RevisedOctober14,2008

Boeing787:TheDreamliner(B)
In April 2008, Boeing confirmed a delay in the 787airplane and announced a 14month
delayindeliveringBoeingsmostanticipatedairplane.TheBoeing787airplane,tobeput
in service in 2008 initially, has become Boeings bestselling new plane ever; as of
September 2008, the Boeing company had orders for 895 airplanes from 58 customers
worldwidewithanestimatedbacklogvalueof$151billion(seeExhibit1forthedifferent
787airplaneconfigurationsthatBoeingoffers).

Although not a fullblown crisis such as the one faced by Airbus with its A380airplane
delays,theannouncementwasnonethelessapotentiallyserioussetbackforBoeing.Notes
the Wall Street Journal: Some analysts believe Boeing could be liable for as much as $4
billion of concessions and penalty payments to airlines for missed deadlines. Boeing . . .
plans to book the first 25 deliveries at zeroprofit margin to cover penalties.1 Analyst
estimatesindicatethatthedelaycouldcostBoeingover$2billiondollarsinpenaltiesalone,
plusadditionalR&Dexpensesoverthenextfewyears(seeExhibit2).

AccordingtoBoeingsrevisedschedule,thefirsttestflightofthe787airplanewasexpected
to be carried out in late 2008, and the first deliveries in the 3rd quarter of 2009. The
companyalsoplannedadramaticallyslowerrampupinproduction;Boeingsgoalnowisto
produce 10 787s a month starting in 2012, a figure significantly lower than originally
planned (see Exhibit 3). Notes Boeings 787 spokesperson, Yvonne Leach, the average
delayforall58787customersisexpectedtobeabout20months.2

ReasonsandResponsetotheDelays

ReasonsfortheDelay

Boeingattributeditsfirstdelay,announcedinOctober2007,toanunexpectedshortageof
fastenersthenutsandboltsthatholdanairplanetogether.Thejobofgettingfasteners
becamemorecomplicatedandresultedinfurtherdelaysbecausethesupplierswhorushed
tomakethemdidnotproperlydocumenttheirworkasrequiredbyfederalauthorities.

ProfessorsSureshKotha,Olesen/BattelleChairedProfessor,UniversityofWashington,FosterSchoolofBusiness,andRichard
Nolan, William Harding Professor of Business Administration (Emeritus), Harvard Business School, and Philip M. Condit
ProfessorofBusinessAdministration,UniversityofWashington,FosterSchoolofBusinesspreparedthiscase.Thecasewas
developedsolelyasthebasisforclassdiscussion.Casesarenotintendedtoserveasendorsements,sourcesofprimarydata,or
illustrationsofeffectiveorineffectivemanagement.

1J.L.Lunsford,BoeingCEOFightsHeadwindDespiteProfitGrowth,787DreamlinerAndTanker

ContractLossTestMcNerney.TheWallStreetJournal,25April2008,B1.
2AccordingtoTheSeattleTimes(May9,2008)InternationalLeaseFinanceCorp.(ILFC),thelargest

customerforthe787airplanes,wastoldthatitfacedanaveragedelayofover27months.

In addition to lack of fasteners, reports The Wall Street Journal: Honeywell International
Inc.[was]scramblingtocompletehundredsofthousandsoflinesofcomputercodethatwill
run the airplanes flight controls, a task . . . that both Honeywell and Boeing [had]
underestimated.3 In January 2008, Scott Carson, CEO Boeings Commercial Airplanes
division, announced the second delay by noting the following: [W]e continue to be
challengedbystartupissuesinourfactoryandinourextendedglobalsupplychain.4He
assured Wall Street analysts and airline customers that Boeing intended to conduct a
comprehensive assessment of its supply chain and production system capabilities to
determinethedetailsofthe787sflighttestprogramandinitialdeliveryprofile.However,
at this time, he refrained from providing details about when customers could expect
airplane deliveries. In April 2008, Boeing officials announced the third delay and revised
thescheduleforthe787airplanedeliveries.Inannouncingthisdelay,Carsonnoted:

Ourrevisedscheduleisbuiltuponanachievable,highconfidenceplanforgettingusto
ourpoweron[inJuly2008]andfirstflightmilestones[inNovember2008].Also,while
the fundamental technologies and design of the 787 remain sound, we have inserted
some additional schedule margin for dealing with other issues we may uncover in
testingpriortofirstflightandintheflighttestprogram.5

