Dow component Boeing Co could weigh on the market after Australia’s Qantas Airways Ltd canceled orders for 15 new Dreamliner planes and deferred orders for another 15 in a new blow to the project.

Boeing fell 2.9 percent to $41.30 before the opening bell.

As investors try to assess the market’s next move after a sharp bounce, J.P. Morgan Securities said the S&P 500 index  is likely to fall to between 830 and 875 through September, given its virtually uninterrupted rise since its March lows.

The strategists also urged investors to use the correction to build positions in cyclical stocks. The index ended Thursday at 920.26.

The broad S&P had rallied as much as 40 percent from March’s 12-year low, but the run-up has stalled as initial optimism about a stabilizing economy has been tempered by worries the recovery could be tepid. The index is up about 36 percent from the March trough.

Data on tap for the day includes a report on personal income due at 8:30 a.m. EDT (1230 GMT) and consumer sentiment at 9:55 a.m. (1355 GMT).

S&P 500 futures eased 2.60 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futuresslipped 14 points, and Nasdaq 100 futures were off 4.50 points.

Palm Inc could boost technology shares after it posted a narrower-than-expected loss and said demand was strong for its new Pre smartphone. Palm jumped 11.9 percent to $15.69 in premarket trade.

Stocks could also be buffeted by end-of-quarter “window dressing as portfolio managers sell stocks with big losses and buy some of the quarter’s best-performing stocks to help improve their returns.

On Thursday, stocks rose on investor relief that Fed Chairman Ben Bernanke withstood a barrage of pointed questions from Congress on the Bank of America-Merrill Lynch deal relatively unscathed. Retailer and home builder shares led markets higher for much of the session.

NEW YORK, June 26 (Reuters)

• German manufacturing and engineering titan MAN AG said it will acquire Volkswagen Truck and Bus from Volkswagen AG (OTC: VLKAY). The 250-year-old MAN AG is Europe’s third-largest truckmaker, and this purchase marks its first major South American investment, Bloomberg reported.

• Siemens AG (ADR:SI) will pay more than $1.3 billion to settle corporate corruption charges that it paid bribes to win major contracts in the United States and Germany. The scandal resulted in the resignations of former CEO Klaus Kleinfeld and ex-CEO and former supervisory board Chairman Heinrich von Pierer, Reuters reported.

• Mattel Inc. (MAT) will pay to settle a probe that its Chinese-made dolls and accessories shipped to the United States were made with lead paint. The toys never made it to the shelves, but the world’s largest toymaker will pay $12 million to the 39 states in the suit, Bloomberg reported.

• Irish banks will be on the receiving end of a $13.5 billion (10 billion euro) investment from the Ireland government, MarketWatch reported. The recapitalization plan may take the form of preference or ordinary shares, the government said in a statement. And the list of banks that will receive the cash has not been determined.

• The National Association of Home Builders/Wells Fargo housing market index remained at nine in December for the second month in a row, indicative of the pessimistic outlook permeating the market.  Index readings higher than 50 indicate positive sentiment about the market. It has slumped below 50 since May 2006 and has been below 20 since April.

• The Boeing Co. (BA) yesterday (Monday) increased its quarterly dividend by 5%, or 2 cents, to 42 cents. The aerospace and defense dividend is payable March 6, 2009 to shareholders of record as of Feb. 6, 2009.

• Homes in the United States will lose more $2 trillion dollars in value by the end of the year, and nearly 11.7 million American households currently owe more on their mortgage than their homes are worth, Reuters reported yesterday (Monday). “In general, homeowners in most areas we cover are struggling with foreclosures pouring into the market, large amounts of negative equity and dropping home values,” Dr. Stan Humphries, vice president of data and analytics for Zillow Real Estate Market Reports, said in a statement.

Source: Global Investing Roundups Tuesday, December 16th, 2008

The Chicago-based aerospace giant also has unveiled a series of management changes it says will improve supervision of both supply-chain management and production quality at improving oversight of supply-chain and quality problems that led to delays on all of Boeing’s jet programs in recent months.

With the move, the fuel-efficient jet’s first flight has been shifted into the second quarter of 2009 and first delivery into the first quarter of 2010. Prior to the strike that halted much of the company’s commercial airplane work from early September into November, the 787 was to make its first flight late in the fourth quarter of 2008. First delivery was slated for the third quarter of 2009.

“Our industry team has made progress with structural testing, systems hardware qualification, and production, but we must adjust our schedule for these two unexpected disruptions,” said Scott Carson, president and chief executive officer of the Boeing Commercial Airplanes group.

“We’re laser focused on what needs to be done to prepare for first flight,” said Pat Shanahan, Boeing’s vice president in charge of the 787 program. “We will overcome this set of circumstances as we have others in the past, and we understand clearly what needs to be done moving forward.’

Included in the preparations for first flight, Shanahan said, are finalizing and incorporating remaining engineering changes and completing systems testing, qualifications and certification, Boeing said in a company announcement.

