I got an interesting e-mail last week from a former grad school classmate who's still in New York. He wanted to know what the word was out here about last week's announcement of another 787 delay. The scuttlebutt on the Street, he said, is that the problems with Boeing's 787 are so bad, that many investors now don't believe that the plane will ever fly.  

OK, so I'd call that an incredible over-reaction. But it does underscore the credibility issue Boeing is facing right now: Wall Street expected Boeing would have problems getting the 787 built; Boeing said no, we'll deliver on time; then when Boeing acknowledged it was going to be late, Wall Street said "See? We told you so." Then, thinking as Wall Street often does, researchers reasoned that if Boeing is admitting that things are this bad, they must actually be even worse.

And that's how you get rumors that the plane will never fly, and stock pundits advising on why you should short the stock in order to make money as the price falls.  

Let's get this straight: the 787 will fly. The only question is when, and will it meet all of its lofty performance goals or not.  

Sure, the Dreamliner's a plastic airplane, but Boeing and its partners have built planes with composite components before. It's not the composite materials themselves that are revolutionary; what's revolutionary is that for the first time, someone has figured out a way to mass-produce composite airframe parts in the kinds of volumes that are required to make a mostly composite commercial jet feasible, and economically viable. 

At least, that was the plan, and here is where we get to the heart of the real problem the 787 faces: not the airplane itself, but the way it's being built.

I've often argued that the date of the first 787 delivery is less important than the date of the 100^th delivery. My thinking: If the first delivery is late (which it is), that shows only that Boeing and its suppliers had problems getting the global assembly line started. But if the 100^th is late, that's a sign that the global supply chain is flawed. 

Guess what? The 100^th delivery is going to be late, and the gleaming new 787 supply chain is starting to look more like a set of rusty shackles. Is it irretrievably broken? As the Master of Sammamish himself, Leeham's Scott Hamilton, noted last week: "it's hard to say it's not, under the circumstances." Hamilton goes on to say he doesn't think the supply chain is fundamentally flawed, but adds that "It's going to take Boeing a long time to get this under control." 

Make no mistake, Boeing does have to get this under control, because it's stuck with this supply chain. These are one-of-a-kind parts being made by one-of-a-kind tooling. It's not as if Boeing could dump Vought as a supplier and turn to Lockheed - Lockheed would have to build a new factory and start from scratch too. And while Boeing conceivably could take some of the work back in-house, as Machinist union leaders are suggesting, that would mean shelling out $400 million or so to build its own factory and autoclave - which was a major reason why Boeing outsourced so much of it in the first place. 

In any case, Boeing's going to have to shell out some cash to airlines, in the form of late penalties. Air India and Qantas were quick to announce their intent to seek compensation last week. More will follow. And as my friends at The Daily Herald in Everett note, the suppliers - even those delivering on time - are going to be hurt. Many have contracts that don't allow them to get paid until Boeing starts deliveries. Boeing may have to bail out some of them. 

As we've discussed before, this won't be a one-time hit to Boeing's bottom line: program accounting allows the company to spread out those costs over the life of the program. So don't expect big losses in the next couple quarters. But it will lower the per-unit profit on each plane. And shrinking profits, we'd all agree, are always a problem. 

Someday, the 787 will fly, and it will be an engineering marvel. Boeing's still got to prove that it can make the global assembly line fly just as well.