FromBleedingEdgetoLeadingEdge.InalettertoBoeingemployeesdiscussingthe
thirddelayfacingthe787dreamliner,JamesMcNerney,BoeingsCEO,inanopenletterto
employeeshadthefollowingtosay:

Tome,twothemeshaveemergedfromthe787atthisearlystageinitslife.Onecenters
on innovation, the other is on execution. . . . Fundamental, gamechanging innovation
likethatwerepursuingonthe787usuallyhasableedingedgequalitytoitmeaning
it goes beyond leading edge into a realm where both the risks and the potential
returnsarehigh....However,ourstruggletoexecutehascomeataprice,nottheleast
ofwhichistheimpacttoourcustomerrelations.6

Asanexampleofthebleedingedgeinnovation,publishedreportspointtothechallenges
Boeing has faced with composites the carbonfiber technology used for the majority of
structuralsectionsoftheairplane(seeExhibit4).NotesBusinessWeek:
ThecarbonfibertechnologyhaspresentedadauntingchallengeforBoeingengineers.If
componentsoftheplanearetooheavy,theplanelosesitsenergyefficiency.Butifthey
are too light, the parts and even the entire plane might not be structurally sound. That
wasthecasewiththecenterwingbox,thecriticalsectionoftheplanewherethewings
areattached.Itwasfoundtobetoolightandneeded[strengthening].Engineersdevised
a patch for the first six aircraft; the seventh will have the redesigned wing box
incorporatedfromthestart.7
Designingthepatchcostthe787programamonthindelays,andredesigningthewingbox,
primarily the responsibility of Boeings partner, was now Boeings concern. One analyst

3J.L.Lunsford,Boeing787FacesLessRoomforError.TheWallStreetJournal,September6,2007.
4BoeingPressRelease,BoeingShiftsSchedulefor787FirstFlight.January16,2008.
5BoeingPressRelease,BoeingRevises787FirstFlightandDeliveryPlans.April09,2008.
6BoeingPressRelease,TimetoDeliveronthe787.April21,2008.
7J.Crown&C.Matlack,BoeingDelaysDreamlinerAgain.BusinessWeek,April9,2008.

noted that is a kind of biggie and poses residual risk until the airplane flights tests are
completed.8

Blaming Boeings Business Strategy. Many blamed Boeings business strategy for the
delays. Boeing has outsourced an unprecedented share of responsibility for the 787
manufacturingtooverseasrisksharingpartnersinItaly,Spain,andJapan(seeExhibit5).
AccordingtoBusinessWeek:[M]anyofthesepartnercompanies[firsttiersuppliers]have
struggled,eitherinbuildingthecomponentsthemselvesorgettingthepartstheyneedfrom
others [secondtier suppliers], in time to meet Boeing's rigorous construction schedule.9
FurtherareportinTheWallStreetJournalnoted:

BoeingextolledthebusinessvirtuesofhavingsuppliersfromasfarawayasJapanand
Italy build much of the fuelefficient new jetliner, with Boeing performing final
assembly. . . . But the plan backfired when suppliers fell behind in getting their jobs
done,...[and]Boeingwasforcedtoturntoitsownunionworkforcetopiecetogether
thefirstfewairplanesaftertheyarrivedatthecompany'sfactoryinEverett,Wash.,with
thousandsofmissingparts.Thatfueledbothangerandanxietyamongunionworkers.10

Published reports pinpoint to the botched assembly of the first 787fuselages at two
factories in Charleston, S.C. as a major reason for the delay. At Charleston, S.C., Vought
AircraftIndustriesmanagesonefactory,andGlobalAeronautica(GA),analliancebetween
Vought and Italy's Alenia, manages the other. GA is responsible for integrating the large
fuselagesectionsfromItalyandJapanwithBoeingfurnishedparts.Accordingtopublished
reports: The two factories planted here to build big Boeing 787 Dreamliner fuselage
sectionsbeganasadisastrousexperienceinoutsourcing.Theirincompleteworkplayeda
largepartinthesnafusthatsnarledthefinalassemblylineinEverettthathasdelayedthe
787sfirstflightby14months.11

ElmerDoty,CEOofVought,hadthefollowingtosayaboutsuchreports:

Voughts role in the venture became problematic when the supply chain broke down
and work that was to be completed by other major suppliers arrived in Charleston
unfinished....TheproblemwasVoughthadnocontrolovertheprocurementofthose
largepieces.Boeing,astheprimecontractorwasresponsibleformanagingthosemajor
partners....Tomanagethetraveledworkefficiently,youneedthatresponsibility....
Thatisbestdonebytheprime[contractorBoeing].

