* 787 to make first flight by year's end
* Risks still seen given poor track record
* Shares rise 8 pct
* Japan's ANA, JAL say may seek compensation (Updates with ANA, JAL comments)
By Karen Jacobs and Deepa Seetharaman
ATLANTA/NEW YORK, Aug 27 (Reuters) - Boeing Co said on Thursday its 787 Dreamliner would finally make its first flight by the end of this year, with initial delivery expected in the fourth quarter of 2010, and its shares shot up 8 percent.
Shares of the Chicago-based company rose to a five-month high as the statement helped answer questions that have surrounded the lighter, more fuel-efficient 787 aircraft, said Alex Hamilton, an analyst with Jesup & Lamont Securities.
"There was a lot of uncertainty, and a lot of the chatter on the street was 'Would this aircraft ever fly?'" he said. "It sort of ends the uncertainty."
Standard & Poor's Equity Research upgraded Boeing shares to "buy" from "hold".
Boeing, the No.2 plane maker behind EADS unit Airbus, said it expects its 787 programme to be profitable eventually, but also plans to take a third-quarter charge to write off the cost of the first three test-flight planes, which it says have no commercial value because of extensive modifications.
The date of the first test flight has been put off repeatedly because of production problems and a two-month labour strike, hurting Boeing's credibility as it grapples with the commercial aerospace slump.
The latest delay was in June, when Boeing said the plane would not fly as scheduled during the second quarter so it could reinforce a side-of-body section.
The June delay was the 787 project's fifth, with the first coming in 2007.
"Risk remains the new schedule could slip given the current challenge of re-fitting the wing-body join, the possibility of changes to the electrical and environmental control systems and simply the poor 787 track record," Credit Suisse analyst Robert Spingarn said in a note to clients.
Boeing told analysts on a conference call that it had "a high degree of confidence" in the fix for the structural problem that caused the latest 787 delay, and had done a thorough analysis.
BIG PRETAX CHARGE
The third-quarter charge will be a result of reclassifying costs from the first three test planes as research-and-development expenses versus programme inventory. The change will create an estimated non-cash pretax charge of $2.5 billion, or $2.21 a share, against third-quarter results.
Analysts were expecting a profit of $1.21 a share for the third quarter, according to Reuters Estimates.
"This is money that was already spent and this is money that they're reclassifying as an R&D expense ... The message should be clear -- it's still an economically viable aircraft," Hamilton said.
Fitch Ratings said the 787 programme has potential long-term credit benefits if Boeing successfully executes the updated plan.
"But Fitch is still concerned about the program given that (Boeing) still needs to achieve first flight, certification, and a successful production ramp-up," the agency wrote.
The revolutionary carbon-composite 787 has been lauded for its fuel-efficiency. About 850 of the planes have been ordered.
The Dreamliner's delivery delays are making some customers dissatisfied, however, with Japanese airlines including launch customer All Nippon Airways mulling a possible compensation claim.
"We understand the need to make the best and safest aircraft possible and appreciate that delays due to engineering issues of the current nature must be solved in order to move forward," All Nippon, which has 55 of the planes on order, said in a statement.
"However, as a launch customer and future operator of the 787, the length of this further delay is a source of great dismay, not to say frustration," All Nippon said.
An ANA spokesman said the company will look into the possibility of compensation once it knows the actual delivery schedule and can assess the effect of the delays on its business.
Japan Airlines (JAL), Asia's biggest carrier by revenues, has ordered 35 of the planes. It said it will look into every option including a compensation claim against Boeing once the delivery schedule and the effect on its business plans is clear.
Boeing said it projects achieving a production rate of 10 Dreamliners per month by late 2013, and was evaluating where to locate a second production line.
While it is not selling the first three test flight 787 planes, Boeing said it still expected to market three other test-flight 787s.
Boeing shares rose 8.4 percent or $4.00 to $51.82 on the New York Stock Exchange. The stock has risen about 18 percent since June 23, when the latest 787 delay was announced. (Additional reporting by Nobuhiro Kubo in Tokyo; Editing by Maureen Bavdek, Gunna Dickson, Matthew Lewis and Michael Watson)