Could the Dreamliner Become a Nightmare for Boeing?

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The Federal Aviation Administration (FAA) announced it will conduct a comprehensive review of the Boeing (NYSE: BA) 787 Dreamliner, but declared the aircraft safe despite a recent fire, a cracked window, and a fuel leak earlier this week.

"We are confident that the aircraft is safe. But we need to have a complete understanding of what is happening," FAA Administrator Michael P. Huerta said in an agency press release. Boeing has also made a statement declaring their cooperation with the investigation and their confidence in a “safe and efficient airplane.”

Transportation Secretary Ray LaHood also vouched for the airliner. “I believe this plane is safe, and I would have absolutely no reservations about boarding one of these planes and taking a flight.”

The 787 Dreamliner is Boeing's newest and most advanced aircraft. It is the world's first carbon-composite airliner. It also uses rechargeable lithium ion batteries, which charge faster and can be made in custom, space efficient sizes. The electrical power runs on-board functions such as hydraulics and air conditioning, instead of heavy pneumatic systems used on other planes. The weight savings makes the airliner more fuel efficient lowering overall jet fuel costs.

In the past week there was a fire in the battery pack of an auxiliary power unit of a Japan Airlines 787 on the tarmac of Boston’s Logan International Airport. (There were no passengers at the time.)  A few days later, a fuel leak delayed a flight from Boston to Tokyo of another Japan Airlines Dreamliner. Japan’s All Nippon Airways (NASDAQOTH: ALNPY) experienced an oil leak in the left engine of a flight from Japan’s Miyazaki airport to Tokyo. The jet returned to Miyazaki, was found to be safe after it was checked, and continued to Tokyo. On another flight in Japan, the glass in a cockpit window cracked, and the aircraft was grounded for repairs. ANA has no specific plan for inspections and will continue regular operations. The airline intends to cooperate with instructions from the FAA and other authorities.

What should all of this mean to investors? Could these problems mean trouble ahead for Boeing and the Dreamliner?

Boeing insists that the 787’s problems are no worse than when the 777 was new in the mid-1990s. The company has urged investors to put the incidents into perspective. The Dreamliner has logged 50,000 hours of flight and there are more than 150 flights occurring daily. There have only been a small handful of incidents, and in at least three of them, the aircraft was deemed safe enough to return to flight.

The company delivered 23 787’s in the fourth quarter of 2012. As of November 2012, 35 787s were delivered to eight airlines, with more than 800 unfilled orders for 58 customers worldwide.

United Airlines (NYSE: UAL) is currently the only American company operating the 787, with six airplanes delivered. United, along with Air India, LOT, and other airlines, have announced confidence in the aircraft, with no intention to change plans.

Analysts and experts have declared confidence in Boeing and the Dreamliner. Some systems may require tweaking, but that is usual for any newly manufactured model. Thus far nothing indicates a major reason to doubt Boeing’s or the aircraft’s long-term prospects.

Meanwhile, Makoto Yoda, president of Japanese battery maker GS Yuasa Corp, which makes the Dreamliner batteries, said his company would dispatch a team of engineers to cooperate with the FAA investigation.


ErinAnnie has no position in any stocks mentioned. The Motley Fool recommends Under Armour. The Motley Fool owns shares of Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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