Grounding Of 787s Creates Doubts About 'Business As Usual' At Boeing

Wed, January 30, 2013 11:04pm

Story by Yuki Noguchi




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Boeing generated more cash than expected last year and reclaimed the top spot over rival Airbus as the world's biggest airplane maker.

But all that was overshadowed by the fact that its entire fleet of 787s is grounded after batteries on two of its planes either overheated or caught fire.

"For 2013, our first order of business, obviously, is getting the 787 back into service," Boeing CEO James McNerney says.

With the National Transportation Safety Board and the Federal Aviation Administration investigating the incidents, McNerney said repeatedly on a conference call he could not hazard any guesses about how and when the review would turn out. .

"I can't predict an outcome and I'm not going to," he says. "We're in the middle of an investigation. We're making progress on the investigation. We've got every expert in the world looking at this issue."

In the meantime, McNerney says, Boeing plans to keep building the planes on schedule.

"Business as usual, let's keep making planes and then let's ramp up as we've planned," he says.

But some are not so sure about continuing the assembly line.

"I'm skeptical, only because we don't know what we don't know," Scott Hamilton, an aviation industry consultant, says.

Without new information, he says it's impossible to gauge the potential impact of the 787's grounding on Boeing.

"We don't know what the problem is, we don't know what the solution is, we don't know what the design of the fix will be, we don't know how long the planes will be on the ground," Hamilton says.

The investigations have centered on the plane's new lithium-ion batteries — notable for both their power and volatility. Several media reports said airlines had returned large numbers of faulty batteries. In Wednesday's call, however, McNerney dismissed those issues as routine maintenance unrelated to the recent overheating incidents.

"I'm a little surprised that McNerney was so definitive in dismissing the possible connection because I don't think we know," Hamilton says.

Boeing's struggles with the 787 go back in time.

Initial production faced over three years of delays and billions of money in extra costs. The complexities stem in part from the use of new, fuel-efficient technology and materials, and the plane comprises thousands of components made by over 100 manufacturers.

So far, the planes have been grounded for two weeks.

Oppenheimer aviation analyst Yair Reiner says the longer the investigation drags out, the more it's an indication the problem is complicated — perhaps going beyond just battery issues — and therefore more expensive to fix.

"That progress seems to be evolving more slowly than they might have earlier expected," Reiner says.

He says coming off a strong 2012 puts Boeing in a good position heading into difficulties. Still, he says, the company really wants to avoid slowing its manufacturing schedule — which could anger airline customers waiting for their new fleets.

"Boeing still has a leash of several weeks, maybe a couple of months, to resolve this before it will likely have to slow down production," he said.

The company's stock closed up 1 percent today and is down 3 percent since its planes were grounded.

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