A Recent Record of Costly Delays

Boeing has long prided itself for delivering new aircraft on time. That’s why escalating problems with the highly complex Dreamliner – a fuel-efficient jetliner that can carry between 225 and 300 passengers – have turned what could have been a public-relations marvel into an embarrassment for Boeing

This newest delay would represent the fourth time that the company has had to tell customers holding orders for almost 900 of the jets that the delivery schedule will be pushed back. With each new delay, Boeing executives and marketing officials have assured investors and customers alike that the new delivery date was set in concrete – only to later be forced to set that date back again because the company was surprised by a new set of problems.

One of the problems with the program is that the Dreamliner is being made of highly sophisticated materials, and is being constructed by a network of suppliers that’s truly global in nature. The fact that so much of the aircraft is outsourced means Boeing is encountering a whole new set of logistical and technical problems that it’s never before encountered.

The company has attributed part of the delay to the 58-day strike by 27,000 of its unionized workers that ended in early November. The workers ratified a four-year deal and returned to work, but the cost was high.

Boeing delivered just four jetliners in November, even after the resolution of a strike that paralyzed the airplane-maker’s commercial aircraft business during the two previous months, Forbes.com reported Friday. That compares with five airplanes delivered in October – when the strike with the machinists was at its peak – and 12 in September – two of them before the strike began.

Boeing delivered 36 planes per month in August and July. The company also delivered 35 jetliners in November 2007, the company said on its Web site. Analysts say that Boeing usually delivers about 40 jetliners a month.

A New Role

For the Dreamliner program, Boeing is labeling itself as a “systems integrator” – rather than as a manufacturer, as it historically has been known – because of how thoroughly Boeing has outsourced production around the world.

In fact, in return for investing more upfront, and accepting a share of the high development costs, suppliers were able to get major sections of the Dreamliner to build. Boeing itself is responsible for only about 10% of the jet by value – chiefly the tail fin and the final assembly. The rest of the work is being done by 40 “partners” around the world: The wings are being built in Japan, while factories in Italy, South Carolina and Kansas assemble the bulk of the carbon composite fuselage. The landing gear is made in France.

Once completed, the components are loaded aboard a specially modified Boeing 747 cargo jet and flown to Everett, Wash. for the final assembly.  Boeing says that when the system is up and running, it will eventually be able to snap together Dreamliners in as little as three days, in a manner similar to assembling plastic model airplanes, Finfacts Irelandreported.

Sources told the Journal that Boeing has been meeting with its partners and suppliers on the jet program in an attempt to once again understand all the new challenges that have sprung up in part because of the big share of the program work that the company had outsourced.

Customers are getting quite irritated by the delays. In a recent interview, Virgin Atlantic Airways Ltd. Chief Executive Steve Ridgeway conceded that he’s “pretty fed up. We’ve got no clarity from Boeing.”

Virgin was originally due to receive its first Dreamliner in 2011, but Ridgeway said “we don’t know how long the delay is now.”

The Dreamliner, Ridgeway said ruefully, is “the world’s rarest airplane.”

A key area of concern: The continuing difficulty program participants are having as they try to work out software “bugs” in the millions of lines of computer code that run the airplane’s various systems, including cockpit flight instruments to the electric brakes required for stopping as the planes taxi or land.

Suppliers who were having trouble delivering completed sections of the airplane to Boeing have worked through the worst of their problems, but some officials at Boeing are still concerned about the ability of suppliers to turn out sufficient parts for seven or more airplanes a month.

Scheduling Uncertainty Remains

People familiar with the program said that Boeing managers had to figure out how much time they should build into the airplane’s schedule. Not only must Boeing find a way to produce the airplane reliably, it must also allow the Federal Aviation Administration (FAA) adequate time to certify the plane as safe to fly. That process alone could take as much as a year, say these people.

Virgin Atlantic’s Ridgeway agrees, recounting how his airline was also the first recipient of a new model jetliner from Boeing rival Airbus SAS – which went through the same sorts of delays and teething problems. The Airbus A350, which was delayed because of problems the European aircraft manufacturer had with its A380 Super jumbo, isn’t expected to be launched until 2013 – if not later. Airbus is expected to deliver the first A380 next week to Singapore Airlines Ltd. It is a double-decker plane that can seat more than 550 passengers and is designed for long-haul routes.

For that reason, Ridgeway says he knows that Boeing’s Dreamliner problems extend beyond the slipped delivery date.

A lot of attention has been focused on when Boeing will deliver its first Dreamliner, “but nobody’s talking about production run-rates” or problems the plane may encounter when it goes into service, Ridgeway said in the Journal interview. “Just getting the first ones delivered to a handful of airlines isn’t the end of the story.”

