WRAPUP 6-Boeing Dreamliners grounded worldwide on battery checks

Thu Jan 17, 2013 1:57pm EST

* Most regulators follow FAA in grounding 787s
    * Poland's LOT first to seek compensation from Boeing
    * JAL cancels Tokyo-San Diego flights for a week
    * Boeing shares up about 0.6 pct


    By James Topham and Alwyn Scott
    TOKYO/SEATTLE, Jan 17 (Reuters) - Airlines scrambled on
Thursday to rearrange flights as regulators around the world
joined the United States in grounding Boeing Co's 787
Dreamliner passenger jets while battery-related problems are
investigated.
    Poland's state-controlled LOT Airlines said it would seek
compensation from Boeing for grounding its two planes. It
expects delivery of three more Dreamliners by the end of March,
but would only take them if the technical issues have been
resolved, deputy chief Tomasz Balcerzak told a news conference.
    The lightweight, mainly carbon-composite aircraft has been
plagued by mishaps, raising concerns over its use of lithium-ion
batteries. An All Nippon Airways Co Ltd domestic flight
made an emergency landing on Wednesday after warning lights
indicated a battery problem.
    Boeing shares were up about 0.6 percent at $74.78 in
afternoon New York Stock Exchange trading. For the first few
weeks of the recent spate of incidents, the stock held up
relatively well compared with the broader market, but has
weakened recently as analysts grew wary of the costs Boeing
might face. 
    "While it is entirely possible that the current battery
issue is resolved in short order, it is also equally possible
that the 787s current certification could be called into
question," BB&T Capital Markets analyst Carter Leake wrote
Thursday, cutting his rating on the stock to "underweight."
    The U.S. Federal Aviation Administration (FAA) temporarily
grounded Boeing's newest commercial airliner on Wednesday,
saying carriers would have to demonstrate the batteries were
safe before the planes could resume flying. It gave no details
on when that might happen. 
    It is the first such action since the McDonnell Douglas
DC-10 had its airworthiness certificate suspended following a
deadly crash in Chicago in 1979, analysts said.
    Boeing has sold about 850 of its new aircraft, with 50
delivered to date. Around half of those have been in operation
in Japan, but airlines in India, South America, Poland, Qatar
and Ethiopia, as well as United Airlines in the United States,
are also flying the 787, which has a list price of $207 million.
    By Boeing's accounting, the 787 program will not be
considered profitable until the company has delivered 1,100
Dreamliners. As it stands, the plane accounts for a small
portion of Boeing's revenue, given that it produces five of them
a month versus 35 for the 737 model.  
    
    
    SCHEDULE GAPS
    With most of that Dreamliner fleet now effectively out of
action as engineers and regulators make checks, primarily of the
plane's batteries and complex electronics systems, airlines are
wrestling with gaps in their scheduling.
    Japan Airlines Co Ltd said it canceled eight
Dreamliner flights between Tokyo and San Diego until Jan. 25,
affecting some 1,290 passengers, and would switch aircraft for
another 70 flights scheduled to fly the 787. Air India said it
would use other planes on scheduled Dreamliner flights.
    Qatar Airways, whose Chief Executive Akbar Al Baker had been
one of the most outspoken critics of delays and technical
problems with the 787, said his airline would ground its fleet
of five aircraft. Ethiopian Airlines said its fleet of four
Dreamliners had not experienced the same problems as other
carriers, but that it would ground the planes nonetheless.
    Keeping the 787s on the ground could cost ANA alone more
than $1.1 million a day, Mizuho Securities calculated, noting
the Dreamliner was key to the airline's growth strategy.
    Regulators in Japan and India said it was unclear when the
Dreamliner could be back in the air. A spokesman for the
European Aviation Safety Agency said the region would follow the
FAA's grounding order. 
    Boeing said in a statement it was confident the 787 was safe
and it stood by the plane's integrity. 
    Passengers leaving United's flight 1426 in Houston, which
took off from Los Angeles moments before the FAA announcement,
reported an incident-free trip.
    "I fly over 100,000 miles a year," said Brett Boudreaux, a
salesman from Lake Charles, Louisiana. "That was one of the most
relaxing flights I've ever had. I hope they sort it out. It's a
hell of a plane."
    
    'WORST THING'
    Scott Hamilton, an analyst at Leeham Co, an aerospace
consulting firm in Seattle, said having a plane grounded "is
about the worst thing that can happen to an airplane program."
    "If this goes beyond just a bad design of a battery and you
have to redesign some systems leading to the battery and look at
why didn't safeguards on this thing work, you get a ripple
effect. They'll have more airplanes going out the door and they
can't deliver them. So you build up inventory. Every day ... is
an added day of delivery delays."
    Six new 787s, painted and apparently ready for delivery,
were parked on the apron at Paine Field in Everett, Washington,
adjacent to Boeing's 787 plant. Four more Dreamliners occupied
the final assembly spots inside the factory.
    American Airlines, which just this week placed firm orders
for 42 Dreamliners, pending U.S. Bankruptcy Court approval, said
it was sticking to its plans.
    "We are in constant dialogue with Boeing. We believe the 787
is a great aircraft," Virasb Vahidi, chief commercial officer
for American, said in an interview.

    SMOKE AND SOOT
    The Japan Transport Safety Board said the battery on the ANA
flight that made the emergency landing was blackened, carbonized
on the inside and weighed 5 kg less than normal, the Kyodo news
agency reported. Representatives from the FAA, Boeing and the
U.S. National Transportation Safety Board were due in Japan on
Friday to inspect the plane.
    The use of new battery technology is among the cost-saving
features of the 787, which Boeing says burns 20 percent less
fuel than rival jetliners using older technology.
    The 787 represents a leap in aircraft design, but the
project has been plagued by cost overruns and years of delays.
    Based on how regulators usually handle air safety, experts
say U.S. authorities and Boeing will discuss the criteria for
inspections on the Dreamliner. They would also set what fixes,
if any, are needed and a timetable for those. Analysts say it is
unclear how long that could take or how much it could cost, but
some question whether Boeing can stick to its target of doubling
787 output to 10 a month by the end of this year.
    "It guarantees some throttling back in production. It's
clear one of the problems was building planes before fully
understanding the rhythm of production," Teal Group analyst
Richard Aboulafia said.
    But aircraft industry sources say there was no immediate
threat of airlines cancelling orders.
    "You aren't going to see cancellations," Leeham's Hamilton
said, noting airlines have no alternative because rival models
from Airbus are sold out and have years-long waiting
lists.
    Airbus reported a 43 percent drop in orders for its planes
last year, surrendering its crown as the world's largest
aircraft maker to Boeing. The European manufacturer said it was
confident of achieving the maiden flight of its A350
carbon-composite airliner by mid-year. The new plane will also
use lithium-ion batteries, made by France's Saft Groupe SA
.
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