Approximately six months ago shares of Boeing stock were trading at $107 dollars per share. This was a significant increase in its post 9-1-1 trading days, when the stock was trading at $29 a share. Record sales, orders and earnings were the primary drivers in the stock appreciation. Boeing and Airbus have both been developing the next generation airliners for the airline industry. Airbus, a consortium of three government countries; Spain, France, and Germany, opted for a much larger plan that could carry 700-800 passengers in single flight. Boeing chose a slightly smaller, more fuel efficient plane. Several years ago, Airbus encountered significant production delays for its A380 Super Jumbo airplane. Now, is apparent that Boeing is encountering similar delays with its’ new airliner called the Boeing 787 Dreamliner. News of production delays for the 787 have significantly impacted Boeing share price. Currently, Boeing shares are trading at approximately $79 per share, down significantly from six month ago when shares were selling at $107 per share.
Why did the production delays impact Boeing stock so significantly? One of the main reasons is that Boeing will not deliver the planned quantity of 787’s in 2008 and 2009. Boeing will also be subject to penalties for failure to deliver aircrafts in accordance with its contracts. There is also concerns that the delays will impact deliveries of non 787 aircrafts as well as the factory becomes bottled up with traveled and out of sequence work. This will also negatively impact earnings due to poor performance from cost inefficiencies. Anyone familiar with Boeing knows the impact of production delays based on previous history. Lastly, until the first aircraft is delivered, there is a significant Boeing Production Delays
amount of risk as to how bad the production delays really are. Will delays continually get pushed back or will they stick to their revised recovery plan?
