FIX COULD COST BOEING HUNDREDS OF MILLIONS Battery problems
Fixing the battery problems onboard Boeing’s new troubled 787 that led U.S. regulators to ground the planes could potentially cost the Chicago-based aerospace giant in the hundreds of millions of dollars, according to one analyst estimate.
And given that problems have cropped up in different areas of the technologically advanced nextgeneration plane, that could signal that costly changes are likely, other experts said.
The Federal Aviation Administration took the highly unusual step of grounding the 787, which just entered the market 15 months ago because of potential fires from its lithium ion batteries. Regulators ordered Boeing and the airlines to demonstrate that the batteries are safe. On Thursday, regulators across the globe joined the U.S. in grounding the new jets.
“Redesign or re-manufacture could total in the extreme . . . between $250 million to $625 million,” Jefferies & Co. analyst Howard Rubel wrote in a research note Thursday.
But Rubel noted the energyefficient plane has the potential to deliver in excess of $45 billion in gross margin for the company over a 10- to 15-year period.
Boeing will likely be able to fix the battery issues, contends J.P. Morgan Chase analyst Joseph Nadol. If Boeing finds it must abandon the lithium-ion battery, “fortunately for the company, there are other options,” he wrote in a research note.
Barclays analyst Carter Copeland says he expects the financial and production impact will be relatively limited. “The company is heavily focused on proving out the design of the current batteries,” he wrote in a research note.
Boeing’s shares inched up 1.2 percent Thursday as investors appeared to be taking a wait-and-see attitude on the news.
Boeing said it had received no cancellation of orders because of the problems and has no plans to suspend or slow production of the 787.
Boeing has delivered 50 of the planes and has orders for 798 more.
Expect airlines to stay on the sidelines with deliveries and new orders for now, said Neal Dihora, an analyst for Morningstar Inc.
“I don’t see why an airline would take delivery of an aircraft they have to turn around and park somewhere because they aren’t allowed to fly it,” he said.
United Airlines is the only U.S. carrier that has the planes and has parked its six for now.
The FAA action grounding the entire fleet of planes has no recent precedent, Nadol wrote in a research note. He cited the FAA’s decision to temporarily ground DC-10s, which occurred more than 30 years ago in 1979. That fleet was grounded about five weeks following a crash in Chicago, according to Nadol.
Wednesday’s FAA action came after an All Nippon Airways 787 Dreamliner was forced to make an emergency landing in Japan when a message showed battery problems and a burning smell was detected in the cockpit and cabin.
GS Yuasa Corp., the maker of the 787’s lithium-ion batteries, said it was helping with the investigation but that the cause of the problem was unclear.
“We still don’t know if the problem is with the battery, the power source or the electronics system,” said Yasushi Yamamoto, a spokesman for GS Yuasa, which is based in Kyoto, Japan.