Boeing Jet Chief Making 787 Amends Builds on Japan Ties

Boeing Co. (BA)’s commercial jet chief is going back to his roots in sales to help buff the planemaker’s image in Japan after the grounding of the 787 Dreamliner.

No country felt the 787’s absence more keenly than Japan, home to almost half the global fleet parked in January to repair overheating lithium-ion batteries. So Boeing Commercial Airplanes President Ray Conner was aboard April 28 when ANA Holdings Inc. (9202) flew its first Dreamliner since making the fixes.

Japanese companies from Toyota Motor Corp. (7203) to Sony Corp. (6758) to ANA prize long-term commitments, and CEOs typically spend decades rising through the ranks instead of hopscotching among employers as many U.S. counterparts do. That offers Conner, 57, a chance to build on ties he forged as a salesman in Japan more than a decade ago, working with ANA and Japan Airlines Co. (9201)

“If there’s any country they need to go to to support the 787, it’s Japan,” said Geoff Tudor, a principal analyst at Japan Aviation Management Research, who previously worked at Japan Airlines for 38 years. “The relationship between ANA and JAL and Boeing run deep. Boeing is very conscious of the fact that Japan has been a huge customer of their airplanes since the mid-’60s.”

Photographer: Tomohiro Ohsumi/Bloomberg

Ray Conner, president and chief executive officer of Boeing Commercial Airplanes. Close

Ray Conner, president and chief executive officer of Boeing Commercial Airplanes.

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Photographer: Tomohiro Ohsumi/Bloomberg

Ray Conner, president and chief executive officer of Boeing Commercial Airplanes.

That adds to the urgency of retaining dominance in a market where the two biggest airlines, JAL and ANA, rely on Chicago- based Boeing rather than Airbus SAS (EAD) for their wide-body jets, the biggest and most-expensive models in airline fleets.

‘Shows Respect’

Conner was Boeing’s sales chief before being named to lead the commercial business last year after the surprise resignation of Jim Albaugh.

“It’s better if he does visit,” said Ryota Himeno, an analyst at Barclays Securities Japan Ltd. “It shows respect for their launch customer.”

ANA’s weekend flight at Tokyo’s Haneda airport underscored that respect: ANA wasn’t the first airline to get a Dreamliner airborne again. A day earlier, Ethiopian Airlines Enterprise flew a 787, with Boeing Marketing Vice President Randy Tinseth representing the company.

ANA’s passenger service with the Dreamliner will resume June 1, CEO Shinichiro Ito said. Japan Airlines is also planning to restart 787 flights in June, the Tokyo-based airline’s President Yoshiharu Ueki told reporters on April 26.

Replacement Planes

Regulators grounded the global 787 fleet on Jan. 16 after lithium-ion batteries on a JAL jet in Boston and an ANA plane in Japan overheated and melted. That forced ANA, JAL and the other six airlines with 787s in service to rush for replacement planes and defer plans to add new routes.

Ending the grounding was important for Boeing, because it allowed the planemaker to resume deliveries from a backlog of 840 Dreamliners, which start at a list price of $206.8 million. Proving that the 787 can fly safely also would help ease any questions among prospective future buyers.

Boeing has rallied 22 percent this year, beating the 12 percent advance for the Standard & Poor’s 500, as investors bet that the battery fix would be successful. The shares fell 1 percent to $91.90 yesterday in New York.

ANA is the biggest Dreamliner customer, with orders for 66. JAL has ordered 45 and was once the largest buyer of Boeing’s 747s. ANA has received 17 Dreamliners, compared with seven for JAL, out of 50 that were affected by the global grounding.

Ten teams totaling more than 300 people are in place worldwide to rework the Dreamliners already in use, with multiple groups in Japan, Marc Birtel, a Boeing spokesman, said earlier this month. “ANA’s got the most aircraft and so that’s the greatest need,” said Ken Morton, a Boeing spokesman in Tokyo.

Personal Friendships

Conner has worked for Boeing for his entire career of more than 35 years. His first trip abroad was to Japan, about 25 years ago, he told the U.S.-Japan Council luncheon in October. He said he has made hundreds of trips to the country and built personal friendships while deepening Boeing’s business relationship with customers and suppliers.

He said after the April 28 ANA flight that Boeing will discuss compensation with individual airlines for costs associated with the “long” Dreamliner grounding. As is Boeing’s custom, he didn’t give details on those talks.

ANA said in January that the grounding of the fleet cut sales by 1.4 billion yen ($14 million) that month alone. JAL said last month that flight cancellations would cut sales by 1.1 billion yen through the end of March.

Rebuilding Reputation

Conner’s experience and ties may be crucial in rebuilding Boeing’s reputation in Japan, where loyalty is highly valued.

Kazuo Hirai took over as Sony’s CEO last year after joining Sony Music Entertainment Japan Inc. in 1984. Toyota’s Akio Toyoda became president in 2009, a quarter-century after joining the company founded by his grandfather. ANA’s Ito started with the airline in 1974.

Japan’s transport minister, Akihiro Ohta, signaled his appreciation for Conner’s personal approach last month after the two met in Tokyo while the battery fix was still in the works.

“We met and he mentioned words of apology first, and gave us an explanation of their proposal,” Ohta said in Tokyo. “I felt that the CEO was tackling the issue in a very holistic manner.”

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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