S7 cancellation latest hurdle for 787 program

Russia's S7 Airlines has canceled its order for 15 787s, it confirmed yesterday, becoming the first carrier to terminate a major deal for Boeing's delayed next-generation widebody.

The cancellation date was unclear, but Boeing conceded it had lost a 787 order when it reported its fourth-quarter and full-year 2008 results Wednesday. S7 identified itself as the customer yesterday. The airline did not offer a reason for the cancellation but said in a statement that it "retains interest in using the Dreamliner and at the moment is looking into receiving the planes under a leasing scheme at an earlier date, for which it is in negotiations with several leasing companies."

Its order, which also included 10 purchase rights, was placed in May 2007 (ATWOnline, May 30, 2007). The firm aircraft were valued at $2.4 billion at list prices and were scheduled to begin delivering in 2014. A Boeing spokesperson told RIA Novosti that the company "is still in daily contact with S7, which remains an important client."

Boeing's 787 backlog now stands at 895 from 58 customers. Overall, it has taken 914 gross orders for the Dreamliner. In addition to the S7 cancellation, Xiamen Airlines in 2006 replaced an order for three 787s with an order for seven 737-800s and Azerbaijan Airlines replaced one 787 with one 767-300ER last summer (ATWOnline, Aug. 8, 2008).

The manufacturer has delayed the 787 program five times, with the latest postponement in first flight and first delivery announced last month (ATWOnline, Jan. 28), frustrating customers that made the aircraft a central component of growth plans. Continental Airlines, which has firm orders for 25, said yesterday it does not expect to take delivery of its first 787 until 2011 and will receive three that year at best. It originally expected to start receiving 787s this year.

Chairman and CEO Larry Kellner told reporters and analysts that he fears the delivery rate of CO's remaining 22 787s will be "slower" than previously anticipated. "We're clearly going to be two or three years behind our [original 787 deployment] plan," he said. The carrier has slowed international growth owing to both 787 delays and the weak global economy. Kellner said it "won't go to 5%-7% growth [its targeted international capacity expansion rate] until we get those planes" regardless of how fast the economy recovers. He said that despite the delays, the 787 will be a "game changer" and give CO the "flexibility" in long-haul flying it now lacks.