Boeing on target for 787 deliveries, though costs are a concern

By Alwyn Scott

SEATTLE (Reuters) - Boeing Co has more than enough 787 Dreamliners in the production pipeline to meet its year-end delivery target of 110 aircraft, despite concerns a shortage of seats could cause the world's biggest aircraft maker to miss its target, according to industry experts and a Reuters review of its factory.

A Reuters survey of jets in production at Boeing's factory in Everett this week showed 14 of the high-tech planes parked outside, and at least five undergoing assembly inside.

Boeing has to deliver 14 787s in December to meet its year-end target, after delivering 96 through the end of November.

The company has delivered eight 787s this month, leaving just six for the remainder of the year, according to industry sources and plane-spotting blog All Things 787.

Concern about the target rose after French seat maker Zodiac Aerospace SA said on Dec. 11 that production delays on seating would continue to affect its profits

Boeing declined to comment.

The pace of 787 deliveries is important to Boeing investors as a gauge of progress in lowering the cost of building each jetliner. In theory, aircraft become cheaper to produce over time as workers learn procedures and iron out kinks on the factory floor.

Three years after the 787 entered service, Boeing continues to lose as much as $30 million on each 787 it produces, according to Richard Aboulafia, an analyst at Teal Group. He bases the figure on Boeing's deferred production cost, which reached $25.2 billion in the third quarter, more than analysts expected.

"The continued creep up in 787 deferred production costs means that profitability ramp-up of the program may be slower than previously expected," Ron Epstein, an analyst at Bank of America Merrill Lynch, wrote in a note to clients at the time.

Boeing has said it is incurring more deferred costs in part because it is buying parts for new variants of the 787 to ensure they are on hand when the factory needs them.

Epstein expects Boeing to beginning digging out from those costs late next year or early next year, but that depends on smooth production and the steady delivery of 787s to customers.

(Reporting by Alwyn Scott. Editing by Andre Grenon)