* Dreamliner reliability 98 pct
* Further progress in reliability will be slower
* New report of electrical power panel problem emerges
By Balazs Koranyi and Joachim Dagenborg
OSLO, Jan 24 (Reuters) - The reliability of Boeing's pioneering 787 Dreamliner jet is improving but is still not satisfactory, the planemaker's top official in charge of keeping the jet flying said on Friday.
The Dreamliner's reliability rate is now around 98 percent, meaning two out of every 100 flights are delayed for mechanical problems - up from 97 percent in October but still short of the firm's target, said Mike Fleming, vice president for 787 support and services.
He was speaking at a news conference in Oslo where Norwegian Air Shuttle ASA, one of the jet's most publicly critical customers, has faced a series of glitches.
"I'll tell you that's not where we want the airplane to be, we're not satisfied with that reliability level of the airplane," Fleming said.
"The 777 today flies at 99.4 percent ... and that's the benchmark that the 787 needs to attain.
"We introduced the 777 in 1995 and it was in the 1999 timeframe that we saw sustained performance over 99 percent in that fleet ... to get the fleet above 99 percent you have to keep working every day, so my guess is that it will be similar to what we had with the 777," he added.
Norwegian Air Shuttle, the only European budget carrier to fly long haul, has been plagued by problems with its first three Dreamliners, with a series of breakdowns last year leaving passengers stranded.
The Dreamliner was supposed to be a game-changer for the aviation industry as its lighter body and electrical systems cut fuel consumption by 20 percent and reduced maintenance.
But it has been beset by problems including a battery fire that grounded all 787s in service for three months last year and forced Boeing to re-design the powerful lithium-ion battery and enclose it in a tough new steel containment box.
It also equipped the battery with a metal exhaust tube to vent fumes and gases outside the jet if the battery were to overheat.
Earlier this month, a Japan Airlines maintenance crew noticed white smoke coming from the main battery of a Dreamliner, with a cell found to be showing signs of melting just two hours before the plane was due to fly.
"We recently had a single-cell failure in a battery on another customer's airplane and we didn't get propagation of that to other cells, other cells continued to function," Fleming said. "The containment box worked as supposed to and the vapour vented overboard as supposed to."
Fleming said the battery has not suffered an in-flight failure since the redesign and Boeing could still change the battery's design based on the conclusions of the investigation into the latest incident.
"We didn't assume we would never have another cell failure. We always assume we're going to have a failure and we design the airplane with a redundancy," Fleming said.
Other issues on the Dreamliner still facing Boeing include the reliability of flight controls, particularly for the wing spoilers, brakes and electrical power components.
Although attention has focused on the aircraft's batteries, its electrical components are part of an ongoing survey of its critical systems by the Federal Aviation Administration, following suspected faults that first surfaced before the battery crisis.
Last July, Reuters reported that a 787 operated by Qatar Airways was grounded for days after smoke was reported near an electrical panel, which was replaced. Boeing at the time referred queries to the airline, which denied any serious fault.
In a previously unreported incident, Ethiopian Airlines has told Reuters that an electrical panel had to be replaced shortly after its first 787 was delivered in August 2012.
Boeing declined to comment on specific incidents.
"We've made it clear that improving component reliability is part of our effort to improve overall dispatch reliability and those efforts are making a difference - with the overall fleet-wide average now at around 98 percent," said spokesman Marc Birtel by email, in response to a Reuters query.
"That's the metric we're focused on and we're not going to break things down component by component or customer by customer," he added.
An FAA spokeswoman said earlier this month that it was not clear when the broader systems review would be complete.
Many aircraft including some produced by European rival Airbus suffer reliability problems or defects in early service, but Norwegian is among airlines that have been particularly vocal about recurrent problems with the 787.
"When our airplane breaks and our service doesn't deliver on what it's supposed to, we take responsibility," Fleming said. He declined to discuss the issue of compensation.
Boeing, which says it upgraded various systems during last year's grounding, has avoided serious industrial consequences from the 787's recent troubles and said on Friday it had hit a targeted 787 output rate of 10 jets a month.