Boeing said last month that it was adding as much as 10 weeks to the delivery dates for all 3,734 jetliners it had on order to account for the International Association of Machinists and Aerospace Workers’ strike, which shut Boeing’s Seattle-area assembly plants for the better part of September and October. The company acknowledged that the strike made it impossible for the first Dreamliner to make its maiden flight before the end of the year as planned, but it did not alter the Dreamliner schedule.

As has been the case with delays encountered by arch-rival Airbus, Boeing has discovered that delays in the Dreamliner program are causing other development programs to slide – including a key one to update its 747 jumbo jet. Last month, Boeing said a new version of the four-engined jetliner – known for the distinctive hump on the top of its fuselage just behind the cockpit – would be as much as nine months late entering the market, in part because engineering resources were being gobbled up by the Dreamliner, the Journal said.

Source:  Latest Delays With Boeing’s Dreamliner Puts Program Two Years Behind Schedule

Sources told the Journal that the first deliveries of the fuel-efficient jet might not occur until the summer of 2010. Boeing’s most recent schedule called for initial deliveries in the third quarter of 2009. Officials with the Chicago-based aerospace giant are expected to announce the newest delays later this month, after making certain of the new timetable, the newspaper said.

A Recent Record of Costly Delays

Boeing has long prided itself for delivering new aircraft on time. That’s why escalating problems with the highly complex Dreamliner – a fuel-efficient jetliner that can carry between 225 and 300 passengers – have turned what could have been a public-relations marvel into an embarrassment for Boeing.

This newest delay would represent the fourth time that the company has had to tell customers holding orders for almost 900 of the jets that the delivery schedule will be pushed back. With each new delay, Boeing executives and marketing officials have assured investors and customers alike that the new delivery date was set in concrete – only to later be forced to set that date back again because the company was surprised by a new set of problems.

One of the problems with the program is that the Dreamliner is being made of highly sophisticated materials, and is being constructed by a network of suppliers that’s truly global in nature. The fact that so much of the aircraft is outsourced means Boeing is encountering a whole new set of logistical and technical problems that it’s never before encountered.

The company has attributed part of the delay to the 58-day strike by 27,000 of its unionized workers that ended in early November. The workers ratified a four-year deal and returned to work, but the cost was high.

Boeing delivered just four jetliners in November, even after the resolution of a strike that paralyzed the airplane-maker’s commercial aircraft business during the two previous months, Forbes.com reported Friday. That compares with five airplanes delivered in October – when the strike with the machinists was at its peak – and 12 in September – two of them before the strike began.

Boeing delivered 36 planes per month in August and July. The company also delivered 35 jetliners in November 2007, the company said on its Web site. Analysts say that Boeing usually delivers about 40 jetliners a month.

A New Role

For the Dreamliner program, Boeing is labeling itself as a “systems integrator” – rather than as a manufacturer, as it historically has been known – because of how thoroughly Boeing has outsourced production around the world.

In fact, in return for investing more upfront, and accepting a share of the high development costs, suppliers were able to get major sections of the Dreamliner to build. Boeing itself is responsible for only about 10% of the jet by value – chiefly the tail fin and the final assembly. The rest of the work is being done by 40 “partners” around the world: The wings are being built in Japan, while factories in Italy, South Carolina and Kansas assemble the bulk of the carbon composite fuselage. The landing gear is made in France.

Once completed, the components are loaded aboard a specially modified Boeing 747 cargo jet and flown to Everett, Wash. for the final assembly.

Boeing says that when the system is up and running, it will eventually be able to snap together Dreamliners in as little as three days, in a manner similar to assembling plastic model airplanes, Finfacts Ireland reported.

Sources told the Journal that Boeing has been meeting with its partners and suppliers on the jet program in an attempt to once again understand all the new challenges that have sprung up in part because of the big share of the program work that the company had outsourced.

A person who has been involved in the discussions told the newspaper that “there is no question” that the Dreamliner will be delayed further. “The real issue right now is that Boeing wants to make sure it has a believable date before going back to the customers with more bad news.”

Customers are getting quite irritated by the delays. In a recent interview, Virgin Atlantic Airways Ltd. Chief Executive Steve Ridgeway conceded that he’s “pretty fed up. We’ve got no clarity from Boeing.”

Virgin was originally due to receive its first Dreamliner in 2011, but Ridgeway said “we don’t know how long the delay is now.” The Dreamliner, Ridgeway said ruefully, is “the world’s rarest airplane.”

A Boeing spokesman declined comment yesterday (Thursday) about any possible new Dreamliner delays, telling the Journal that the company is “currently reviewing the schedule” and would have an announcement at a later date.

There’s probably a lot more to review than the company would like to admit. Sources close to the program say that Boeing has encountered surprises on an all-too-regular basis; the problems range from “minor annoyances” to issues that require notification of Boeing Chief Executive W. James McNerney Jr. at the company’s headquarters.

A key area of concern: The continuing difficulty program participants are having as they try to work out software “bugs” in the millions of lines of computer code that run the airplane’s various systems, including cockpit flight instruments to the electric brakes required for stopping as the planes taxi or land.

