WRAPUP-Boeing gets OK to test new 787 battery, wins big 737 order

Tue Mar 12, 2013 6:29pm EDT

* FAA allows two 787s to test fly redesigned battery

* Puts Boeing closer to getting 787 back in service

* $15 billion 737 order from Ryanair seen

* Stock hits almost five-year high

By Bill Rigby

SEATTLE, March 12 (Reuters) - Boeing Co got approval from U.S. transport regulators on Tuesday to start testing a redesigned battery for the 787 Dreamliner, putting it one step closer to getting its most troubled airplane back into regular service.

Also on Tuesday, sources told Reuters the planemaker was close to signing a $15 billion deal to sell about 170 single-aisle 737 planes to budget Irish carrier Ryanair.

Boeing's shares closed up 1.5 percent, hitting an almost five-year high, and extended gains in after-hours trade.

Late on Tuesday, the U.S. Federal Aviation Administration said it approved Boeing's battery certification plan and will permit two aircraft limited flights to test the new design.

Regulators grounded the 50 Dreamliners in use by airlines on Jan. 16 after lithium-ion batteries burned aboard two planes, banning airlines from flying the 787 and stopping Boeing from delivering them. Although its factories continue to make the 787, Boeing is losing an estimated $50 million a week while the planes are grounded.

"We won't allow the plane to return to service unless we're satisfied that the new design ensures the safety of the aircraft and its passengers," U.S. Transportation Secretary Ray LaHood said in a statement.

Boeing's new battery - which it presented to the FAA in late February - is designed to minimize the chances of a short circuit, insulates the cells within the battery better and adds a new containment and venting system to prevent damage even if the battery catches fire.

The FAA said the new design must pass a series of tests before it is approved and that the agency will be "closely involved" in the certification process. The FAA has been criticized for delegating too much responsibility to manufacturers in certifying equipment.

The FAA's decision was welcomed by Boeing.

"Today's approval from the FAA is a critical and welcome milestone toward getting the fleet flying again and continuing to deliver on the promise of the 787," Boeing Chief Executive Jim McNerney said in a statement.

Airline customers cautiously agreed. Steven Udvar-Hazy, chairman and chief executive of Air Lease Corp, which has 12 787s on order, called the FAA approval a "good step forward" during a panel discussion at an aircraft trading conference in Orlando, Florida.

"It is not flying yet. It is a first step," said Udvar-Hazy, considered one of the world's most influential airplane buyers. "I'm happy that the FAA has taken the constructive role in working with Boeing to address this problem."

News of the big order from Ryanair further helped investor enthusiasm for Boeing. Sources familiar with the deal, speaking on condition of anonymity, told Reuters the order was exclusively for the current generation 737NG jet. If completed, it would mark a major win against rival Airbus, a unit of Europe's EADS.

Boeing shares closed up $1.22, or 1.5 percent, at $84.16 on the New York Stock Exchange, their highest close since May 2008, and extended gains after hours to $84.44. That is the highest since the end of May 2008.

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