Boeing Co. (BA)’s 787, already the focus of a special U.S. safety review, faces fresh scrutiny after Japanese airlines grounded almost half the world’s Dreamliner fleet for at least two days following an emergency landing.
All Nippon Airways Co. (9202) pilots on a domestic flight got electrical-fault warnings related to the plane’s lithium-ion battery, the carrier said. ANA and Japan Airlines Co. (9201) parked their 24 Dreamliners through today, while United Airlines (UAL) was among the carriers that continued flying 787s.
The groundings added to the questions plaguing a model that was targeted for a U.S. assessment because of a Jan. 7 fire in a lithium-ion battery pack on a Japan Airlines plane in Boston. Fuel leaks, electrical faults and a cracked windscreen also have been reported on 787s in recent weeks.
- SLIDESHOW: ANA, Japan Air Ground 787s
“The issue now is: How rapidly can the National Transportation Safety Board get to the source of the battery issue and how rapidly operators can get inspections done?” said Robert Mann, president of consultant R.W. Mann & Co. in Port Washington, New York. “It would be an understatement to say this is bad for Boeing.”
An NTSB investigator is being sent to Japan to assist in the follow-up inquiry on the ANA incident, Kelly Nantel, an agency spokeswoman, said in an e-mail. The FAA and Chicago-based Boeing also dispatched representatives, Nantel said.
An initial inquiry found “the main battery in the forward electronic equipment bay was discoloured and the electrolysis solution had leaked,” All Nippon said in a statement. Battery warnings and an “unusual smell” in the cockpit and cabin spurred the emergency landing, according to the statement.
“There was no smoke in the cockpit,” Nao Gunji, a spokeswoman, said by e-mail.
Boeing is “aware of the event and working with our customer,” Lori Gunter, a spokeswoman, said in an e-mail. “We don’t have any more details to share at this point.”
The shares fell 3.4 percent, the most since June 1, to $74.34 at the close in New York. That exceeded the 3.3 percent decline for all of last week, the steepest such drop since the five-day period ended Nov. 16, after the Japan Airlines fire.
The 787 is Boeing’s most technologically advanced jet, featuring a body made of composite materials instead of the traditional aluminum. The 787-8 model carries about 250 passengers. It conserves fuel by using five times more electricity to power its systems than other planes, and is Boeing’s first model to rely on lithium-ion batteries.
After last week’s fire, the renewed focus on battery risks after the ANA incident will be a bigger concern for investors than the fuel leaks and windshield cracking, Carter Copeland, a Barclays Plc analyst in New York, said in a note to clients.
“We see potentially ‘connected’ events” putting more pressure on the shares, wrote Copeland, who recommends Boeing as overweight. “Our conversations would suggest that this incident still does not reveal a ‘safety of flight issue.’”
The Dreamliner entered commercial service in 2011 after more than three years of delays, and ANA was the initial customer. ANA and Japan Airlines are the biggest operators of the planes so far, with 24 Dreamliners in a global fleet that the U.S. FAA says now numbers 50 aircraft.
United Flight 33 flew to Los Angeles from Tokyo hours after the ANA incident. The unit of United Continental Holdings Inc. also is flying 787s from Houston to Los Angeles, Chicago and Newark, New Jersey, said Mary Ryan, a spokeswoman.
“We inspected all of our 787 aircraft and they are flying as scheduled,” Ryan said in an e-mail. The Chicago-based company has six of the planes.
LOT Polish Airlines SA began trans-Atlantic service yesterday with a 787, flying to Chicago O’Hare International Airport from Warsaw, and Qatar Airways said it would continue operating its Dreamliners as well. Ethiopian Airlines said “minor bugs” are common on new aircraft, and that it is pleased with the aircraft’s performance so far.
In the ANA incident, pilots sent the 129 passengers and eight crew members down emergency chutes after diverting the Tokyo-bound flight to Takamatsu airport in southern Japan, Vice President Osamu Shinobe said at a press conference in Tokyo. One passenger was taken to the hospital because of wrist pain.
All Nippon will “carefully” investigate the episode, which may have been caused by a battery issue, President Shinichiro Ito told reporters. Resumption of flights with the 787 will come after the airline completes its investigation, Ito said, without providing a timeframe.
“Finding out what happened is our first and utmost priority now,” Ito said after meeting Japan’s Transport Minister Akihiro Ota to apologize for the incident. The ministry said by e-mail that it considered the emergency landing a “serious” incident that could have led to an accident.
All Nippon shares fell 1.6 percent to 182 yen at the close of trading in Tokyo, their biggest drop in more than a month, while Japan Airlines gained 1.8 percent to 3,675 yen. The shares of the battery maker, GS Yuasa Corp., tumbled 4.5 percent, the most since Oct. 23, in Tokyo trading.
Boeing last week stood by its new plane, saying the issues are introductory pains that will be overcome. The 787’s entry into service hasn’t been any worse than that of the 777, one of Boeing’s most popular models, and has been better than “other wide-bodies” available, Mike Sinnett, chief 787 project engineer, said Jan. 9.
This is a crucial year for the 787 as Boeing increases deliveries, trying to get out from under the weight of seven delays to the jet’s introduction. Boeing is set to double 787 output this year to help fill remaining orders for about 800.
The planemaker has delivered the $207 million jets to eight customers: All Nippon, Japan Airlines, Air India, Ethiopian Airlines, Chile’s LAN Airlines (LFL), LOT, United Continental and Qatar Airways.
Boeing chose lithium-ion batteries for the 787 because they hold more energy and can be quickly recharged, Sinnett said.
In a worst-case scenario in which the batteries do burn, they are designed to do so in a way that doesn’t threaten the aircraft, Sinnett said. If the jet is airborne, smoke is supposed to be vented out of the compartment so that it doesn’t reach the cabin, he said, and all of the battery cells can ignite without harming the plane’s ability to stay aloft.
“It’s too early to say that the design of this airplane is to the point where it needs to be grounded,” Michael Barr, an instructor at University of Southern California’s Aviation Safety and Security Program, said in an interview. “But it is very disconcerting that an airplane with this much testing and evaluation is having these types of problems.”