Broken Promises Do Not Make Investors Smile

Recently, Boeing (NYSE: BA  ) and its launch customer ANA announced their plans to fly the new 787 Dreamliner to Japan. Their goal is to simulate in-service operations that they hope will validate the aircraft's operational readiness. But considering all the problems Boeing has had with the Dreamliner, should investors remain skeptical?

Has the nightmare ended?
To say that Boeing's Dreamliner has had a few problems is a massive understatement. Its 2009 test-flight cancellation, and Boeing's failure to deliver on schedule, cost the company more than a dozen orders of its 787 Dreamliner from Qantas alone. Boeing's failure has also strained its relationship with its suppliers Spirit AeroSystems (NYSE: SPR  ) , Precision Castparts (NYSE: PCP  ) , Honeywell (NYSE: HON  ) , and General Electric (NYSE: GE  ) . Spirit went so far as to file claims against Boeing, and Boeing has agreed to pay.

But is Boeing's latest announcement a sign that the company has moved beyond these troubles?

Up in the clouds
This is definitely a step in the right direction for Boeing, but given its past failures, optimism is a little hard to muster. Boeing claims that it plans to deliver the first 787 to ANA in August or September, but with all of the setbacks so far, this claim has to be met with a bit of skepticism. If Boeing is able to deliver as promised, the Dreamliner stands to be a great money-maker. Still, the word to focus on is "if."

That brings me to my next question …
Boeing recently won a fixed-price $35 billion contract to build 179 KC-46A tankers for the U.S. Air Force, and it is supposed to deliver the first 18 by 2017. Dennis Muilenburg, Boeing's defense and space CEO, stated that "we don't do airplane design in the public realm," though he has alluded to the fact that the tanker will be related to an as-yet undeveloped freighter version (designated 767-2C) of the 767-200ER. It's also rumored that the KC tanker's flight deck will be based on the Boeing 787 Dreamliner's digital flight deck.

With the amount of setbacks the Dreamliner has experienced, is it reasonable to think Boeing will be able to deliver the tankers on time? Boeing's reputation in underbidding and promising unattainable goals has already resulted in skepticism around this fixed-price contract. In a recent sign of diminished confidence, Capitol Hill lawmakers recently implemented a requirement that all modifications of $5 million or more be submitted to Congress within 30 days for review. It certainly seems that those with detailed knowledge of the program have their doubts. Maybe you as an investor should do the same.

Only time will tell whether Boeing can execute as promised. However, if past performance is indicative of future performance, I'm going to have to say it won't. A failure on Boeing's part will prove great news for competitors Northrop Grumman (NYSE: NOC  ) , and General Dynamics (NYSE: GD  ) -- reducing Boeing's chances of winning future contract bids.

Crash and burn, or fly high?
Yes, Boeing may be able to make its Dreamliner come together, and it may be able to deliver the tanker on time, but with its past history of delays and hold-ups, you might do well to take a closer look at those competitors.

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Fool contributor Katie Spence likes to keep her feet, and her pocketbook, firmly grounded. She owns shares of Northrop Grumman. The Motley Fool owns shares of General Dynamics and Northrop Grumman. Motley Fool newsletter services have recommended buying shares of Spirit AeroSystems Holdings and Precision Castparts. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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