Bloomberg News

All Nippon Says Boeing 787 Dreamliner Grounding to Cut Sales

January 31, 2013

All Nippon Says Boeing 787 Dreamliner Grounding to Cut Sales

A Boeing Co. 747-400 aircraft operated by All Nippon Airways Co. prepares to take off at Haneda Airport as the sun rises in Tokyo. ANA canceled 830 Dreamliner flights from Jan. 16 through Feb. 18, affecting 81,820 people, the carrier said last week. Photographer: Akio Kon/Bloomberg

All Nippon Airways Co. (9202), the world’s biggest operator of Boeing Co. (BA:US) 787s, said the grounding of the Dreamliner fleet cut sales by 1.4 billion yen ($15.4 million) this month.

ANA, which has 17 Dreamliners in its fleet and became the first operator of the plane in late 2011, isn’t sure when normal service with the aircraft will resume, according to a statement the airline released in Tokyo today. All Nippon, which ordered 66 Dreamliners, kept its full-year profit forecast unchanged at 40 billion yen.

All Nippon, Japan Airlines Co. (9201), and six other operators stopped flying 787s after the Federal Aviation Administration ordered the suspension of all flights following a lithium-ion battery fire, and an emergency landing by an ANA plane Jan. 16. Chicago-based Boeing yesterday forecast profit that met estimates, assuming no drag from the grounding of the marquee jet while investigators examine battery faults.

“I think all the airlines are stuck with what they’ve ordered,” said Sash Tusa, an analyst at Echelon Research & Advisory LLP. “We’re talking now about months rather than weeks” for the problem to be fixed.

The airline hasn’t asked Boeing for compensation on 787 and will discuss the issue when it knows the total impact, Executive Vice President Kiyoshi Tonomoto told reporters in Tokyo today.

The carrier had to cancel 459 domestic and international flights in January, according to the statement.

Boeing’s Prediction

Shares of the carrier fell 0.6 percent to 179 yen in Tokyo trading today. The stock has dropped 1.1 percent this year.

ANA, based in Tokyo, canceled 830 Dreamliner flights from Jan. 16 through Feb. 18, affecting 81,820 people, the carrier said last week. The Dreamliners make up about 7 percent of ANA’s fleet and the carrier had to set up an emergency team to minimize disruption to a network of more than 1,000 daily flights and 175 routes.

Aviation regulators in the U.S., Japan and other nations ordered airlines to park their 787s after an ANA plane made an emergency landing in Takamatsu, Japan. Earlier this month, there was a battery fire on a Japan Airlines 787 in Boston.

Airlines so far have received 50 of the aircraft, which entered service 16 months ago and start at a list price of about $207 million. While deliveries have been halted, 787 production is continuing, Boeing said yesterday.

Profits

The planemaker predicted shipments of more than 60 Dreamliners this year among a total of 635 to 645 commercial planes, up from 601 in 2012, as it increases airliner output more than 60 percent in the four years through 2014.

ANA started its first international service with the plane in January, when it added an extra flight to Frankfurt with the new plane, and then added a service to Seattle. Earlier this month it added flights to San Jose, which it has since had to cancel as it only has permission to fly a 787 on that route.

The impact on ANA and JAL’s profits may not be that big even if they can’t fly the 787s for a year, said Yasuhito Tsuchiya, an analyst at Bank of America-Merrill Lynch. In such an event, operating profit at ANA would be cut by 5 billion yen, and JAL’s would be reduced by 4 billion yen.

NTSB

ANA had predicted it will save about 10 billion yen a year in jet kerosene costs with its fleet of the more fuel-efficient planes.

The U.S. National Transportation Safety Board is working with Boeing to study the batteries’ history since the 787 entered service late in 2011, according to the investigative agency. The probe hasn’t yet found out whether those were causes or the result of a fire.

GS Yuasa Corp. (6674) and the batteries it supplied are at the center of the investigation by U.S. and Japanese authorities. U.S. investigators are asking for data on the performance of the devices as ANA said yesterday it had replaced 10 of the battery and charger systems on its planes.

Earlier this week, Japan’s government said it’s ending on- site inspections of Kyoto, Japan-based GS Yuasa’s headquarters, as no reports of problems with quality control that could affect the battery were made so far, said Shigeru Takano, a director for air transportation at the ministry’s Civil Aviation Bureau.

The 787 is Boeing’s most advanced jet and uses new technology such as carbon-fiber materials to save weight and improve efficiency. ANA and JAL together have signed up for 111 of the Dreamliners, about 13 percent of the 848 orders for the plane, according to Boeing’s website.

Japan Airlines will report earnings for the three months ended Dec. 31 on Feb. 4.

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net


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