WASHINGTON/NEW YORK (Reuters) - The U.S. government ordered a wide-ranging review of Boeing's latest passenger jet, the 787 Dreamliner, citing concern over a fire and other recent problems but insisting the plane was still safe to fly.
It was unclear how long the review will take or how much it will ultimately cost Boeing, but the company was concerned enough that it sent a top executive to a Washington press conference on the problem. Boeing shares fell 3 percent.
The 787 represented a leap in the way planes are designed and built, but the project was plagued by cost overruns and years of delays. Some have suggested Boeing's rush to get planes built after those delays resulted in the recent problems, a charge the company strenuously denies.
Either way, regulators said a thorough examination was needed to identify the root cause of the problems, including a fire on a parked 787 on Monday.
"There are concerns about recent events involving the Boeing 787. That is why today we are conducting a comprehensive review," Transportation Secretary Ray LaHood told a news conference followed by more than 100 reporters around the world.
Those concerns notwithstanding, though, LaHood also maintained the plane was still airworthy.
"I believe this plane is safe and I would have absolutely no reservations about boarding one of these planes and taking a flight," he said.
While the FAA launched its review, Boeing customer All Nippon Airways had a launch of its own, initiating Dreamliner service between Tokyo and the Silicon Valley hub of San Jose. Passengers preparing to board shook off any suggestion they might be worried.
"Whenever there's a new plane there's some breaking in that comes with it. If the pilot's willing to get behind the stick and ride the plane, I have a great deal of confidence in the worthiness of the plane," said Marc Casto, 37, who runs a San Jose-based travel company.
Boeing shares fell 2.7 percent to $75 in late trading. Since December 4, when the first of the recent incidents took place, the stock is up 1.5 percent, underperforming a 4.3 percent gain in the S&P 500.
Much like the company's customers, who have generally stood behind it, analysts give the company good marks for its early response to the crisis.
"Boeing is doing a good job getting in front (as much as a company can) of the FAA situation. My view is that if the FAA deems this as a non-design issue, Boeing will be fine. If this is a design issue, it will be more troublesome because we need to pause the production to fix the design and then proceed," said Morningstar analyst Neal Dihora.
CHALLENGE FOR BOEING'S COMMERCIAL CHIEF
The review will focus on the 787's advanced electrical systems and cover their design, manufacture and assembly, the Federal Aviation Administration said.
The move comes on top of a separate probe by U.S. safety investigators into a battery fire that caused "serious damage" to an empty Japan Airlines 787 jet at Boston airport on Monday. Early findings of that probe are due next week.
The 787, the world's first mainly carbon-composite airliner, is Boeing's boldest effort to revolutionize commercial aviation by using new technology to cut fuel costs by 20 percent. Each lightweight jet has a list price of $207 million.
Airlines are pleased with the savings, and have so far given the plane their approval, both by ordering more than 800 jets and mostly sticking by it through the current spate of troubles.
After roughly 10 incidents on 787s in six weeks, one jet suffered a cracked cockpit window on Friday, while another had an oil leak.
"We also stand 100 percent behind the integrity of the 787 and the rigorous process that led to its successful certification and entry into service," Boeing CEO Jim McNerney said in a statement on Friday.
The review is a significant test for the recently appointed chief executive of Boeing's commercial airplanes division, Ray Conner, who attended Friday's news conference.
"The redundancies that we have put into this machine are phenomenal and the airplane performed perfectly in that respect. Now, we'd like to make sure that none of these happen again, and that's what we're going to try to do," Conner said.
Those complex systems that Conner referred to are among the advantages of the 787, but also complicate finding and solving problems, according to the director of MIT's Aeronautical Systems Laboratory.
"You now have the interdependencies that you didn't have before. The systems are much better when they work but they're harder to guarantee that they will work all the time and it's harder to predict what will happen when something fails," said R. John Hansman in an interview.
As Boeing's 787 comes under review, the company is involved in difficult labor contract negotiations with its engineering union, which represents the workers who would be called upon to solve any problems with the Dreamliner.
On Friday, Boeing made a revised offer that it said would increase the pool of money available for raises.
Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace (SPEEA), declined to comment on the FAA review. He said Boeing's latest offer still included drastic cuts from the contract that expired in November.
The media storm about the 787 glitches echoes global publicity a year ago over wing cracks on the A380 superjumbo, built by Boeing's European rival Airbus.
The A380 has also been deemed safe to fly and few airlines have reported a dip in bookings, but the problems are expected to end up costing Airbus up to 500 million euros in repairs.
The 787 Dreamliner made its first commercial flight in late 2011 after a series of production delays put deliveries more than three years behind schedule. By the end of last year, Boeing had sold 848 Dreamliners. It now has 50 in service.
(Reporting by Kentaro Sugiyama, James Topham, Mari Saito, Mayumi Negishi and Maki Shiraki in TOKYO, Anurag Kotoky in NEW DELHI, Tim Hepher in PARIS, Deborah Charles and Alina Selyukh in WASHINGTON, Ernest Scheyder and Alwyn Scott in NEW YORK, Karen Jacobs in ATLANTA, Malathi Nayak in SAN JOSE and Aman Shah in Bangalore; Writing by Ian Geoghegan, Tim Hepher and Ben Berkowitz; Editing by Alex Richardson, Nick Zieminski, David Gregorio, Gary Hill)