Regulators Wary of Boeing's Plan to Fix the Dreamliner

Boeing (NYSE: BA  ) has spent the past week meeting with transportation safety regulators first in the United States and now in Japan, pushing a plan to fix the concerns that have had the 787 Dreamliner grounded since mid-January. Boeing's customers are losing money and Boeing's reputation suffers every day the planes aren't flying, so Boeing would like to get the planes back in the air as soon as April.

Boeing has traced the problems, which have included smoke infiltrating the plane cabin and even a small fire, to large, advanced lithium ion batteries in the plane's wing, which can overheat. While investigators don't yet know what causes the batteries to overheat in the first place, Boeing's fix involves mitigating this event by insulating the batteries, surrounding them in a fireproof case, and venting gases that could build up inside the battery compartment.

While the U.S. Federal Aviation Administration is not yet ready to allow test flights , Japanese regulators aren't even ready to admit that the battery itself is the problem, according to The New York Times. At a press conference, Japanese transport minister Akihiro Ota called Boeing's plan a "starting point" and indicated that his ministry would need to take some time just to evaluate the proposal to see if its satisfactory. If Japanese regulators don't accept that the battery is at fault, and require Boeing to go back to the drawing board for a more comprehensive fix, resuming flights by April would look very unrealistic.

There may be a bit of nationalist pride in Japan's regulatory position here: The batteries in question were produced by GS Yuasa, a Japanese company. That nationalism could hurt Boeing now, but it has certainly helped in the past. I doubt it's any accident that Japanese suppliers produced around a third of the Dreamliner, a larger portion than any other country, and Japanese national airlines have been the biggest customers for the Dreamliner.

Japanese airlines, including launch customer All Nippon Airways and Japanese national flag-carrier Japan Airlines, between them operate around half of the global 787 fleet. In the U.S., just six Dreamliners have been delivered nationwide, all of them to United Air Lines (NYSE: UAL  ) .

Japan's preponderance of Dreamliners means that even though Boeing is an iconic American company, Japanese regulators actually have far more clout than US regulators in determining when and how the 787 gets back in the air. Of course, Japan's heavy investment in the Dreamliner also means the nation has a strong incentive to get the plane back in the air as quickly and safely as possible.

For Boeing, the opportunity is absolutely massive. However, the company's execution problems and emerging competitors have investors wondering whether Boeing will live up to its shareholder responsibilities. In this premium research report, two of the Fool's best industrial minds have collaborated to provide investors with the key, must know issues around Boeing. They'll be updating the report as key news hits, so make sure to claim a copy today by clicking here now.


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  • Report this Comment On March 02, 2013, at 6:09 PM, fmrBngwkr wrote:

    I used to build the 787 in N.C. I also have 30+ years flying and working on various makes and models of aircraft. Of all the aircraft I have worked on, the 787 is some of the shoddiest workmanship and engineering, accordingly I would be very skeptical of any quick fix Boeing proposes. They are paying penalties for being so far behind on this aircraft and are under a lot of pressure to get these planes flying again.

  • Report this Comment On March 02, 2013, at 10:35 PM, AngelTread wrote:

    I agree with fmrBngwkr above.

    The Boeing 787 is a mess.

    Boeing didn't "trace" the problem to the lithium ion battery. No, Boeing said the problem was the lithium ion battery. Subtle but big difference.

    Before the grounding, you might remember that there were numerous electrical faults occurring on the 787, as reported in many news sites. My opinion is that those electrical faults were no coincidence.

    Boeing wants to get a quick fix so its Dreamliner planes can fly again quickly. But fixing the battery may not fix the problem that caused the fires in the first place.

    I will not fly on a Boeing 787 Dreamliner myself. I know more and more people feeling the same way. Airlines that buy Dreamliners are going to have to contend with this aversion from the public.

  • Report this Comment On March 03, 2013, at 9:01 AM, sonofamram wrote:

    LOL: "two of the Fool's best industrial minds" -- haha

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