Suppliers who were having trouble delivering completed sections of the airplane to Boeing have worked through the worst of their problems, but some officials at Boeing are still concerned about the ability of suppliers to turn out sufficient parts for seven or more airplanes a month.

Scheduling Uncertainty Remains

People familiar with the program said that Boeing managers are still unsure how much time they should build into the plane’s schedule. Not only must Boeing find a way to produce the airplane reliably, it must also allow the Federal Aviation Administration (FAA) adequate time to certify the plane as safe to fly. That process alone could take as much as a year, say these people.

Virgin Atlantic’s Ridgeway agrees, recounting how his airline was also the first recipient of a new model jetliner from Boeing rival Airbus SAS – which went through the same sorts of delays and teething problems. The Airbus A350, which was delayed because of problems the European aircraft manufacturer had with its A380 Super jumbo, isn’t expected to be launched until 2013 – if not later. Airbus is expected to deliver the first A380 next week to Singapore Airlines Ltd. It is a double-decker plane that can seat more than 550 passengers and is designed for long-haul routes.

For that reason, Ridgeway says he knows that Boeing’s Dreamliner problems extend beyond the slipped delivery date.

A lot of attention has been focused on when Boeing will deliver its first Dreamliner, “but nobody’s talking about production run-rates” or problems the plane may encounter when it goes into service, Ridgeway said in the Journal interview. “Just getting the first ones delivered to a handful of airlines isn’t the end of the story.”

Boeing said last month that it was adding as much as 10 weeks to the delivery dates for all 3,734 jetliners it had on order to account for the International Association of Machinists and Aerospace Workers’ strike, which shut Boeing’s Seattle-area assembly plants for the better part of September and October. The company acknowledged that the strike made it impossible for the first Dreamliner to make its maiden flight before the end of the year as planned, but it did not alter the Dreamliner schedule.

As has been the case with delays encountered by arch-rival Airbus, Boeing has discovered that delays in the Dreamliner program are causing other development programs to slide – including a key one to update its 747 jumbo jet. Last month, Boeing said a new version of the four-engined jetliner – known for the distinctive hump on the top of its fuselage just behind the cockpit – would be as much as nine months late entering the market, in part because engineering resources were being gobbled up by the Dreamliner, the Journal said.

Source: Boeing Will be Forced to Announce Yet Another Dreamliner Delay

But it’s the first time China’s commercial airplane sector has a long-term flight plan to follow.

Roughly $4 billion deals involving 102 aircraft were signed during the six-day event, which was attended by representatives of 600 aviation companies from 35 countries, officials from the Airshow China Organizing Committee told the People’s Daily newspaper.

But the real news was that China has set a timetable for its proposed “jumbo” jet, a passenger aircraft China plans to design and build domestically to compete directly with commercial jetliners built by industry heavyweights Airbus SAS of Europe and The Boeing Co. (BA), the U.S.-based airliner industry pioneer that’s America’s biggest exporter.

China said its jumbo jet would be on the market by 2015. The Commercial Aircraft Corp. of China Ltd. (CACC), established in May, was put in charge of the huge jetliner’s assembly, marketing and after-sales service. The government is providing $2.9 billion in seed money for the venture.

Miao Wei, vice minister of industry and information technology, told the People’s Daily that the design concept and research on the airplane’s key technologies will be finished before 2010, and the first airliner will roll off the production line before 2015. With those tasks completed, China’s jumbo jet should be in service by 2020.

“The next few years will be an important period for China’s aviation industry,” Miao said.

China’s move into the jumbo-jet market is just the latest move by the world’s fourth-largest economy to establish itself as a global superpower. This particular project was chosen well.

During the next 20 years, in fact, Boeing estimates that air carriers worldwide will require 28,600 commercial aircraft with a value of $2.8 trillion. The Boeing outlook is generally viewed as the world’s best analysis of the global market for commercial airliners and cargo aircraft.

And this projection isn’t limited to jumbo-sized passenger jets: It includes short-range connector planes, regional jets, cargo planes and the jumbos. When it refers to a “jumbo” jet, China is talking about the so-called wide body airliners that carry 200 to 800 passengers and that make globetrotting trips to almost any point on the globe.

China alone will require 3,400 new airplanes worth about $340 billion over the next 20 years, Boeing projected in its recent market forecast. That works out to sales of about  $17 billion annually over the next two decades. About 2,650 of those commercial airplanes will be actual airliners, Airbus projected in a forecast of its own. Up to now, Chinese airlines have been placing huge orders with Boeing and Airbus to modernize their air fleets and close the customer-service gap on their foreign competitors.

And neither of those forecasts factor in other white-hot Asian markets – such as Vietnam – which will also need to outfit their commercial air fleets as their economies make the leap from “emerging” to mainstream.

But with such a large potential market, many observers find it surprising that there aren’t more potential players.