For instance, Vought points out that while Israel Aircraft Industries was contracted to
supplythe787planesfloorgridasasinglestructure,insteadVoughtreceivedpieceparts.
ReportsinthemediaalsonotethattheworkforceinSouthCarolinalackedstrongaerospace
experience such as that found in Everett, Washington, home of Boeings commercial
airplane division and this lack of experience of the workforce is responsible for some the

8D.Gates,TheLatestDelayofBoeing787PushesBackFirstDeliverytoThirdQuarterof2009.The
SeattleTimes,April10,2008.
9J.Crown&C.Matlack,BoeingDelaysDreamlinerAgain.BusinessWeek,April9,2008.
10J.L.Lunsford,OutsourcingatCruxofBoeingStrike.TheWallStreetJournal,September8,2008.
11D.Gates.BoeingExpertiseSpeedingup787partners.TheSeattleTimes,June11,2008.

delays.12 Reports also have pinpointed issues at the Spirit Aerosystems Plant, formerly
BoeingWichita,forthedelays.Spiritisresponsiblefortheforwardfuselageoftheairplane
includingtheplanescockpitinstallation(seeExhibit5).

RespondingtotheDelays

Boeinghasrespondedquicklytoaddresssuchdelays.Withindaysofannouncingthefirst
delayinOctober2007,thevicepresidentandgeneralmanager,whowasresponsibleforall
aspectsofthe787programsinceitsinceptionin2004,wasreassigned.PatShanahanwas
namedthevicepresidentandgeneralmanagerofthe787program.Shanahan,whojoined
Boeingin1986,ismostrecentlycreditedwithturningaroundtheChinookhelicopter,theV
22 Osprey tiltrotor airplane, and groundbased missiledefense programs at Boeings
Defense division. Responding to the Wall Street analysts questions, Shanahan noted:
WheredoIthinktheinherentriskis?Ithinkitsinthecapabilitiesofthesupplychaintodo
thingsthatweneedtohavedone....Thatistheuntestedpartofthisproductionmodel....
Thatswhereourenergyandattentionis.

Shanahanquicklyrevampedthe787executiveteamandreorganizedtheresponsibilitiesof
Boeingexecutivesinthreeareas:(1)airplanedevelopment,(2)theglobalsupplychain,and
(3)thefinalassemblyanddeliveryareas.HealsotookactiontocomplywithMcNerneys
insistencethatthe787teambemoreaggressivewithsuppliersbystickingtheirnosesinto
suppliers operations, including stationing Boeing employees in every major suppliers
factory.13 For example, he appointed Scott Strode to oversee all development activities
withVoughtAircraftIndustriesinanefforttostrengthenmanagementofthesupplychain
(seeExhibit6foralistofmanagementchangesunderPatShanahan).

To solve the problems in Charleston factories, for example, Boeing bought out Voughts
interest in the joint venture and followed it up with changes to speed things along. Now
Boeing and exBoeing managers run the Charleston plants; Joy Romero, a former Boeing
employee with 25 years of Boeing managerial experience manages Voughts plant, and
MarioCapitelli,aBoeingexecutivewithsignificantoperationsexperience,runsGAsplant.
Two retired Boeingplant managers initially brought in as consultants to solve problems
nowassistCapitelli.14

NotedRomero,Voughtsplantmanager:

VoughtsCharlestonoperationshasfixedtheproblemsthatmarredearlydeliveriesand
isnowapproachingBoeingsoriginalconcept....Theproofisthis:DreamlinerNo.1s
rearfuselagelefttheCharlestonplantinMay2007withonly16percentofitsstructure
completedandnoneofthesystemsinstalled.ButwhentherearfuselageofDreamliner
No.4wasdeliveredtoEverettlastweek(June2008),ithad98percentofthestructure
finishedand87percentofthesystemsinstalled.15

