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Boeing 787 Dreamliner Is Grounded Worldwide by Regulators

By Alan Levin and Susanna Ray
January 17, 2013 8:18 AM EST 39 Comments
Boeing 787 Dreamliner Fleet Grounded by U.S. After Emergency
Boeing 787 Dreamliner Fleet Grounded by U.S. After Emergency

Boeing Co. (BA)’s global fleet of 787 Dreamliners was grounded, with airlines suspending service on the most advanced civil airliner, to comply with an order from regulators following an emergency landing by one of the planes.

The Federal Aviation Administration instructed airlines to prove that lithium-ion batteries in the model, which went into service in late 2011, “are safe and in compliance,” prompting regulators in Europe and Japan to follow suit and putting all 50 Dreamliners operated by eight airlines worldwide out of duty.

The global grounding marks the first time in 34 years that an entire airplane model has been pulled out of service, with Boeing “working around the clock” to find a fix. All Nippon Airways Co. (9202), the first customer to fly the plane, said some 4,800 passengers may be affected by the cancellations, while LOT Polish Airlines’ 787 was left stranded in Chicago following its maiden trans-Atlantic flight just yesterday.

“The FAA will work with the manufacturer and carriers to develop a corrective action plan to allow the U.S. 787 fleet to resume operations as quickly and safely as possible,” the agency said in a statement.

Boeing fell as much as 3.1 percent to the equivalent of $72.04 in German trading today. The stock dropped 1.9 percent to $72.90 at 6:30 p.m. in New York in trading yesterday after regular market hours, extending an earlier drop of 3.4 percent that marked the biggest decline since June 1.

Credit Negative

Issues with the 787 are credit negative, while a rating change is unlikely, Moody’s Investors Service said in a statement. Chicago-based Boeing has a stable A2 rating at Moody’s and a stable A rating at Standard & Poor’s.

The global grounding followed a battery fire that forced an All Nippon 787 to make an emergency landing in Japan yesterday and other incidents last week. All Nippon, with 17 Dreamliners in its fleet, said it will cancel all Dreamliner flights tomorrow, and Japan Airlines Co. said it won’t have any flights with the Dreamliner between Jan. 19 and Jan. 25.

United Continental Holdings Inc. (UAL) is the only U.S. carrier operating the Dreamliner, with six in service. Air India, which operates six Boeing 787 planes, will ground its aircraft, as will Latam Airlines Group SA (LAN), the Santiago, Chile-based carrier. LOT Polish Airlines SA, Ethiopian Airlines Enterprise and Qatar Airways Ltd. also said they’d suspend service of 787s.

LOT’s Fleet

LOT, which defied the suspension of Dreamliners yesterday by Japanese carriers and went ahead with the flight to Chicago, said the cost of grounding the jets is “significant.” The carrier plans to have five 787s in service by the end of March.

Through the end of 2012, Boeing had 848 orders for the 787, according to the planemaker’s website. The 50 planes now in service have flown 50,000 hours, Boeing said in a news release. The aircraft, which is made largely of lighter composite materials, was three years late when it was delivered in 2011.

The FAA didn’t identify what Boeing, United or other airlines must do to ensure the plane is safe. EASA is in talks with U.S. regulators over participating in the 787 review, said Dominique Fouda, a spokesman for the Cologne-based agency.

“I think the FAA really has a black eye in all of this because clearly they were falling down on the job,” said Mary Schiavo, a former inspector general at the U.S. Department of Transportation and author of “Flying Blind, Flying Safe.”

Seeking Answers

The agency last ordered an entire model grounded in 1979, when it barred flights on the Douglas DC-10. Inspections of the DC-10 had discovered wing damage similar to what led to a crash in Chicago that killed 271 people. The FAA has ordered portions of other fleets grounded as recently as 2008, when American Airlines Inc.’s MD-80s were parked so wiring could be inspected.

“Boeing is committed to supporting the FAA and finding answers as quickly as possible,” Chairman and Chief Executive Officer Jim McNerney said in a statement. “We are confident the 787 is safe and we stand behind its overall integrity.”

While Boeing is working to fix electrical and other issues, the Dreamliner’s multiple layers of backup systems have ensured its safety, Boeing Commercial Airplanes President Ray Conner said at a Washington press conference on Jan. 11.

“Once the incidents have happened, the airplane has performed exactly as designed,” he said.

All Nippon pilots on a domestic flight in Japan yesterday got electrical-fault warnings related to the lithium-ion battery, forcing an emergency landing. ANA and Japan Airlines (9201) then parked their 24 Dreamliners, while United continued flying its 787s until the FAA issued its order.

Battery Woes

The 787’s lithium-ion batteries are made by Tokyo-based GS Yuasa Corp. (6674) and are part of the Dreamliner’s electrical power conversion system, which is manufactured by France’s Thales SA. (HO) United Technologies Corp. (UTX)’s Aerospace Systems unit supplies the overall system, which uses 1.45 megawatts of electricity, enough to power 400 homes.

GS Yuasa has sent technical experts to investigate the 787’s battery, and it may take months to complete the investigation into what caused an emergency landing of the All Nippon plane, spokesman Hiroharu Nakano said.

The battery system must be modified before further flights, Japan’s transport ministry said. The battery maker’s shares fell 5 percent in Tokyo trading today, the longest three-day losing streak since October.

The battery, used to start a small turbine engine that provides power when the plane is parked, is designed to not burn critical wiring or the plane’s structure, Mike Sinnett, the 787 chief project engineer, said in a briefing last week.

Boston Fire

The emergency landing followed a fire in Boston that erupted Jan. 7 on a Japan Air Dreamliner after passengers who had flown from Tokyo had left the plane. A lithium-ion battery pack had ignited, filling an equipment bay in the jetliner’s belly with smoke. It took firefighters 40 minutes to extinguish the blaze, according to the NTSB.

U.S. regulators announced Jan. 11 they were conducting a review of the Dreamliner’s design, manufacturing and assembly in the wake of the fire.

“We are confident about the safety of this aircraft, but we’re concerned about these incidents and we will conduct the review until we’re completely satisfied,” Michael Huerta, head of the FAA, said at a Jan. 11 press conference in Washington announcing the review.

To contact the reporters on this story: Alan Levin in Washington at alevin24@bloomberg.net; Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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