That’s changing – or at least it is at the lower end of the market. China and Russia are both well along on government-backed programs to develop a regional jetliner for sale to global customers. Back in March, Japan entered the regional jetliner shootout when Mitsubishi Heavy Industries Ltd. (PINK: MHVYF) unveiled a plan to develop a “regional” jetliner for use by airlines all around the world. The development work alone is expected to cost several billion dollars, but the program has the backing of both Toyota Motor Corp. (TM) – the world’s No. 1 automaker by sales – and the Japanese government.

Mitsubishi Heavy hopes to have the jet in the air by 2013 and is aiming to sell 1,000 of the airplanes over the next 20 to 30 years, grabbing one-fifth of expected new demand in a market that is projected to roughly quintuple to more than 5,000 planes by 2026. But it could be a bumpy flight: Incumbents Bombardier Inc., of Canada, and Embraer (Empresa Brasileira de Aeronautica SA) (ERJ) of Brazil, currently dominate the short-range jetliner market.

Both the China and Russia ventures will take wing well before Japan’s new jet, and the eventual existence of all five combatants in this slice of the airline market could lead to some pretty congested airspace – especially since several players are expected to link up with market-savvy foreign heavyweights, including, potentially, Boeing.

As tough as that sounds, attacking the jumbo-jet market will be tougher still. Even with fewer contestants.

Jumbo Challenges for a Jumbo Jet

The tremendous appetite for capital, the engineering challenges that range from complex aerodynamics to new composite materials, and the need to be able to manage a string of suppliers scattered about the globe are just a few of the hefty demands that make this mountain too high for all but a few global companies to climb.

Right now, in fact, there are only two new jumbo jet programs under way, either in development or in testing, and both have been riddled with technical problems and other issues that have resulted in pushed-back delivery dates. These are:

• The Boeing 787 “Dreamliner,” a replacement for the company’s Boeing 767. It’s making heavy use of composite materials and depends heavily on a network of global suppliers, and delays have pushed the delivery date for the first jets well into next year. Boeing’s just-settled strike is the latest such issue.
• And the Airbus A350, a replacement for the Airbus A330/A340 line, and a program whose many delays have pushed its delivery date out to an estimated 2012 or 2013, according to several sources.

Given that huge companies such as McDonnell Douglas and Lockheed have gone up against Boeing and failed, many analysts are skeptical about the “commercial prospects” of a jumbo jet designed and built in China. China has virtually no experience in this market and the two other (known) attempts – ventures with Douglas and Airbus – ended in failure.

And even if China succeeds, it’ll be a good 20 years before U.S. or European airlines flying China-built jets will be ready to lose your bags on a regular basis.

China’s jumbo-jet company “might be able to establish a presence in the business over the next 10 to 20 years if they nurture it with government seed cash, and gradually offer shares to the private sector,” Richard L. Aboulafia, an aviation analyst with Teal Group Corp., an aerospace-and-defense consulting firm, told Reuters.

Although that’s probably a good estimate, China clearly isn’t deterred by such long time frames. The country reorganized its aviation industry back in 1999, establishing 10 state-owned companies – each with carefully defined mandates, reports GlobalSecurity.org. The jumbo-jet program grew out of that reorganization.

Growing the Business

The jumbo jet isn’t China’s only commercial aircraft program.

Among the deals signed at the air show, the Commercial Aircraft Corp. of China (COMAC) said it will sell 25 ARJ21-700 regional jets to the GE Commercial Aviation Services unit of General Electric Co. (GE) in a deal that’s valued at $733 million. The first jet will be delivered in 2013, with one per month thereafter, the People’s Daily reported.

COMAC Board Chairman Zhang Qingwei said it was the first time Chinese-developed and manufactured regional jets have entered Western airline markets.

Miao said the ARJ21-700 will enter service next year, while work on a 100-seat version, a business-jet model and a freighter begin in the New Year, as well. China has also received 136 orders for the MA 60, a propeller-driven commuter plane, Miao said. Xi’an Aircraft Industry Group Co. Ltd., the maker of the plane, has already delivered 34, he said.

In terms of non-civilian aircraft news, the air show hosted the first rollouts of China’s homebuilt Chengdu Aircraft Industry Corp. J-10 “Annihilator” fighter and FBC-1 “Flying Leopard” fighter-bomber.

Models of a “soft” lunar-lander, and a lunar rover vehicle – all for the second phase of Chinas’ lunar space program, which aims to explore the moon’s surface – were on display at the air for the first time. Designed and produced by the China Aerospace Science and Technology Corp. (CASC), the lander is likely to be launched in 2013, a corporation source said yesterday.

The 8th China International Aviation and Aerospace Exhibition will be held in Zhuhai from Nov. 16 to 21, 2010, the organizers said.

Source: China’s Commercial Aviation Sector to Enter “Important Period,” Top Official Says

Boeing was planning to make the inaugural flight of the next-generation jetliner – already delayed four times – during the fourth quarter. But company spokesman Jim Proulx said the strike – which started Sept. 6 and forced Boeing to temporarily shutter its commercial aircraft business – forced the firm to push the test flight into next year.