Also,VoughtIndustriesisnowresponsiblefortheassemblyoftheairplanefloorgrid,while
IsraelAircraftIndustriesrolewillbelimitedtosupplyingthefloorpieces.Changessuchas

12D.Gates,June11,2008.
13J.L.Lunsford,BoeingCEOFightsHeadwind.TheWallStreetJournal,April25,2008.B1.
14D.Gates,BoeingExpertiseSpeedingup787Partners.TheSeattleTimes,June11,2008.
15D.Gates,June11,2008.

thesewerebeingcarriedoutthroughoutBoeingsglobalsupplychainsysteminaneffortto
rationalizetheproductionsystem,andredrawtheareasofresponsibility,actionsneededto
speeduptheproductionoftheairplane.

ProductiondelaysattheSpiritAerosystemsplant,formerlyBoeingWichita,werealsosaid
toberecoveringwell.ManagersattheplantwereconfidentthatSpirit,whichwasworking
on Airplane #4 (in June 2008), will deliver the next airplane virtually complete. They
attributed its success to Spirits Boeing heritage and the familiarity with tools, processes,
andexperiencegainedinpaststintsinEverett,Washington.16

Reflectingonthechangesandprogress,ShanahanremarkedinApril2008:

We have addressed the major challenges that slowed our progress while trying to
complete the primary structure the parts shortages, engineering changes, and
manufacturing changes and we are well into the systems installation that is the
precursor to putting power on the airplane for the first time. We have also worked
closely with our partners to achieve higher levels of completion of their parts of
subsequentairplanes,andwewillcontinuetodriveimprovementsinthesupplychain
andproductionsystemperformance.17

Following the revised schedule announced in April, the 787team, under Shanahan, has
successfully completed the power on sequence for the first 787airplane in June 2008.
Thepoweronsequenceisacomplexsetoftasksandteststhatbringelectricalpoweronto
the airplane and begin to exercise the use of the electrical systems.18 It represented a
major milestone paving the way for the first flight test of the 787airplane to be done in
November 2008. However, not all things were going according to plan. A new wrinkle
appearedonthehorizonastrikecalledbyBoeingsmachinistsunion.

ChallengesMovingForward

ALaborStrikeThreatensProgress

On September 6, 2008 the 27,000 Boeing membersof the International Association of the
Machinists(IAM)walkedofftheirjobsafternegotiationsbetweenunionleadersandBoeing
managers failed to reach an agreement on a proposed threeyear contract. This was the
fourthtimeinBoeingshistorythatmembersofthisunionhavewalkedofftheirjobs.The
firststrikethattookplacein1948lastedfor140days.Morerecently,however,astrikein
1995lastedfor69days,andonein2005lastedfor24days.Analystspredictthatthestrike
willlastbetween30to60days.TheyestimatethatthestrikeiscostingBoeingabout$100
millionadayinlostrevenues.

BoeingsoffertotheIAMworkerswasa11%wageincreaseoverthelifeofthethreeyear
contract,aswellasacostoflivingadjustment.Italsoagreedtoincreaseworkersmonthly
pensionby$10amonthto$80(a14%increase)foreachyearofservice.Duringthefirst

16 D. Gates, Boeing Dreamliners Front End Gets Finishing Touches at Spirit AeroSystems. The
SeattleTimes,June13,2008.
17BoeingPressRelease,April09,2008.
18BoeingPressRelease,BoeingAchieves787Poweron.June20,2008.

year of the contract, Boeing offered to pay a bonus of at least $2,500 or 6% of a workers
salary,whicheverwasgreater.19Theunion,however,wantsapayraiseofatleast13%and
agreaterincreaseinpensionbenefits.

