid-range A350 aircraft, when they sold shares or exercised stock options worth millions of euros.

Problems with the aircraft and a profit warning were publicly announced in June 2006. That sent the EADS stock price tumbling 26% in one day. According to Le Figaro, EADS joint CEO Noel Forgeard, is one of the parties that have been implicated. Forgeard and his children exercised stock options in the company at a profit of $3.2 million in March 2006, according to AMF filings.

According to the French daily, former co-chairman of EADS Arnaud Lagardere, members of EADS’ executive committee, and Airbus’ then-CEO Gustav Humbert were all aware of the problems plaguing the A380 and A350.

Airbus and EADS have struggled recently. This only adds to a growing list of troublesome issues that include dissention within the company and a strengthening euro, which has made the company’s planes (which are priced in U.S. dollars) less profitable. Airbus is already anticipating thousands of job losses and factory closures.

EADS shares fell 0.9% to 21.68 euros ($30.77) in Paris. The shares of Lagardere sank more than 6%, to 57.89 euros ($82), yesterday.