The FAA May Limit the 787 -- Who Loses?

Reuters is reporting that the Federal Aviation Administration (FAA) may restrict operations of Boeing's (NYSE: BA  ) troubled 787 jetliner when it returns to service in the coming weeks.

Instead of flying long-haul routes over water, the so-called "Dreamliner" could be required to remain within two hours of an airport capable of handling an emergency landing, the wire service says, citing unnamed sources.

How bad might this be, and for whom? Certainly for Boeing, which has delivered less than 6% of the 787 aircraft ordered as of this writing. United Continental Holdings (NYSE: UAL  ) also stands to lose, says Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova.

In the following video, Tim explains that United's most profitable routes run over water, and several of those were to be serviced by the 787 this year. Now, the carrier may be forced to substitute with existing 757 and 777 aircraft.

Will the threat of FAA action keep you out of this stock? What about shares of competing airlines? Let us know what you think about United's prospects in the comments box below.

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  • Report this Comment On March 31, 2013, at 12:14 PM, TMFGemHunter wrote:

    Hi Tim,

    Glad you caught this story. However, I don't think the impact is as big as you suggest. Even with a 120 minute diversion time, you can fly most North Atlantic or North Pacific routes. The diversion points in Iceland/Alaska/Russia are close enough to the great circle routes to make that possible.

    The only announced 787 route that might be impractical with ETOPS 120 certification is Houston-Lagos (the Houston-Auckland flight that was canceled last year also would have required a longer diversion time). So United could still use the 787 for international routes even if it is limited to ETOPS 120 certification initially. The only reason to go all-domestic would be if United management is worried that the Boeing fix is inadequate.

    Best,

    Adam

  • Report this Comment On April 01, 2013, at 12:12 PM, EirikRaude2000 wrote:

    Problem is: Japan Air Lines (JAL) will not be so lucky.

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