United Airlines Boeing 787-9

Editors' Pick: Originally published April 4.

It was four and a half years ago that the Boeing (BA - Get Report) 787 Dreamliner was introduced, a miracle of modern transportation that was expected to expand the frontiers of long-haul flying -- a goal that has largely been achieved.

Today, the airplane has enabled commercial aviation innovations, from the buildup of China service at United's (UAL - Get Report) San Francisco hub to Norwegian Air's ultra-low-fare trans-Atlantic service. Its success has been in demonstrating that a widebody aircraft, 20% more efficient than predecessors, could operate on routes that previously required larger aircraft carrying more fuel and requiring more passengers to be profitable.

The 787 has also had its share of problems. Chiefly, it has amassed $32 billion in deferred production and tooling costs, partially reflecting a globally scattered production model, devised at least partially in an effort to reduce dependence on Boeing's unionized production workers. Largely for the same reason, Boeing established a North 787 manufacturing plant in Charleston, S.C., to supplement the work done in the Seattle area.

Additionally, the aircraft's introduction was marred by startup electrical system problems related to the aircraft's lithium ion batteries, which resulted in a three-month shutdown of 787 flying by the Federal Aviation Administration.

Now, with nearly 400 Dreamliners flying, attention is focused on another crossroads as Boeing moves beyond the first model, the 787-8, to focus on two newer models, the 787-9 and the 787-10.

The first commercial flight by the 787-9 occurred on Aug. 7, 2014, as Japanese carrier ANA managed to put the aircraft in service two days ahead of launch customer Air New Zealand.

Last month, Boeing began major assembly of the 787-10 in Japan. The first flight is scheduled for 2017 with the first delivery scheduled for 2018. Final assembly of all 787-10s will take place in North Charleston.

A recent article in Leeham News and Comment, published by aviation consultant Scott Hamilton, contends that "the 787-8 has becoming a dying sub-type." The article is titled, "Why the 787-8 is no longer favored by Boeing."

"The 787-9 is clearly the go-to airplane," Hamilton wrote. "Sales of the 787-10 haven't been a barn-burner, but the company counts on the airplane to contribute to profits.

"Boeing officials have been pretty up-front that they prefer selling the more profitable, higher margin 9 and 10 than the low-margin (and some believe still unprofitable), 8," Hamilton continued. "The fact is Boeing doesn't want to sell the 8." After 2020, Hamilton noted, no deliveries are scheduled for the 787-8, and said Boeing expects "at best to build one 8 per month from 2020 to fulfill the need for a route-development airplane."

In an interview, Jim Haas, Boeing's director of product marketing, disputed Hamilton's view. He said the 787-8 remains a key component of the 787 program.

"Our plan for the 787 was always to have three family members, each the most efficient for its size," Haas said. Boeing got hundreds of orders when the 787-8 initially became available. Then, "when the 9 was launched, we saw a burst of order, then we saw the 10 and a burst for that.

"Our view has always been the 9 would have the most {orders}, but the 8 was by no means to be replaced or become obsolete," he said. "The bottom line is that there is strong continued demand for the airplane, that if you go out into the future, the 9 will have most orders, but there will be real strong family growth for the 8."

At the end of March, Boeing had 435 orders for the 787-8 and had sold 293. Boeing has orders for 479 787-9s and has delivered 87. Also, Boeing has orders for 153 787-10s.

The 787-8 seats about 242 passengers and has a range of 7,355 nautical miles. The 787-9 seats about 290 passengers and has a range of 7,635 nautical miles. The 787-10 will seat about 325 passengers and have a range of 7,020 nautical miles.

"The 8 is the most efficient," Haas said. "Take a look at the size and compare it with other airplanes that are similar size that are flying today and that need to be replaced. It's over 1,000: 767s, the {Airbus} A330-200, and there are still some A300s and A310s. All of these need to be replaced."

Haas noted that few customers are converting orders from the 787-8 to the 787-9. He said that larger airlines, such as the big three U.S. carriers, may want to have a variety of 787 models, perhaps using the 787-8 to open routes and "then move to a bigger airplane." By contrast, he said, a smaller carrier may simply desire a single model.

Brian Znotins, United's vice president of network, called the 787-8 "a great development airplane." The 787-8 can't fly San Francisco-Singapore, a 8,448-mile route, so United will use the 787-9 when it begins service on June 1. But Znotins noted that United can fly from San Francisco to anywhere in China using the 787-8.

"In any growing aviation business you always have markets to develop," Znotins said. "Those will grow into bigger airplanes, and then we may go to other markets with the development airplanes. So we think there is definitely a place for the 8."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.