Boeing is conducting a special assessment to determine just how much the strike affected its production schedule. The company will revise the Dreamliner’s schedule – including a new date for that first test flight – based on the assessment’s findings, Forbes.com reported.

“Given the duration of the … work stoppage, the first flight of the 787 will not be accomplished in the fourth quarter 2008,” Proulx told journalists. “The time frame for the first flight has not been established and will be based on the strike recovery assessment.”

Prior Test Flights Delayed

Boeing – which also produces the 737, 747, 767 and 777 jetliners – postponed the 787 Dreamliner test flights in September and October of 2007, and again in January and April of this year. The delays have cost the company substantial credibility with investors – and caused it to incur billions of dollars in anticipated additional costs and penalties – and have left the Dreamliner program more than a year behind schedule.

The company’s longest strike in 13 years was just the latest problem to induce a program delay. The job action ended Saturday when workers in Washington State, Kansas and Oregon ratified a four-year contract with the company. Workers then workers returned to their jobs for the third shift on Sunday night (Nov. 2). The company and the workers represented by the International Association of Machinists and Aerospace Workers union had reached a tentative agreement on Oct. 27.

The postponement was merely the latest in a series of program delays for the super-hot-selling 787, a commercial passenger jet whose construction from lightweight carbon-based composite materials is expected to lead to a very high degree of fuel efficiency.

One of the key problems with the Dreamliner program stems from the extensive use of overseas suppliers – a first for Boeing, which is trying to establish itself as the world’s most-economically superior builder of aircraft. Boeing wants to regain that reputation as it attempts to wrest back the worldwide No. 1 market share spot, now held by archrival Airbus SAS, a subsidiary of pan-European defense giant EADS NV.

The labor impasse cost Boeing an estimated $100 million per day in deferred revenue. Last month, Boeing said that supplier problems and the strike combined to force third-quarter profits down 38%, to $695 million, or 96 cents per share. The strike alone cut earnings by about 35 cents a share, while the supplier problems shaved profits by an additional 25 cents a share, Forbes reported.

The Boeing 787 Dreamliner, shown here in the colors of British Airways PLC (ADR: BAIRY), is a key product for the U.S. jetliner company. [Photo courtesy of The Boeing Co. (BA)].

Laborious Labor Issues

This was the third strike Boeing has endured in 13 years, and both sides claimed victory this time around. The union said that it “won the battle and made some significant gains,” while Boeing claimed it had “retained the flexibility necessary” to manage its business, Reuters reported.

The production workers walked off the job because of a dispute over contract provisions related to health-care benefits and job security. The machinists had initially wanted a 13% pay raise over three years and to rewrite certain language in the contract related to outsourcing. The agreement gives workers a 15% raise over the four-year life of the contract and gives the union more scope for challenging Boeing’s use of outside contractors. The deal also grants lump-sum payouts totaling at least $8,000 per employee over the four-year term of the deal and immediately lifts pension payments.

The pact, longer than ones Boeing previously signed with the IAM, “addresses the union’s job-security issues while enabling Boeing to retain the flexibility needed to run the business,” Scott Carson, president and chief executive of the Boeing Commercial Airplanes division, said in a statement.

Boeing now must turn to its labor negotiations with its engineers and technical workers. Boeing’s current contract with the Society of Professional Engineering Employees in Aerospace expires Dec. 1, MarketWatch.com reported.

Credibility Quandary

Scott Hamilton, an aviation consultant and managing director of Leeham Cos. LLC in Sammamish, Wash., believes that first test flight may not take place until the second quarter of next year.

The mounting delays are “the cumulative effect of issues they find in putting these airplanes together, as well as the strike impact,” Hamilton said.

Boeing, the world’s second-largest commercial airplane maker after Europe’s Airbus, has roughly 900 orders for the Dreamliner. The strike put it behind schedule on 80 deliveries.
The first airline scheduled to receive one of the planes, All Nippon Airways Co. Ltd. (OTC ADR: ALNPY), expects to get its first Dreamliner in August.

According to Hamilton, the ongoing global financial crisis has caused only two cancellations and 80 delivery deferrals; Boeing has said that other customers quickly grabbed those production slots.

The 787 Dreamliner is Boeing’s first newly designed jet since airlines started flying the 777 in 1995, and it will be the world’s first large commercial airplane made mostly of the carbon-fiber composites, which are more durable than aluminum.

It remains a competitively strategic airplane for Boeing. The reason: The competing Airbus A350 won’t be ready before 2013, which is a key reason that Boeing has an order backlog for the Dreamliner that reaches all the way to 2017 or 2018.

Even so, the persistent delays have eroded Boeing’s credibility with investors and with customers, Hamilton told Forbes.com.

