Bloomberg News

Regulators Won’t Rush to Clear Boeing’s 787, LaHood Says

February 01, 2013

U.S. aviation regulators aren’t pressing to get Boeing Co. (BA:US)’s 787 back into the air and won’t let the grounded Dreamliner jet resume flights until they know it’s safe, Transportation Secretary Ray LaHood said.

“We’re not feeling any pressure,” LaHood told reporters after a speech yesterday in Falls Church, Virginia. “We’re going to get this right. We have to get this right.”

The transportation secretary gave no sign investigators are closer to discovering why lithium-ion batteries overheated on two 787s last month. That leaves murky at best the pathway for getting Boeing’s most advanced jetliner airborne again.

All 50 Dreamliners in service around the world have been grounded since Jan. 16 after an All Nippon Airways Co. (9202) 787 made an emergency landing because one of its lithium-ion batteries smoked and became charred. The U.S. National Transportation Safety Board and its Japanese counterparts have few definitive clues into what caused that incident and a Jan. 7 battery fire in a Japan Airlines Co. (9201) plane on the ground in Boston.

“The worst scenario is you don’t find anything,” John Hansman, an aeronautics and astronautics professor at the Massachusetts Institute of Technology, said in an interview. “And if you don’t find anything, you actually have to correct all the things it could possibly be, even though there’s no direct evidence. That’s more complicated and expensive.”

The battery woes have left Boeing surrounded by uncertainty even as Chief Executive Officer Jim McNerney said in a Jan. 30 earnings call that progress toward finding a cause was being made. McNerney said Boeing hasn’t seen anything that causes it to question its choice of lithium-ion batteries, which were approved by the FAA for the Dreamliner in 2007.

Production Continued

Boeing has continued production of the Dreamliner even though it can’t deliver them because of the grounding. The company doubled 787 production last year to five a month and is set to double it again this year.

Boeing rose $1 to $74.87 in New York trading yesterday.

Until regulators are satisfied with the jet’s safety, none of the 787s, including a LOT Polish Airlines SA plane stranded in Chicago by the grounding, will be allowed into the air, LaHood said.

“We will continue to look at the entire plane with a focus on the batteries,” he said. “People expect us to get this right. They don’t want to fly in planes when there are issues.”

The U.S. Federal Aviation Administration, which certified the 787 as safe to fly before it entered service in 2011, is conducting a broad review of that decision and the plane’s manufacturing.

‘Green Light’

“Those planes are not going to fly until we get the green light from the people doing the top to bottom review that they’re safe to fly,” LaHood said.

Investigators for the NTSB, which is leading the probe of the Boston fire, are poring over microscopic battery remains, production records and circuitry while running tests to rule out other potential causes.

The safety board yesterday said electrical measurements, mass measurements and infrared thermal imaging of a battery like the one on the JAL jet have found nothing out of the ordinary. Additional tests, including CT scans and a “soft short” test of battery cells, are continuing, the agency said in a statement.

The NTSB probe has no deadline, Kelly Nantel, an agency spokeswoman, said in an interview. “We all appreciate the magnitude of this situation and are working tirelessly on this investigation,” Nantel said.

‘Swing Factor’

Boeing’s sales will fall 3 percent below forecasts if the grounding halts deliveries of 787s for six months, and by 6 percent over nine months, Peter Arment, an analyst with Sterne Agee & Leach Inc. in New York, wrote in a note. He’s forecasting 2013 revenue of $84.8 billion, meaning a potential loss of $2.5 billion or $5 billion.

If the investigation ends this quarter and the Chicago- based planemaker’s required fixes are minimal, as Arment expects, the impacts will be “limited in scope,” he wrote.

In a worst case, Boeing would have to to write off about $5 billion in anticipated revenue, Howard Rubel, a Jefferies & Co. analyst, wrote in a report. Rubel put the odds of that at about 4 percent.

“The biggest swing factor in Boeing’s 2013 guidance is clearly the 787 assumptions,” Arment said.

An investigation this complex, with evidence that’s been damaged by fire, could take years, Tom Haueter, the retired aviation investigations chief at the NTSB, said in an interview.

Five-Year Probe

Haueter, now an aviation safety consultant in Great Falls, Virginia, helped lead a probe in the 1990s that lasted five years while investigators looked for evidence to explain rudder flaws on Boeing’s 737 blamed for crashes near Pittsburgh and in Colorado Springs, Colorado, that killed 157 people.

If investigators can narrow the possible causes of the failures to a handful of possibilities, Boeing may be able to install fixes or warning systems to address each of them that would satisfy the FAA, Haueter and Hansman said.

“They don’t have to wait until the investigation is completed,” Haueter said. “They could do some kind of interim fix.”

Finding technical solutions is just part of what it will take to resume flights, Hansman, the MIT professor, said. Boeing and the FAA must also convince lawmakers in Washington and other capitals, and the public, that the plane is safe, he said.

“You are going to have to do something to restore confidence in the batteries,” he said.

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Alan Levin in Washington at alevin24@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Ed Dufner at edufner@bloomberg.net


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