Althoughwagesandbenefitswereimportantissues,jobsecurityemergedastheissuefor
unionmembers.NotesareportinTheWallStreetJournal:

Attheheartoftheunionmachinists'strikeagainstBoeingCo.isahighstakesshowdown
oversomethingtheaerospacegiantoncetoutedasamanufacturinginnovation:Itseffort
tooutsourcekeyrolesinproducingitsnew787Dreamlinerjet....Boeingsaysitneeds
flexibility in its manufacturing to avoid the problems that have befallen other big
industrial companies, while the union is fighting to keep as many jobs as possible. The
flashpoint in that debate is Boeing's troubled 787Dreamliner program, which striking
workerspointtoasExhibitNo.1intheircaseagainstoutsourcing.20

In 2002, during the last contract negotiations with the union, Boeing inserted a contract
provisionthatisattheheartofthecurrentlabordispute.NotesTheEconomist:

The union is worried about a more insidious form of outsourcing, closer to home. A
previousagreementallowedBoeingssupplierstodeliverpartsstraightontothefactory
floor at its Seattle sites. The next step, the union fears, is for contractors to start fitting
partsontoplanesontheline,displacingwellpaidworkers.Itwantsjobsecurity,withthe
payrollheadcountlinkedtothenumberofordersandproductionrates.Itwantsachance
tocompeteformallywithoutsourcingcontractsinabidtokeepholdofthework.Butits
aggressivepaydemandsandstrikeactionwouldseemtoworkintheoppositedirection.21

Althoughtheunionleadersobjectedtothisprovisionin2002,theywereunabletomuster
the required twothirds support from their members to call a strike. According to Tom
Buffenbarger,IAMPresident,Theunionjustwantstobeabletohaveashotatmakingthe
casethatourworkerscandothosejobscompetitivelybeforeBoeingshipsthemout.22

While a prolonged strike could negatively impact the delivery of the 787airplane, some
analystsseeasilverlininginthestrikeandresultingworkstoppage.Pointsoutanarticlein
TheWallStreetJournal:

Intheshortterm,somesuppliersaretakingadvantageofthestriketocatchupwiththe
backlog that has piled up as they raced to keep Boeing supplied in recent months. . . .
It's nice to actually get caught up a bit, but it will be a different story if this thing
stretchesmorethanamonth,saidasupplierwhoaskedthathisnamenotbeusedfor

19Underthenewproposedcontract,theaverageunionmemberisexpectedtoearnabout$65,000a

yearbeforeovertimewages.Withovertimeworkerscouldtakehomeanother$10,00ayearormore
inadditionalwages.Underthecontractthatexpired,theaveragewageforaBoeingmachinistwas
about$27anhouror$56,000ayearbeforeovertimewageswereincluded.
20J.L.Lunsford,OutsourcingatCruxofBoeingStrike.TheWallStreetJournal,September8,2008.
21StrikingDifferences.TheEconomist.September11,2008,printedition.
22QuotedinLunsford,September8,2008.

fearofviolatingconfidentialityagreementswithBoeing.23

Theprogressbeingmadebythe787teamisclearlythreatenedbythecontinuationofthe
laborstrike.Publishedreportsnotethattheworkersareangryenoughtostayoutuntilthe
endof2008.24

Despite the concerns being raised by workers, Boeings senior management is confident
thatitsbusinessstrategyofoutsourcingisindeedsound.WhileMcNerney,BoeingsCEO,
admitted that Boeing has had problems executing its new strategy he sees no reason for
change.McNerneyreiteratedhiscommitmenttoBoeingscurrentapproach:

The global partnership model of the 787 remains a fundamentally sound strategy. It
makessensetoutilizetechnologyandtechnicaltalentfromaroundtheworld.Itmakes
sensetobeinvolvedwiththeindustrialbasesofcountiesthatalsosupportbigcustomers
of ours. But we may have gone little too far, too fast in a couple of areas. I expect well
modify our approach somewhat on future programs possibly drawing the lines
differentlyinplaceswithregardtowhatweaskourpartnerstodo,butalsosharpening
ourtoolsforoverseeingoverallsupplychainactivities.25

PotentialStrikebyEngineers

In September 10, 2008, Boeing engineers union, The Society of Profession Engineering
Employees in Aerospace (SPEEA), representing 21,000 workers presented a proposal to
Boeing for a new threeyear labor contract since their existing contract is scheduled to
expireonDecember1,2008.Inadditiontoseekingwageincreasesandchangestopension
and healthcare plans, the proposal was proposing limits to Boeings use of contract
labor.26 In the past, Ray Goforth, SPEEAs executive director, has called Boeing
management to correct its flawed reliance on global partners and bring the work back
[insideBoeing].Sendingengineersaroundtheworldtohelpsupplierssimplytransfersall
of the aerospace knowledge to other companies in other countries.27 Stan Sorscher,
SPEEAs director of research, has noted while outsourcing design for say sneakers may
work, outsourcing an airplane design cannot because it requires a tight community of
experienced mechanics and engineers working together to overcome the inevitable
challenges.Henoted:Wethoughtthe787wouldbethetestcaseforthis....Theresults
are in.28 In this judgment, Boeings current approach with the 787airplance was flawed
andneededreexamination.