“Boeing lost [its] credibility on the 787 program a long time ago,” he said. “What this does is [raise] additional questions about what’s next.”

The test-flight delay was announced Tuesday. Boeing shares nosedived $3.83 each, or 7.73%, to close at $45.72 yesterday (Thursday). They are down 54% from their 52-week high of $98.43, and are down more than 50% since the start of the year.

Source: Boeing Machinists Strike Will Delay Dreamliner Jetliner Test Flight Until the New Year, Company Says

The Boeing statement announcing the agreement did not provide details of the union vote. A simple majority of the striking members of the International Association of Machinists and Aerospace Workers union was all that was needed to ratify the deal.

The workers had walked off the job Sept. 6, halting all commercial-aircraft production. After talks broke down – resulting in the two sides not meeting for weeks – contract negotiations resumed Oct. 23. The Chicago-based company and the IAM reached a tentative agreement on Oct. 27.

It was the longest strike in 13 years: The union walked out for 28 days in 2005 and 69 days in 1995.

Both sides claimed victory this time around. The union said that it “won the battle and made some significant gains,” while Boeing claimed it had “retained the flexibility necessary” to manage its business, Reuters reported.
Union workers were to return to work for the third shift yesterday.

The production walked off the job because of a dispute over contract provisions related to health-care benefits and job security. The machinists had initially wanted a 13% pay raise over three years and to rewrite certain language in the contract relating to outsourcing. The agreement reached Monday gives workers a 15% raise over the four-year life of the contract and gives the union more scope for challenging Boeing’s use of outside contractors. The deal also grants lump-sum payouts totaling at least $8,000 per employee over the four years. It also immediately lifts pension payments.

The pact, longer than ones Boeing previously signed with the IAM, “addresses the union’s job-security issues while enabling Boeing to retain the flexibility needed to run the business,” Scott Carson, president and chief executive of the Boeing Commercial Airplanes division, said in a statement.

Boeing now must turn to its labor negotiations with its engineers and technical workers. Boeing’s current contract with the Society of Professional Engineering Employees in Aerospace expires Dec. 1, MarketWatch.com reported.

Boeing originally predicted the strike would last about a month, Money Morning reported. Back in mid-September, Tom Buffenbarger, the union’s national leader, told The Seattle Times that if the strike costs Boeing $100 million a day in lost sales – as many Wall Street analysts estimated – it would take strikers one month and one week to drain Boeing’s $10 billion cash reserve.

The union represents about 25,000 Boeing production workers in and around Seattle, another 1,500 in Gresham, Ore., and 750 in Wichita, Kan, TV station KXMB in Bismark, N.D. reported.

Boeing’s shares jumped $1.72 each, or 3.39%, to close at $52.42 Friday. On Wednesday, when the union announced it would hold the ratification vote Saturday, the shares soared $6.55 each, or 15.5%, to close at $48.91. The company’s shares still are down 47% from their 12-month high of $98.71.

Source: Boeing Union Workers Ratify Four-Year Pact, Ending Eight-Week Strike

Boeing’s shares soared $6.55 each, or 15.5%, to close at $48.91. They are still down 50% from their 12-month high of $98.71 and are down 45% for the year.

It was the longest strike in 13 years: The union walked out for 28 days in 2005 and 69 days in 1995.

Both sides claimed victory this time around.The union said that it “won the battle and made some significant gains,” while Boeing claimed it had “retained the flexibility necessary” to manage its business, Reuters reported.

Saturday will be the 57th day of the walkout by unionized machinist workers, who have shut down Boeing’s commercial-jetliner-assembly business since they left their jobs on Sept. 6., in a dispute over contract provisions related to health-care benefits and job security.

The machinists had initially wanted a 13% pay raise over three years and to rewrite certain language in the contract relating to outsourcing. The agreement reached Monday gives workers a 15% raise over the four-year life of the contract and gives the union more scope for challenging Boeing’s use of outside contractors.

Boeing originally predicted the strike would last about a month, Money Morning reported. Back in mid-September, Tom Buffenbarger, the union’s national leader, told The Seattle Times that if the strike costs Boeing $100 million a day in lost sales – as many Wall Street analysts estimated – it would take strikers one month and one week to drain Boeing’s $10 billion cash reserve.

The union represents about 25,000 Boeing production workers in and around Seattle, another 1,500 in Gresham, Ore., and 750 in Wichita, Kan, TV station KXMB in Bismark, N.D. reported.

Source: Striking Machinists to Vote Saturday on Deal To End Boeing Walkout – Shares Soar

But for investors with an interest in long-term profits, this is a story that’s well worth a detailed look. It will leave you with a very clear understanding of why China is a “must invest” kind of market. And it will demonstrate, yet again, how committed China is to becoming a world economic superpower, as well as the tenacity that’s likely to make that happen.

Let’s start with a look at the basics.

