Boeing won’t pull back on 787 Dreamliner production
BY FRANCINE KNOWLES Business Reporter email@example.com January 30, 2013 8:32AM
An All Nippon Airways' Boeing 787 Dreamliner sits on the tarmac at Haneda Airport in Tokyo, Wednesday, Jan. 30, 2013. U.S. regulators said Wednesday they asked Boeing Co. to provide a full operating history of lithium-ion batteries used in its grounded 787 Dreamliners after Japan's All Nippon Airways revealed it had repeatedly replaced the batteries even before overheating problems surfaced. (AP Photo/Shizuo Kambayashi)
Updated: March 2, 2013 7:39AM
Boeing Co. isn’t planning on scaling back production of its troubled 787 Dreamliner or backing away from the lithium-ion battery that led U.S. regulators and others around the globe to ground the fleet of planes and launch investigations of the battery earlier this month.
“Nothing we have learned yet has told us that we have made the wrong choice on the battery technology,” Boeing Chairman and Chief Executive Office Jim McNerney said as the Chicago-based aerospace giant released its fourth-quarter earnings and gave a 2013 profit forecast that beat Wall Street expectations.
“787 production continues as planned,” McNerney said during the earnings conference call.
Aviation officials two weeks ago grounded all 50 of the next generation new planes that have been delivered over the past 15 months until Boeing can demonstrate that the batteries are safe.
The National Transportation Safety Board said Wednesday it has asked Boeing for a full operating history of the batteries on the 787s. Japan’s All Nippon Airways confirmed that it had replaced batteries on its 787 aircraft 10 times because they didn’t charge properly or connections with electrical systems failed. Japan Airlines also said it had replaced 787 batteries.
McNerney said no batteries were replaced due to any safety concerns.
“What I do know is batteries are replaced on planes everyday,” he said. “…It’s a replaceable unit, designed to be replaced.”
But replacement rates have been slightly higher than predicted, he said.
The 787 is the first Boeing plane to use rechargeable lithium-ion batteries for its main electrical system. Such batteries are prone to overheating and have additional safeguards designed to prevent fires and contain a fire should one occur.
The Federal Aviation Administration grounded Boeing’s 787 Dreamliner and regulators, including the NTSB, began investigating the batteries this month following a fire on a Japan Airlines 787 while it was empty of passengers and parked in Boston and after an emergency landing of an All Nippon Airways 787 in Japan last week after its pilots smelled something burning and received a cockpit warning of battery problems.
Boeing has halted deliveries of the planes until the battery issue is resolved, but still plans to deliver more than 60 this year and double production levels from five per month at the end of 2012 to seven by mid-year and 10 by the end of this year.
McNerney declined to speculate on whether the company would consider reducing 787 production rates if deliveries end up being halted for several months.
He also said engineering resources assigned to determine the cause of the 787 battery problems aren’t draining engineering resources from other projects.
The company is continuing development of two new versions of the 787.
Boeing said it earned $978 million in the latest quarter, or $1.28 per share, down 30 percent from $1.39 billion, or $1.84 per share, a year earlier when Boeing had a benefit of 52 cents per share from a tax settlement.
The profit exceeded the $1.19 per share expected by analysts surveyed by FactSet.
Sales rose 14 percent to a record $22.3 billion, matching analysts’ estimates.
Boeing, which recaptured its title as the market leader in deliveries and orders of commercial planes last year from France-based Airbus, said 2012 sales rose 19 percent to $81.7 billion. Net income fell 3 percent to $3.9 billion, or $5.11 per share.
Profit declined because although last year’s deliveries of its new 787 as well as its revamped 747-8 brought in cash, they actually hurt earnings because the planes cost more to build than what Boeing now collects. Profit margins for commercial planes shrank slightly, even as revenue rose 32 percent to $14.16 billion in the fourth quarter, and profits rose 29 percent to $1.27 billion.
Defense, Space and Security sales fell 2 percent in the fourth quarter to $8.3 billion.
Boeing forecast 2013 earnings of $5 per share to $5.20 per share, with revenue of $82 billion to $85 billion.
Analysts had been expecting a 2013 profit of $5.17 per share on revenue of $88.13 billion.
The outlook assumes “no significant financial impact” from the 787 being out of service, the company said.
Boeing said it expects to deliver between 635 and 645 commercial airplanes this year.
“We believe this assumes a flat or low growth in 787 deliveries for 2013 compared to 2012, which seems reasonable given the FAA directive,” Morningstar Inc. analyst Neal Dihora said in a research note.
Boeing delivered 46 787s in 2012.
Shares of Chicago-based Boeing Co. closed up 1.3 percent at $74.59.