FAA decision to ground 787 ‘Dreamliner’ could land Boeing in financial trouble

by Keith Laing, The Hill Newspaper

The Federal Aviation Administration’s (FAA) decision to ground the Boeing 787 “Dreamliner” airplane this week could lead to financial turbulence for the aircraft’s manufacturer.

The 787 was rolled out to much fanfare this year by the Washington state-based company, which touted the airplane’s light weight and long distance range as major developments in commercial aviation.

The self-proclaimed Dreamliner’s debut was marred by a series of incidents that led the FAA and other worldwide aviation agencies to ground the plane, however.

Aviation industry observers said the hiccups with the 787’s take-off could cause big financial problems for Boeing, unless they are resolved quickly.

“I have seen a lot of things similar to this and there have been temporary groundings of other airplanes, but I think this is probably larger in scale for both Boeing and for the airlines because of the value of the airplane,” former American Airlines CEO Robert Crandall said in an interview on Bloomberg Television’s “Bloomberg Surveillance” show.

“What they cost–a couple hundred million dollars a piece and it is Boeing’s largest and most important product for the next 15 years,” Crandall continued. “This obviously is a big and concerning problem for both the airlines and for Boeing.”

The FAA attributed its decision to bar U.S. airlines from flying the 787 to concerns about the possibility of electrical fires sparked by the lithium batteries that are used to power the large airplane.

Another 787 developed a fuel leak this month, and the computers on a third plane wrongly indicated there was a problem with the brakes. The combination of mishaps prompted the FAA’s initial announcement of a review of the 787 airplane before the second battery issue this week.

No one was injured in any of the incidents.

Boeing has responded to the spate of problems with the 787 by moving quickly to convince both airlines and passengers that the difficulties are fixable.

“The safety of passengers and crew members who fly aboard Boeing airplanes is our highest priority,” Boeing CEO Jim McNerney said in a statement after the FAA announced its decision to ground the airplanes.

“Boeing is committed to supporting the FAA and finding answers as quickly as possible,” McNerney continued. “The company is working around the clock with its customers and the various regulatory and investigative authorities. We will make available the entire resources of the Boeing Company to assist.”

McNerney also maintained that the 787 was safe to fly, despite the current grounding.

“We are confident the 787 is safe and we stand behind its overall integrity,” he said. “We will be taking every necessary step in the coming days to assure our customers and the traveling public of the 787’s safety and to return the airplanes to service.”

Crandall said he was also confident Boeing would be able to fix the 787, though he added “[I] think it may turn out to be a very expensive problem.

“Boeing has been making great airplanes for years,” Crandall said in the Bloomberg interview. “They will find out what the problem is and they will fix it and they will do so without compromising safety.”

Northwest University Transportation Center Director Aaron Gellman told The Hill that Boeing had motivation to fix the glitches with the 787 even before the FAA got involved in the situation.

“The private sector has tremendous interest in fixing all this,” Gellman said Friday in an interview. “Boeing, the people that fly the planes, and the people that expect to fly the planes because they’ve ordered them.”

Gellman said the 787 was “not the first aircraft to have problems when it was new.

“When the 757 came onto the market, it had a lot of windshield cracks,” he said. “There’s been one crack with the 787…this will get solved.”

Gellman said the 787 dust-up could “have a dent” in Boeing’s earnings in the near term. However, he said any impact would likely be small “given the enormity of the Boeing enterprise.”

Boeing’s stock was down 0.22 percent on Friday after dropping by more than 3 percent earlier in the week. The company is the largest airplane manufacturing company in the world, making planes for both commercial and defense operations.

Boeing’s largest competitor is European-based Airbus.


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