Most Boeing Dreamliners Grounded for Battery Checks

Airlines scrambled on Thursday to rearrange flights as Europe, Japan, Qatar and India joined the United States in grounding Boeing Co's 787 Dreamliner passenger jets while battery-related problems are investigated.

Poland's state-controlled LOT Airlines said it would seek compensation from Boeing for grounding its two planes. It expects delivery of three more Dreamliners by end-March, but would only take them if the technical issues have been resolved, deputy chief Tomasz Balcerzak told a news conference.

The lightweight, mainly carbon-composite plane has been plagued by recent mishaps - including an emergency landing of an All Nippon Airways domestic flight on Wednesday after warning lights indicated a battery problem - raising concerns over its use of lithium-ion batteries.

The U.S. Federal Aviation Administration (FAA) on Wednesday temporarily grounded Boeing's newest commercial airliner, saying carriers would have to demonstrate the batteries were safe before the planes could resume flying. It gave no details on when that might happen.

It is the first such action since the McDonnell Douglas DC-10 had its airworthiness certificate suspended following a deadly crash in Chicago in 1979, analysts said.

Boeing has sold around 850 of its new planes, with 50 delivered to date. Around half of those have been in operation in Japan, but airlines in India, South America, Poland, Qatar and Ethiopia, as well as United Airlines in the United States, are also flying the aircraft, which has a list price of $207 million.

With most of that Dreamliner fleet now effectively out of action as engineers and regulators make checks - primarily to the plane's batteries and complex electronics systems - airlines are wrestling with gaps in their scheduling.

Japan Airlines Co said it cancelled eight Dreamliner flights between Tokyo and San Diego until January 25, affecting 1,290 passengers, and would switch aircraft for another 70 flights scheduled to fly the 787. Air India said it would use other planes on scheduled Dreamliner flights.

Motohisa Tachikawa, spokesman for Tokyo-based travel agent JTB, said there had not yet been any direct impact on bookings. "I'm sure JAL and ANA are furiously trying to assign replacement planes for those that are grounded. How and when they will make that clear will impact our situation," he told Reuters.

Keeping the 787s on the ground could cost ANA alone more than $1.1 million a day, Mizuho Securities calculated, noting the Dreamliner was key to the airline's growth strategy.

NO FIRM TIMETABLE

Regulators in Japan and India said it was unclear when the Dreamliner could be back in action. A spokesman for the European Aviation Safety Agency said the region would follow the FAA's grounding order. Qatar Airways said it grounded its five 787s.

Boeing said in a statement it was confident the 787 was safe and it stood by the plane's integrity.

Passengers leaving United's flight 1426 in Houston - which took off from Los Angeles moments before the FAA announcement - reported an incident-free trip. "I fly over 100,000 miles a year," said Brett Boudreaux, a salesman from Lake Charles, Louisiana. "That was one of the most relaxing flights I've ever had. I hope they sort it out. It's a hell of a plane."

In after-hours trading, Boeing shares fell more than 3 percent to $71.90.

"Ultimately, you can view it as a positive thing if they can resolve what the issues are and give people confidence in the safety of the aircraft," said Ken Herbert, analyst at Imperial Capital in San Francisco. "In the near-term, though, it's a negative. It's going to force the company to make significant investments."

Scott Hamilton, an analyst at Leeham Co, an aerospace consulting firm in Seattle, said having a plane grounded "is about the worst thing that can happen to an airplane programme".

"If this goes beyond just a bad design of a battery and you have to redesign some systems leading to the battery, and look at why didn't safeguards on this thing work, you get a ripple effect," he said. "They'll have more airplanes going out the door and they can't deliver them. So you build up inventory. Every day .. is an added day of delivery delays."

Six new 787s, painted and apparently ready for delivery to various airlines, were parked on the apron at Paine Field in Everett, Washington, adjacent to Boeing's 787 plant on Thursday. Four more Dreamliners occupied the final assembly spots inside the factory.

SMOKE AND SOOT

The Japan Transport Safety Board said the battery on the ANA flight that made the emergency landing was blackened, carbonized on the inside and weighed 5 kg less than normal, the Kyodo news agency reported. Representatives from the FAA, Boeing and the U.S. National Transportation Safety Board were due in Japan on Friday to inspect the plane.

The use of new battery technology is among the cost-saving features of the 787, which Boeing says burns 20 percent less fuel than rival jetliners using older technology.

Shares of GS Yuasa Corp, a Japanese firm that makes batteries for the Dreamliner, tumbled as much as 7.5 percent to a 2-month low. The stock has dropped 18 percent since January 7 when one of its batteries caught fire in a parked JAL-operated 787 at Boston Logan International Airport.

The 787 represents a leap in the way planes are designed and built, but the project has been plagued by cost overruns and years of delays. Some have suggested Boeing's rush to get planes built after those delays resulted in the recent problems, a charge the company denies.

Based on how regulators usually handle air safety, experts say U.S. authorities and Boeing will discuss the criteria for inspections on the Dreamliner. They would also set what fixes, if any, are needed and a timetable for those. Analysts say it's unclear how long that could take or how much it could cost, but some question whether Boeing can stick to its target of doubling 787 output to 10 a month by the end of this year.

"It guarantees some throttling back in production. It's clear one of the problems was building planes before fully understanding the rhythm of production," said Teal Group analyst Richard Aboulafia.

Moody's said the 787 grounding "could pose new operating and financial pressures for Boeing, including further delay in delivery schedules and future order flow, as well as ongoing reputational risk."

But aircraft industry sources say there was no immediate threat of airlines cancelling orders. "You aren't going to see cancellations," said Leeham's Hamilton, noting airlines have no alternative as rival Airbus models are sold out and have years-long waiting lists.

Airbus reported a 43 percent drop in orders for its planes last year, surrendering its crown as the world's largest planemaker to Boeing. The European manufacturer said it was confident of achieving the maiden flight of its A350 carbon-composite airliner by mid-year. The new plane will also use lithium-ion batteries - made by France's Saft Groupe.