Boeing 2009 Annual Report Download - page 38

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quarter of 2010. First delivery of the Intercontinental passenger variant remains scheduled for the
fourth quarter of 2011. The gap between the delivery of the last 747-400, which occurred in 2009, and
first deliveries of the 747-8 will result in lower 747 program revenues.
767 Program The accounting quantity for the 767 program increased by 12 units during 2009. In April
2009, we announced a delay in previous plans to increase the production rate.
777 Program The accounting quantity for the 777 program increased by 50 units during 2009. Delivery
of the first 777 Freighter occurred in February 2009. In April 2009, we announced that we will lower the
production rate on our 777 airplane program, affecting deliveries beginning in June 2010. This lower
production rate will decrease revenues and earnings in 2010 and 2011.
787 Program We announced on June 23, 2009 the necessity to reinforce an area of structure at the
side-of-body section of the airplane. During the fourth quarter, we completed the modifications on the
first two flight-test airplanes and the full-scale static test airplane. First flight of the 787 occurred on
December 15, 2009. A second 787 completed its first test flight on December 22, 2009. Six aircraft in
total will be involved in the flight test program, which is expected to result in certification of the 787-8 in
the fourth quarter of 2010. First delivery is also expected to occur in the fourth quarter of 2010. We
continue to work toward our planned increases in 787 production rates as well as the timely
introduction of the 787-9 derivative.
During 2009, we concluded that the first three flight-test 787 aircraft could not be sold as previously
anticipated due to the inordinate amount of rework and unique and extensive modifications made to
those aircraft. As a result, costs of $2,481 million previously recorded as program inventory as of
July 31, 2009 were reclassified to research and development expense. Additional production costs
incurred between August and December 2009 of $212 million related to these flight-test airplanes were
also included in research and development expense. We will continue to incur research and
development costs on these flight test aircraft in 2010. We believe that the other three additional 787
flight test aircraft are commercially saleable and we continue to include costs related to those aircraft in
program inventory at December 31, 2009. If we determine that one or more of the other flight test
aircraft cannot be sold we may incur additional charges.
On July 30, 2009, we acquired the business, assets and operations of Vought Aircraft Industries, Inc.’s
(Vought) 787 business conducted at North Charleston, South Carolina. The facility produces aft
fuselage sections, including the fabrication, assembly and systems installation. See Note 2. On
December 22, 2009, we acquired Alenia North America’s 50% ownership interest in Global
Aeronautica. As a result of the transaction, we are the sole owner of this entity. Located adjacent to
Boeing Charleston, Global Aeronautica is an integrator of the 787 mid-fuselage sections.
On October 28, 2009 we announced the North Charleston facility as the location for a second final
assembly site for the 787 Dreamliner program. A groundbreaking ceremony was held November 20,
2009 to mark the start of construction. Until the additional 787 assembly line is fully operational, we will
establish transitional surge capability at our Everett, Washington, location to facilitate the planned
introduction of the 787-9, the first derivative model of the 787 family. When the additional line in North
Charleston is fully operational, the surge capability in Everett will be phased out.
Looking beyond first flight, we continue to monitor and address other areas of challenge associated
with assembly of initial airplanes including management of our extended global supply chain,
completion and integration of traveled work as well as weight and systems integration. Efforts continue
to ensure we remain focused on satisfying customer mission and performance needs in light of the
anticipated weight of their respective aircraft.
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