Boeing’s Dreamliner Pain Spreads To Suppliers

The reduced production has choked the global supply chain for the aircraft, denting sales of parts and components sold by suppliers like Raytheon Technologies Corp. RTX -2.34% and Hexcel Corp. HXL -0.16% Analysts estimate Boeing has more than 100 new 787s awaiting delivery while it seeks regulatory approval for proposed inspections before handing the jets over to customers.

Boeing suppliers are looking for further guidance on the company’s plan to resume deliveries and boost production, which could come with its quarterly earnings report on Wednesday.

“We are not shipping anything today on 787,” said Raytheon Chief Executive Greg Hayes on an investor call Tuesday. Raytheon supplies around $10 million in parts and equipment, such as cockpit systems, for each of the wide-body jets.

The Dreamliner is built largely from carbon fiber composite rather than aluminum to save weight and improve fuel efficiency, with a global supply chain flying parts to Boeing’s assembly plant in North Charleston, S.C., from partners in Japan, Italy and throughout the U.S.

Albany International Corp. , which specializes in composite materials, this week flagged low 787 Boeing production, saying it expected about $10 million in revenue from the program this year compared with $50 million in 2019. Albany executives said Boeing held substantial stocks of its material in its inventory.

“Boeing’s low level of production will likely lead to very low levels of production for us for the foreseeable future and may even lead to significant production gaps,” Albany finance chief Stephen Nolan said on an investor call Tuesday.

Carbon fiber supplier Hexcel said on its earnings call last week that reduced 787 production reduced its revenue in the company’s most recent quarter.

Boeing is increasingly expected to resume 787 deliveries early next year, later than previously anticipated, people familiar with the matter said.

A Boeing spokesman said the manufacturer was coordinating with suppliers and customers while it works through comprehensive inspections and reviews. He said the company “will continue to take the time necessary to meet the highest standards.”

American Airlines Group Inc. last week said it had pushed back the expected delivery of more 787s into next year, which it said would inflate its costs and lead it to remove the planes from its flying schedule. United Airlines Holdings Inc. said last week it still hopes to receive one of the eight 787s that were due to be delivered by the end of the year.

Earlier this year Boeing said it was temporarily reducing its Dreamliner output from a planned monthly rate of five as it reassigned workers to fix finished aircraft awaiting delivery. The company has since been dealing with other production defects, including some related to certain titanium components.

The prolonged grounding of the 737 MAX left Boeing more reliant on the 787 and its defense business for cash. The Dreamliner’s problems and expectations for a flat or declining Pentagon budget have dented Boeing’s free cash flow, with analysts forecasting the company will burn through $6.5 billion this year.

Growth prospects for the defense industry were also hit by a warning from Lockheed Martin Corp. LMT -11.80% on Tuesday that its sales are set to shrink in 2022 for the first time in eight years.

Lockheed Martin’s backlog of orders for aircraft, missiles and satellites peaked around $147 billion last year. The company and its rivals now face flat or declining military spending in the U.S. and overseas.

Jim Taiclet, who took over as Lockheed Martin’s CEO last year, said sales are expected to start growing again in 2023, but at a slower clip than investors had expected.

The world’s largest defense contractor by sales is relying on winning some big, new Pentagon contracts to boost growth, Mr. Taiclet said, while accelerating share buybacks and hunting for acquisitions.

Lockheed Martin shares fell more than 11%, wiping around $12 billion from its market value, with other defense stocks also selling off.

Mr. Taiclet, a former telecom executive, has steered the company toward winning a bigger share of the Pentagon’s nascent efforts to link its weapons, satellites and personnel digitally using 5G technology.

Write to Doug Cameron at [email protected] and Andrew Tangel at [email protected]