Inamomentofintrospection,theformerheadof787program,MikeBair,notedthatBoeing
might axe the globalspanning supply chain that has caused its recent problems. He was
candidinnotingthatsomeengineeringdesignworkwaspulledbackinsideBoeingbecause

23 J. L. Lunsford and D. Michaels, Boeing Strike Rattle Key Suppliers. The Wall Street Journal,
September12,2008.
24J.L.LunsfordandD.Michaels,September12,2008.
25BoeingPressRelease,TimetoDeliveronthe787.April21,2008.
26 S. Ray. SPEEA demands return of outsourced work. The Seattle PostIntelligencer, Thursday,

September11,2008.
27 QuotedinD.Gates,LatestdealofBoeing787pushesbackfirstdeliverytothirdquarterof2009.
TheSeattleTimes,Thursday,April10,2008.
28D.Gates,IAM:Contracttalksintrouble.TheSeattleTimes,July30,2008.

someofthepartnerscouldntdeliver.HecommentedthatBoeingfoundthatsomefirsttier
contractors promptly turned around and outsourced their design engineering work to
secondtier contractors, which exacerbated the problems. He said, There are a couple of
[the supplier partners] where I could see us going back to a buildtoprint solution [as
apposed to buildtodesign followed by the 787program]. . . . The right way to do this
wouldbetohaveallthosepartnersacrossthestreet[akindofsupersite]soyoucouldjust
roll them in. . . . Well see on the next airplane programs whether we can accomplish
somethinglikethat.29

BoeingengineersbelongingtoSPEEAhavegoneonstriketwotimesintherecentpast:once
in 1993 for a day, and again in 2000 for 40 days. Notes Harley Shaiken, a laborrelations
professoratUniversityofCaliforniaBerkeley:Thewholeunderlyingissueofjobsecurityis
proving to be pivotal to whats taking place at the bargaining table, and it reflects the
success that Boeing is having. . . . Both the Machinists and the engineers want to see that
continue,buttheywantasuccessfulBoeingtomeanmorejobs,notasmallermanufacturing
presence.30 The crux of the problem for both labor unions is Boeings business strategy
employedinthe787airplaneprogramanditsuseinfutureprograms.

ThreeStrikesandYouAreOut...

Notes Richard Aboulafia, a respected analyst with the consulting firm Teal Group:I think
theres an awful lot riding on this [the 787airplane]. It is one of those threestrikesand
youreout scenarios from the standpoint of management, from the standpoint of a lot of
people who are needed to keep the faith.31 On the brighter side, the 787airplane is the
onlynewmidsizeplaneavailableinthemarketplace;theAirbusA350airplane,beingbuilt
withagoalofslowingthe787smarketpenetrationwontbedeliveredearlierthan2013,at
best. Thus, airline customers have little choice other than to wait for the 787airplane.
However,itisclearfromanalystsreportsandcustomersgrowingconcernsthatBoeingcan
illafford another delay, for a prolonged delay had the potential to turn into a fullblown
crisissimilartotheonefacedbyAirbuswithA380airplane.AndasMcNerneynotedinhis
openlettertoemployeesinApril,thereispricetobepaid,theleastofwhichistheimpact
on Boeings customer relations. Is it time, as the two labor unions asserted, to
fundamentallymodifyBoeingsbusinessstrategyfornewplanedevelopment?

29D.Gates,Boeingmayjunkworldwideassemblefornextjet.TheSeattleTimes,November7,2007.
30QuotedinS.Ray,2008.
31QuotedinD.Carpenter,Boeing787LaunchtoBeDelayedAgain.TheAssociatedPress,Thursday,
April10,2008.

