If you enjoy following the Boeing delays on the Dreamliner here is one explanation put forward by Financial Times ‘LEX’.

“On Thursday the Seattle-based group announced the fourth delay to the Dreamliner’s schedule. Its first flight has now been postponed by up to six months into the second quarter of 2009. This is in part due to a strike and also a problem with fasteners.

There are perhaps 4m parts on the modern airliner. A problem with one can halt construction, while the solution can then impact on other parts. The Nimrod military aircraft developed by BAE Systems is one example of an initially small problem resulting in great delays and catastrophic cost overruns.

Even brief delays are expensive, both for Boeing and members of its long supply chain. For instance, the estimate for the number of jets Airbus has to deliver to break even on its A380 programme has risen from 250 to about 400 thanks to delays. As staffing makes up the vast bulk of expenses, time equates to higher costs that must then be spread over eventual sales.

Meanwhile, delivering late allows customers to impose a financial penalty. The worst case scenario for Boeing would be a failure to get production up to speed in time – 10 aircraft a month is targeted by 2012 – and then not catch up with the delivery schedule for the 910 on order.”

The financial times offers great following of Boeing’s progress.  A definite must read.

Demand for aircraft fasteners is increasing significantly with Boeing back to work.  Boeing is accelerating  deliveries for all aircraft fasteners and aircraft hardware.

IAM strike at Boeing remains at an impasse as machinists stand firm against outsourcing, delaying production of the 787 even further thus leading Delta to consider 777s as replacements for its 787 order.

We continue to receive aircraft fasteners and aircraft hardware on an earlier than quoted basis as the Boeing strike continues.

As suggested in our earlier post, the Boeing strike is giving a much needed reprieve to the aircraft fastener manufacturers to catch up on outstanding orders.  We have seen recent quoted lead times drop from 64 weeks to 40 weeks.  Two years ago a 30 week delay was considered significant, like oil prices we are just happy to have it under 1 year ($100.00 per barrel for oil).

The strike planned by Boeing machinists may be just the delay the Aircraft Fastener manufacturers need to catch up on current long lead times.  As written here previously aircraft fasteners (specifically aircraft nutplates, Hi-Lok pins, and studs) have been on a 52 week delay as Boeing and its subcontractors have placed years of production on order forcing all new aircraft fastener orders into long lead times. As grim as a walkoff by Boeing machinists sounds, it may provide an opportunity to increase the avaialbility of aircraft fasteners into the supply chain in market and therefore into Boeing’s direct supply chain.  A 2 month temporary shutdown would hurt Boeing but may challenge the resolve of the Union and in an unlikely move actually increase the production schedule of aircraft as key aircraft fasteners become more readily available.

There is an interesting analysis / conversation on www.centerofcompetenceblog.com discussing the valuation of pinnacle airlines.

The airline strategy of canceling new orders on aircraft seems short sited.  How can an airline running 1970’s technology with the associated fuel consumption, repair down time and lack of availability of spares expect to compete against new aircraft? canceling orders in today’s market to avoid additional costs will control your CAPEX down this year, but bite you in the future as competitors operate at a 30+% discount to your per hour cost structure. 

We continue to see increasing demand for aircraft fasteners despite airlines reported canceling of aircraft orders on Boeing aircraft.   This month it seems the aerospace nutplates are being replaced by Hi-Loc pins and collars.  We understand the lead time on may Hi-Loc parts are running 80 weeks from the manufacturers like Voi-Shan, Air Industries, and Hi-Shear.

We are realizing increased delays of aircraft fastener (specifically nutplate) deliveries as a direct result of the Alcoa’s buyout of Republic Fasteners. The fastener industry consolidation endorsed by the prime contractors (Boeing and Lockheed) through their sole sourcing ideology bites the delivery schedules.

On a macro view (no financial statement s analysis completed) Alcoa appears to be in a strong investment opportunity with their natural resource availability and competitive lock on aerospace fasteners.