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Boeing 787 Battery Fix Wins Approval to Resume Flights

April 19 (Bloomberg) -- Boeing Co.’s 787 Dreamliner won U.S. approval to return to service with a redesigned lithium-ion battery, more than three months into the government’s longest grounding of a commercial model in the jet age. Peter Cook reports on Bloomberg Television's "Money Moves." Deirdre Bolton also speaks. (Source: Bloomberg)

Boeing Co. (BA) won U.S. approval for the 787 Dreamliner’s redesigned battery, setting the stage for ANA Holdings Inc. and Japan Airlines Co., the jet’s two biggest operators, to seek domestic clearance to restart flights.

Modifications to the planes began yesterday, and the U.S. Federal Aviation Administration said it will issue a directive next week to let flights resume once the battery fixes are made. The 787 will still be allowed to travel as far as 180 minutes from the nearest airport, enabling it to be used on over-ocean routes, said Laura Brown, an FAA spokeswoman.

ANA and JAL will now await Japanese regulatory approval. They’re among eight airlines flying the Dreamliner, and may be able to restart flights over the next several weeks once local regulators vet the battery design. Chicago-based Boeing will be able to resume deliveries, a pivotal step because it gets large payments when aircraft are handed over.

“To have it up and running and flying again within a month is not out of the question,” said George Hamlin, a former executive at planemaker Airbus SAS (EAD) who is now president of Hamlin Transportation Consulting in Fairfax, Virginia.

Neither the FAA nor the U.S. National Transportation Safety Board has determined what caused the battery faults that sparked a Jan. 7 fire on a JAL (9201) 787 in Boston and forced an emergency landing by an ANA (9202) jet in Japan nine days later. Those incidents triggered global grounding orders.

Photographer: Andrew Harrer/Bloomberg

The FAA’s decision will allow the Dreamliner’s eight current operators to restart flights over the next several weeks. Close

The FAA’s decision will allow the Dreamliner’s eight current operators to restart... Read More

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Photographer: Andrew Harrer/Bloomberg

The FAA’s decision will allow the Dreamliner’s eight current operators to restart flights over the next several weeks.

More Protection

Boeing’s reworked battery includes more protection around the cells to contain overheating, a steel case to prevent any fire from spreading and a tube that vents fumes outside the fuselage.

The redesign means that even another failure would be “no longer a safety concern at all,” Boeing Vice President Mike Sinnett told reporters on a conference call. FAA Administrator Michael Huerta said in an e-mailed statement that the agency spent weeks “reviewing detailed analysis” of the new design.

The shares rose 2.1 percent to $87.96 at the close in New York. That extended their gain to 13 percent since Jan. 4, the last trading day before the JAL incident, and more than doubled the 6.1 percent advance for the Standard & Poor’s 500 Index.

Ten teams totaling more than 300 people are in place worldwide to rework the 49 Dreamliners already in use, with multiple groups in Japan since ANA and JAL took the first deliveries, said Marc Birtel, a spokesman. Battery repairs will take five days for each plane, according to Sinnett, who declined to comment on the other teams’ locations.

Stored Dreamliners

Upgrades will be made to dozens of 787s stored around Boeing factories, and the redesign will applied to new planes on the assembly line.

“Boeing further expects that the 787 battery issue will have no significant impact to its 2013 financial guidance,” according to a company statement.

While the FAA’s approval only applies to U.S. airlines, overseas regulators typically follow the agency’s lead. United Continental Holdings Inc. (UAL), the only U.S. carrier with Dreamliners, called the FAA’s move a “good step forward.”

“We are mapping out a return-to-service plan, and we look forward to getting our 787s back in the air,” Christen David, a spokeswoman for the Chicago-based carrier, said in an e-mail.

United is selling seats for Dreamliner flights starting May 31 for domestic routes including Houston-Denver, and is targeting June 10 to begin new service between Denver and Tokyo.

Upgrade Order

Boeing said it will make upgrades in roughly the order the planes were handed over to customers, which would put ANA and JAL (9201) first. ANA has 17 Dreamliners in its fleet and JAL has seven.

ANA is reviewing the FAA announcement, Ryosei Nomura, a spokesman for the carrier, said by e-mail today. A Dreamliner probe by Japan’s transport ministry is in its final stages, Shigeru Takano, the agency’s director in charge of air transport safety, said yesterday at a briefing in Tokyo.

Grounding orders from the FAA and other regulators stranded some 787s far from home. LOT Polish Airlines SA made its inaugural Dreamliner flight on Jan. 16 hours before the FAA’s directive was issued, and that plane was marooned in Chicago upon arrival from Warsaw.

Before deliveries were suspended, Boeing also had handed over jets to Air India, Ethiopian Airlines Enterprise, Latam Airlines Group SA (LAN) and Qatar Airways. Boeing has orders to fill for 840 more, so it kept building 787s at a rate of five a month while working toward a plan to double output by year’s end.

Cash Costs

Boeing probably amassed cash costs of more than $2 billion associated with continued production while not receiving revenue for more than three months, said Carter Copeland, an analyst in New York with Barclays Plc who rates Boeing as overweight. Not all of those costs will be recoverable once deliveries resume, he said in an interview.

Airlines also are demanding compensation for grounding- related losses. Air India plans to seek at least $37 million from Boeing, a person familiar with the matter said.

Analysts are awaiting more financial details when Boeing releases first-quarter earnings April 24 and holds a conference call. Those results will come a day after the NTSB opens a hearing in Washington into the 787’s design and certification, including the FAA’s role.

Robert W. Mann, a former American Airlines executive who is now an aviation consultant, questioned the FAA’s decision to approve the battery fix before the NTSB forum on the Dreamliner. With the root cause of the battery faults still unknown, the agency should have waited until after the hearing, he said.

Timing Questioned

“We’re putting a Band-Aid on something that may not be the problem, and that’s troubling to me,” said Mann, who runs R.W. Mann & Co. in Port Washington, New York. “I’m sure Boeing has strong interest in getting the plane back into the air. I understand the economics of the issue, but this isn’t about economics. It’s about safety.”

With the NTSB hearing approaching next week, Boeing’s Sinnett declined to comment on why the company didn’t design the battery with three levels of protection to begin with.

“We always learn more as we dig deeper,” and the battery is now designed to withstand any possible failure, he said.

The Dreamliner’s grounding is the longest on a large commercial aircraft by U.S. regulators since jets were introduced in the 1950s.

The Douglas DC-10 was ordered parked by the FAA for more than a month in 1979 after cracks in an engine mount were found in inspections after a Chicago crash. Other commercial models, such as the supersonic Concorde once flown by British Airways and Air France, were grounded by other nations for longer periods.

The Dreamliner is the only large commercial jet equipped with lithium-ion batteries as part of its power system. The electrical system is the first to replace traditional pneumatics on a commercial jet.

GS Yuasa Corp (6674)., based in Kyoto, Japan, makes the batteries, which are part of an electrical power conversion system built by France’s Thales SA. (HO) United Technologies Corp.’s Aerospace Systems unit supplies the system, which uses 1.45 megawatts of electricity, enough to power 400 homes.

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

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Ed Dufner at edufner@bloomberg.net

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