Boeing Co said the first delivery of its long-delayed 787 Dreamliner would come in the third quarter of 2011, clearing up fears about the schedule after a November electrical fire on a test flight threw the timing into doubt.

Boeing shares rose more than 3 percent as investors were relieved the widely expected delay was not longer. The Dreamliner is already nearly three years behind its original schedule due to glitches in the supply chain and labor problems. (For a timeline graphic on Boeing and its Dreamliner: http://r.reuters.com/cuv86r )

We think investors widely expected a delay of this magnitude and, given the recovery in the stock price, have become comfortable that the 787 problems are not a show stopper, and will not have a meaningful impact on the positive trajectory of this aerospace upcycle, said Robert Stallard, an aerospace analyst at RBC Capital Markets.

Boeing shares tumbled 9 percent in the wake of the November 9 fire, which forced an emergency landing, but they have recouped that drop. The shares were up 3.3 percent at $72.37 at midday Tuesday on the New York Stock Exchange.

If Boeing can avoid further 787 issues, we think improving airline and industry fundamentals will continue to benefit the stock and potentially move its valuation higher, Stallard said.

Boeing said the new delivery date reflects the impact of the November fire and the time required to produce, install and test updated software and new electrical power distribution panels in the flight test and production planes.

This revised timeline for first delivery accommodates the work we believe remains to be done to complete testing and certification of the 787, Scott Fancher, vice president and general manager of the 787 program, said in a statement.

We've also restored some margin in the schedule to allow for any additional time that may be needed to complete certification activities, Fancher said.

The first Dreamliner delivery has been delayed repeatedly due to snags in the supply chain and labor disputes. Boeing last revised the 787 delivery schedule in September because of a delay in the availability of a Rolls-Royce Group Plc engine needed for the final phases of flight testing.

Boeing said financial forecasts and anticipated initial 787 deliveries for 2011 will be discussed after the company reports its fourth-quarter earnings on January 26.

Many industry experts had long expected the delay to Japan's All Nippon Airways Co Ltd <9202.T>, but opinions differed on how long it might be.

We are pleased, as it should settle some investors' fears, said Alex Hamilton, managing director of EarlyBirdCapital. That said, they haven't done a good job of achieving the goals of the 787 schedules.

Boeing currently has 847 orders for the Dreamliner, which promises a quieter and more comfortable ride for passengers.

Boeing has not said how much it has invested in the Dreamliner or how much it has spent. The company offers two versions of its Dreamliner, which lists between $185.2 million and $218.1 million. Boeing receives payment for airplanes at delivery.

Boeing competes for orders with European rival Airbus, an EADS component, which celebrated on Monday a surprising win in the annual orders race with the 10,000th plane sale in its 40-year history, part of a $5 billion order from Virgin America.

Last-minute orders for 200 planes in December pushed Airbus past Boeing for a third year. Boeing, whose net orders were hit by cancellations in 2009, bounced back in 2010, but Airbus still managed a 52 percent market share.

(Reporting by Kyle Peterson; editing by Gerald E. McCormick, Matthew Lewis and Andre Grenon)

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