Boeing Postpones 787 Test Flights
NEW YORK (
) --
Boeing
(BA) - Get Report
said Wednesday it has postponed flight test activities for its 787 Dreamliners after an electrical fire occurred on an aircraft during a test flight in Texas on Tuesday.
"Consistent with our internal processes, until we better understand the cause of the incident on ZA002, we have decided to postpone flight test activities on other airplanes," the company said in a press release. "Ground test activities will be conducted until flight test resumes."
On Tuesday, the
company's ZA002 test plane experienced smoke in the main cabin
during its approach to the airport in Laredo, Texas. The plane landed safely and the crew was evacuated without incident. The cause of the fire, however, is still unknown, and Boeing has acknowledged the plane lost primary electrical power during the test flight.
The big question for investors, of course, is what this latest incident may mean for 787's delivery schedule, which is now estimated to be around three years behind initial expectations, according to the
Associated Press
. Boeing most recently disappointed Wall Street on this front in August when it pushed back the delivery date for the first 787 Dreamliner to the middle of the first quarter of 2011 from the first few days of 2011, citing an engine availability issue.
During Wednesday's session, the shares tumbled 3.2% to $67.07 on volume of 10.5 million, more than double the issue's trailing three-month daily churn of 4.6 million. The stock remains up about 28% year-to-date, and
some analysts believe this pullback on the latest 787 issues may be a buying opportunity.
The shares ticked lower to $67 in extended trading, according to
Nasdaq.com
with volume reaching around 90,000.
For now, the company is playing it close to the vest with regard to whether another delay could be in the offiing.
"Likewise, we cannot determine the impact of this event on the overall program schedule until we have worked our way through the data," Boeing's statement reads. "Teams have been working through the night and will continue to work until analysis is complete and a path forward is determined."
Wedbush Morgan issued a note late last week discussing what the impact of further delays would be to its investment thesis. The firm, which has an outperform rating on the stock with a 12-month price target of $86, was commenting on media reports saying Boeing has been telling customers that deliveries following the initial delivery to All Nippon Airlines would be later than previously expected.
Wedbush said it was already skeptical of the mid-first quarter target Boeing has set, so a further delay "would not be a surprise to us." The firm didn't see a huge EPS impact on the company in 2011 if a delay does come to pass as Boeing is already discounting orders from initial customers significantly, typically charging around 60-70% of the plane's list price so that a $180 million list price would generate between $125 million to $145 million in revenue.
Using estimated deliveries of 22 aircraft in 2011, Wedbush was projecting the 787 would only represent 3-4% of Boeing's total revenue for the year.
But the firm did caution that delays would further reduce the sale price for the initial deliveries and said that there was some risk that Boeing could be forced to boost R&D spending to fix the initial aircraft, impacting the bottom line.
--
Written by Michael Baron in New York.
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