Boeing stock rises despite 787 problems
Boeing's 787 is supposed to revolutionize air travel. It just needs to get out of its own way first.
The new plane is undoubtedly Boeing's most visible. It's built from composites instead of aluminum and comes with the promise of the most comfortable ride in the sky. At $200 million each, 787s are an important part of Boeing's future, even though it will be a while before it makes money on them.
But this sophisticated piece of transportation wizardry hasn't been behaving as designed. Just this week one caught fire, and another suffered a fuel leak. The 787 was delayed for three years, so Boeing's investors and customers notice each time one has a problem. Boeing asserts such growing pains are typical for new models.
The 787's chief engineer said Wednesday that he has “extreme confidence” in the Dreamliner — Boeing's nickname for the plane — even as federal investigators try to determine the cause of the fire on board an empty, parked Japan Airlines plane on Monday in Boston. Officials have said one of the plane's lithium ion batteries burned.
The 787 is the first Boeing plane to use lithium ion batteries, which charge faster and can be molded to space-saving shapes compared to other airplane batteries. The liquid inside them is flammable, putting the battery at more risk for a fire than previous airplane batteries, the Federal Aviation Administration has found.
After Monday's fire, the big question for Boeing will be whether the issue is a manufacturing defect, which can be fixed relatively cheaply, or a design flaw, which might require expensive redesign and rework on existing planes, said Citi analyst Jason Gursky.
Boeing has delivered 50 of the 787s, starting in late 2011. It has almost 800 more on order. To get through the backlog, Boeing is ramping up production to build 10 787s per month in Washington state and South Carolina by the end of 2013. By comparison, it cranks out more than one 737 every day.
The 737 is Boeing's best-seller, and the company has been building the smaller plane for decades.
In November, Boeing said it had begun making five 787s per month. But if any major manufacturing changes are needed to fix the electrical problems, the company could fall further behind in deliveries. New planes like the 787 take years — and hundreds of millions of dollars — to develop. The roots of the 787 go back to 2003. Boeing has not said how much the research cost. It has estimated it will need to deliver 1,100 of them to break even by some accounting measures.
“It's definitely the most expensive plane program that they've ever developed,” Gursky said.
No customers have canceled a 787 order following the fire, and several airlines have been reported saying they are confident in the plane.
“If airlines are worried, they sure aren't showing it,” said Oppenheimer analyst Yair Reiner in a note to clients.
Investors rallied behind the company Wednesday, sending shares up by 3.5 percent to $76.74. That followed a two-day drop of 4.6 percent. Boeing shares had gained 11 percent in the three months prior to Monday as investors anticipated a growing flow of cash from Boeing's faster production of its big planes.
Besides the fire, another Japan Airlines plane leaked 40 gallons of fuel at Boston Logan on Tuesday.
The airline said an open valve caused one tank to overflow through a vent. Last month a United Airlines 787 flying from Houston to Newark diverted to New Orleans because of an electrical problem with a power distribution panel.
Boeing insisted on Wednesday that the 787's problems are no worse than what it experienced when its 777 was new in the mid-1990s.
That plane is now one of its top sellers and is well-liked by airlines.
“Just like any new airplane program, we work through those issues and move on,” said Mike Sinnett, the 787 chief engineer.
He added, “We're not satisfied until our reliability and our performance are 100 percent.”
Sinnett didn't say so, but other new planes have had their own issues, including the Airbus A380 superjumbo. Small cracks have been discovered on the wings, and in 2010 a Rolls Royce engine on a Qantas flight exploded in mid-flight.
He said the nature of lithium ion batteries means no fire extinguisher system will stop them from burning once they start.
The NTSB said it took firefighters 40 minutes to put out Monday's fire.
Sinnett said Boeing has no plans to replace the lithium ion batteries with another type. If he had to re-do the choice to go with lithium ion, he said, he'd make the same choice today.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Kennametal expects to consolidate plants as it shrinks manufacturing
- Post-Gazette offers voluntary buyouts in bid to avoid layoffs
- Range Resources cuts workforce 11%
- United Airlines hack coincided with incursion into government employee data
- Muni bond funds stressed
- U.S. Steel CEO expects rebound
- GNC sales, profits slip in second quarter
- Gold continues to fall further out of favor with investors
- Voice-assisted technology raises privacy concerns
- Travelers find direct Web route to Priory’s spirited past in North Side
- PPG puts brand 1st in strategy to reach commercial paint market