Exhibit1:TheThreeProposedModelConfigurationsofthe787Airplanes

7878 7879 7873

Passengers 210250 250290 290330*

Range(NauticalMiles) 7,650to8,200 8,000to8,500 2,500to3,050

Cabinwidth 18feet,10inches 18feet,10inches 18feet,10inches

Wingspan 197feet 208feet 170feet

Length 186feet 206feet 186feet

Height 56feet 56feet 56feet

Cruisespeed Mach0.85 Mach0.85 Mach0.85

Maximumtakeoff
weight(pounds) 484,000 545,000 364,000

Totalcargovolume
(cubicfeet) 4,400 5,400 4,400

Entryintoservice 2009 2012 2010

Price(millions) $157to$167 $189to$200 $146to$151.3

Optimizedforshorter
Consideredthebase Thisstretchedversion rangeflights,thisplaneis
model,thismodelis isaimedatreplacing aimedatreplacingthe
aimedatreplacing midsizejetssuchas AirbusA300,Boeing757
midsizejetssuchasthe the767andAirbus 300,Boeing767200and
767andAirbusA330. A330. 300.

* One-class configuration
Source:BoeingCorporationandTheSeattleTimes

Exhibit2:PenaltyCostsEstimatesAssociatedwiththe787airplaneDelays
Revised
Original Deliveries
Deliveries (optimisticcase)
Assumesabout5
2008 37 planesamonth 0
Assumesalittle
over6planesa Deliveriesstart
2009 75 month 40 inOctober
Assumesalittle Assumesa
over10planesa littleover5
2010 132 month 65 planesamonth
Assumesasteady Assumesabout
stateto14planesa 7planesa
2011 164 month 85 month
Assumesa
Assumesasteady steadystateto
stateto14planesa 10planesa
2012 164 month 120 month

572 310
5,014(Total Penaltyforthe
Monthof $0.5(Monthly =$2,507 first310
Delays) X Penalty,millions) (millions) planes

Source:Jefferies&Associates,2008.

Exhibit3:Announced787AirplaneCumulativeDelays

Numberofplanesto
FirstFlight FirstDelivery deliveredby2009

Original
Timeline Aug07 May08 112

October2007
Revision Mar08 NovDec2008 109

January2008
Revision Jun08 NotSpecified

April2008
Revision* OctDec2008 JulySept2009 25

*Boeingalsochangedthetimingoftheintroductionoftwo787derivativesthe7879and787
3.The7879alargervariantoftheairplanewillbethefirstderivativeofthebaseline787with
delivery planned for early 2012 while the 7873, a shorterrange model previously slated to
deliverin2010,willbecomethesecondderivativeofthisfamily.

10


Exhibit4:MaterialsEmployedinthe787AirplanesStructure

Source: The Seattle Times

Exhibit5:MajorRiskSharingPartnersInvolvedinthe787Program

Source: The Seattle Times

11


Exhibit 6: List of Leadership Changes under Pat Shanahan

ChangesmadeafterassumingleadersinNovember2007:

Scott Strode, a VP formerly in charge of the 787airplane production, is reassigned to oversee all
developmentactivitieswithVoughtAircraftIndustries.
Mark Jenks, formerly incharge of the 787wing team, is promoted to head the 787 Development and is
responsibleforairplanedefinition,certificationanddeliveryofthefirst787airplane.
BobNoblewillcontinueasVPresponsiblefortherelationshipwithBoeingsglobalpartnersandwilllead
the787SupplyChaingroup.
Steve Westby will remain as VP of manufacturing and quality, leading the 787 Final Assembly and
Delivery.
JeffStone,mostrecently,productionoperationsleaderontheF22Raptorjetfighterprogramwillsupport
787BodyStructuresgroup.
KathyMoodiewillleadtheinteriorsinstallationandberesponsibleforpreparingtheairplanesforflight
AdditionalchangesmadeinJanuary2008:
HowardChambers,formerlyheadofBoeingsSpaceandIntelligenceSystems,wasnamedasdeputytoPat
ShanahaninJanuary2008.
JohnVanGels,formerVPofoperationsandsuppliermanagementatBoeingsdefensedivisionwasasked
tooverseemanagementofthe787supplierpartnersaswellasthefinalassemblyoperationinJ
Source:TheSeattleTimesandBoeingPressReleases.

12