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Boeing’s Dreamliner hit small for now but clock is ticking: analyst

A Boeing 787

A Boeing 787

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Updated: March 6, 2013 6:11AM

If by the end of June, Boeing Co. hasn’t resolved the lithium-ion battery problems that led regulators to ground its 787 airplane, the aerospace giant likely will have to look at changing its production plans, contends Morningstar Inc. aerospace and defense industry analyst Neal Dihora.

Meanwhile Dihora doesn’t anticipate Boeing will take a significant hit from airlines seeking damages due to the grounding of the planes, unless the problems drag on for many more months.

“I believe that Boeing can continue producing the 787 as long as it can assume a fix of some sort by June 30,” Dihora said. “I think that Boeing would have to really think about changing production rates if nothing were to happen by that point.”

He noted Boeing delivered 11 aircraft in December 2012.

“If it can do that from July to December of 2013, it will hit its 60 [787] aircraft guidance for 2013.”

Boeing said in releasing its earnings report last week that it was sticking with its 787 production plans. Last month, it halted deliveries of the 787 due to the grounding.

Japan Airlines Co. said Monday that it will talk to Boeing about costs the airline has faced due to the idling of its jets, which it estimated at nearly $8 million from earnings through to the end of March, Reuters reported.

Japan Airlines has seven 787 Dreamliners, among 50 that have been delivered to a total of eight carriers. Those carriers include United Airlines, which has six of the planes and was the only U.S. carrier that was flying the plane.

United Airlines declined to comment Monday on what the grounding has cost it and on whether it plans to seek damages.

Last week, All Nippon Airways said it plans to seek damages. The Japan-based carrier, which has the most Dreamliners of any airline in its fleet with 17, said it had canceled 459 domestic and international flights last month, causing about $15.4 million in lost revenue.

Dihora estimated the grounding could cost all of the airlines combined roughly $53 million if the grounding lasts through the end of March and around $60 million if it lasts for a total of three months — costs not seen as having a significant financial impact on Boeing.

If the grounding costs for the airlines ultimately climbed to around $315 million, or 5 percent of Boeing’s $6.3 billion 2012 operating profit, that would be significant, he said, and markets would start to care. But it would take roughly 15 months to hit that $315 million figure, he estimated.

“The grounding costs for airlines appear to be a small issue,” for Boeing currently, he said.

Boeing declined to comment on whether it has been contacted by airlines seeking damages. Regarding the potential financial impact on Boeing, spokesman Marc Birtel said, “We can’t know what, if any, significant financial effect there will be at this stage. It’s too early to know.”

The Federal Aviation Administration grounded Boeing’s 787 Dreamliner on Jan. 16, and regulators, including the NTSB, began investigating the lithium-ion batteries on the planes. Their actions followed a fire on a JAL 787 while it was empty of passengers and parked in Boston and after an emergency landing of an ANA 787 in Japan that occurred after its pilots smelled something burning and received a cockpit warning of battery problems.

The NTSB said in an update Friday the auxiliary power unit battery on the Japan Airlines flight was the original battery delivered with the airplane on Dec. 20, 2012. The battery is manufactured by Japan-based GS Yuasa and is comprised of eight individual cells. All eight cells came from the same manufacturing lot in July 2012, the NTSB said.

The agency said a battery expert from the Department of Energy has joined the investigative team and that an investigative group continues to interpret data from the two digital flight data recorders on the aircraft, and is examining recorded signals to determine if they might yield additional information about the performance of the battery and the operation of the charging system. The NTSB earlier said the battery short circuited.

This week an NTSB investigator will travel to France with the battery “contactor” for examination at the manufacturer, the agency said. The battery contactor connects a wiring bundle from the airplane to the battery.

Investigators are continuing their work in Washington and Japan and a team in Seattle continues to observe the FAA-led review of the certification process for the 787 battery system, the NTSB 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.

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