Two weekends ago in Shanghai, the Chinese government unveiled its first “jumbo” passenger aircraft company, a venture that’s labeled as the Commercial Aircraft Corp. of China Ltd. (CACC). By “jumbo” jet, China is referring to the so-called widebody airliners that carry 200 to 800 passengers and make globetrotting trips to almost any point on the globe.

Right now – and for many years – the world jumbo-jet market has belonged to just two companies:

• The Boeing Co. (BA), the U.S.-based airliner industry pioneer that’s America’s biggest exporter.
• And the pan-European venture, Airbus SAS, a subsidiary of European defense giant EADS NV.

With its 747 “Jumbo Jet,” Boeing both defined and dominated the jumbo market. The jetliner, with its distinctive humpbacked silhouette, made its first commercial flight in 1970, and held the passenger-capacity record for 37 years – a mark that was finally eclipsed by the Airbus 380.

Lockheed Corp. – now Lockheed Martin Corp. (LMT) – was the first to pull the ripcord on the jumbo-jet market. Its L-1011 TriStar jet had been the third widebody jet to enter operation, following the 747 and the McDonnell Douglas DC-10, which was built by McDonnell Douglas Aircraft Corp, a defense/commercial airliner firm. Lockheed launched the jet in 1968 and, thanks to hugely disappointing orders (it only built 250 of the jets), ceased production in 1984.

McDonnell Douglas stayed around a bit longer. But it finally merged with Boeing in 1997, joining a long list of aerospace firms swallowed up by bigger suitors.

If the jumbo-jet market sounds like a tough one to crack, that’s because it truly is. But those difficulties don’t emanate from a lack of demand: The market is huge.

The $3 Trillion Shopping List

Indeed, over the next 20 years, Boeing has forecast that air carriers worldwide will require 28,600 commercial aircraft with a value of $2.8 trillion. The Boeing forecast is generally viewed as the world’s best analysis of the global market for commercial airliners and cargo aircraft. And this forecast isn’t limited to jumbo-sized passenger jets: It includes short-range connector planes, regional jets, cargo planes and the jumbos.

The huge revenue potential of the global airliner market – combined with the low number of viable competitors and the high barriers faced by new potential entrants – has been a big reason that Money Morning’s investment gurus all view Boeing as a promising profit play for years to come. Not even China’s plans will change that viewpoint.

But with such a large potential market, many observers find it surprising that there aren’t more potential players.

That’s changing – or at least it is at the lower end of the market. China and Russia are both well along on government-backed programs to develop a regional jetliner for sale to global customers. In the past month or so alone – as was reported here in Money Morning – Japan entered the regional jetliner shootout: Japan’s Mitsubishi Heavy Industries Ltd. (PINK: MHVYF) has unveiled a plan to develop a “regional” jetliner for use by airlines all around the world. The development work alone is expected to cost several billion dollars, but the program has the backing of both Toyota Motor Corp. (TM) – the world’s No. 1 automaker by sales – and the Japanese government.

Mitsubishi Heavy hopes to have the jet in the air by 2013 and is aiming to sell 1,000 of the airplanes over the next 20 to 30 years, grabbing one-fifth of expected new demand in a market that is projected to roughly quintuple to more than 5,000 planes by 2026.

However, it could be a bumpy flight: Incumbents Bombardier Inc., of Canada, and Embraer (Empresa Brasileira de Aeronautica SA) (ERJ) of Brazil, currently dominate the short-range jetliner market. Both the China and Russia ventures will take wing well before Japan’s new jet, and the eventual existence of all five combatants in this slice of the airline market could lead to some pretty congested airspace – especially since several players are expected to link up with market-savvy foreign heavyweights, including, potentially, Boeing.

As tough as that sounds, attacking the jumbo-jet market will be tougher still. Even with fewer contestants.

Jumbo Challenges for a Jumbo Jet

The tremendous appetite for capital, the engineering challenges that range from complex aerodynamics to new composite materials, and the need to be able to manage a string of suppliers scattered about the globe are just a few of the hefty demands that make this mountain too high for all but a few global companies to climb.

Right now, in fact, there are only two new jumbo jet programs under way, either in development or in testing, and both have been riddled with technical problems that have resulted in pushed-back delivery dates. There are:

• The Boeing 787 “Dreamliner,” a replacement for the company’s Boeing 767. It’s making heavy use of composite materials and depends heavily on a network of global suppliers, and delays have pushed the delivery date for the first jets well into next year.
• And the Airbus A350, a replacement for the Airbus A330/A340 line, and a program whose many delays have pushed its delivery date out to an estimated 2012 or 2013, according to several sources.

Given that huge companies such as McDonnell Douglas and Lockheed have gone up against Boeing and failed, many analysts are skeptical about the “commercial prospects” of a jumbo jet designed and built in China. China has virtually no experience in this market and the two other (known) attempts – ventures with Douglas and Airbus – ended in failure.

And even if China succeeds, it’ll be a good 20 years before U.S. or European airlines flying China-built jets will be ready to lose your bags on a regular basis.