By Kyle Peterson

CHARLESTON, South Carolina (Reuters) - Boeing Co on Friday unveiled the first 787 Dreamliner made in its new South Carolina assembly plant, a factory at the center of a bitter labor dispute last year and the site of a recent manufacturing glitch that threatened to disrupt the 787 production rate target.

The lightweight, sleek airplane rolled off the Charleston assembly line to the cheers of thousands of blue-shirted Boeing employees, local officials and news media.

Charleston is the second assembly line for the aircraft. The first line is in Everett, Washington. Boeing has delivered 11 Dreamliners from the Washington factory, but the airplane is three years behind its development schedule.

"What a great day for South Carolina. What a great day for Boeing," said Jim Albaugh, the Chief Executive of Boeing Commercial Airplanes.

"The 787 program has been very challenging and everyone knows that. This team has overcome obstacle after obstacle."

The 787 Dreamliner is the first commercial airplane with an airframe made largely of carbon composites instead of aluminum. Because of its lighter weight, the plane consumes 20 percent less fuel than other planes its size on similar routes, savings that are prized by airline customers eager to tame soaring fuel bills.

Passenger comforts include large windows that allow passengers to see the horizon during flights, lighting that gradually changes to simulate the rising and setting sun, and mechanisms to dampen in-flight turbulence.

Boeing has taken more than 800 orders for the 787. The plane that emerged from the Charleston plant is bound for Air India.

Boeing, which aims to make 10 787s per month by the end of 2013, will produce three planes each month in South Carolina. The current 787 production rate is 3.5 per month, and some experts doubt Boeing can hit the 10-a-month target on time.

Earlier this year, workmanship in South Carolina came under scrutiny when Boeing reported signs of "delamination" on the rear fuselage of some 787s made at the Charleston plant. Delamination occurs when stress causes layered composite materials to separate.

Boeing has said the problem may affect up to 55 planes, but that the error will not be repeated because the company has retrained the workers who made the mistake.

Boeing confirmed a $6 billion order for 777-300ER long-range passenger jets from China Eastern, first reported by Reuters on Thursday. The move came weeks after China's third largest airline cancelled an order for 24 Dreamliners due to the development delays.

TURBULENT PATH

Friday's celebration was an important milestone in the Dreamliner saga, which features the controversial outsourcing of design and manufacturing work.

As part of a sprawling global supply chain, South Carolina has been an important and sometimes weak link.

Problems and inefficiencies at plants owned by Boeing suppliers in South Carolina contributed to delays in the 787's development. To help regain control of Dreamliner production, Boeing bought portions of the operations of two of its South Carolina partners in 2009.

The purchase of those two operations became the foundation for a $750 million expansion to build Boeing South Carolina.

"It has been pretty impressive how Boeing has got this whole operation together, and is now actually rolling out an aircraft from a factory that has never made a plane before," said Rob Stallard, an aerospace analyst with RBC Capital.

Last year, South Carolina again was in the spotlight when the National Labor Relations Board complained in an administrative law court that Boeing's decision to open a 787 wide-body assembly away from its Washington state home base was meant to punish the Washington's union for past strikes.

The labor board later dropped the complaint after Boeing reached a deal with the International Association of Machinists to assemble its newest 737 narrowbody in Washington.

Local leaders, meanwhile, used the attention to promote South Carolina - a state unfriendly to unions - as an aerospace manufacturing hub. Several notable aerospace companies have operations in South Carolina including Boeing, Honeywell International and Lockheed Martin.

The plant employees 6,000 people and is expected to create more jobs in South Carolina.

"Up in Seattle, the leadership deals with the union. That's how they negotiate with employees," said Jack Jones, vice president and general manager of Boeing South Carolina. "Here we are developing a culture of trust and respect."

(Reporting By Kyle Peterson; Editing by Patricia Kranz, Gary Hill)