- Commentary -

December 8, 2009 (FinancialWire) (By Philip Holmes) — Investors sent stocks of airframer Boeing (NYSE: BA) up on Monday. The airline industry sector it serves has been rising for weeks. Credit good news on the 787 Dreamliner for Boeing’s good fortune, while the sector is being pushed on optimism about recovery. Are we all being doped?

BA closed up 2% on the trading day, while the airline sector has broadly experienced investor enthusiasm for five weeks. Since the end of October, NYSE Arca Airline Index is up by nearly 30%.

The good feelings for Boeing were not entirely due to optimism about the airline industry. What had investors swooning was good news about Boeing’s biggest bet in the commercial sector: the 787 Dreamliner. Turns out, its first flight – which had been scheduled for the end of the year – may actually take place a bit sooner than expected.

Dreamliner has been a huge sales success, but also something of a problem child. The midsize, long-range plane booked nearly 600 orders in the months following its 2005 launch. It was originally set to be first flown in 2007, but a series of setbacks have delayed the plane’s move to production.

This isn’t entirely surprising. Dreamliner is a revolution for Boeing: it uses more composites in major structures than any other commercial airliner. While rival Airbus was an early adopter of composite airframe technology, Boeing has lagged. Still, the 787 ups the bar considerably on the use of composites versus anything else being produced in the sector.

Adding to the challenge, Boeing decided to modularize the production process, with major components being assembled at various locations then shipped to a final assembly plant and put together. Again, Airbus is ahead of the game in this respect. But while Airbus’ production facilities have traditionally been concentrated in Western Europe, Boeing’s Dreamliner team is spread all over the globe. Major structures are produced in Italy and Japan, for instance.

All of which makes delays almost inevitable. But when the delays push production of the first plane past the start of the biggest recession since WWII, the world becomes less understanding.

Will it now be a dream come true for Dreamliner? What excited airline buyers about the plane to begin – its ability to fly moderate (250 pax) passenger loads to jumbo jet distances using much less fuel per passenger mile — is still valid. An industry climbing out of recession during a time of energy uncertainty will be eager to take advantage of Dreamliner’s charms.

But what about the money? Here we hope that the global credit crunch continues to ease, and that airlines are able to raise the financing necessary to build their fleets. So far, order cancellations have not been a huge plague upon the 787 program – a testament to the aircraft’s standing in the hearts of buyers.

[Go to http://www.financialwire.net/?s=philip+holmes to see more commentaries by Philip Holmes.]

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