A Grounded Jet That Is Still Worth Every Penny
Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Boeing's (NYSE: BA) 787 Dreamliner has been a headache for the company from about the time is was conceived. It is, however, a vital part of the airplane maker's future and of the future of the entire airline industry. The recent grounding of the new plane because of battery problems is bad news. Will it set the industry back 20 years?
Airplanes hadn't made huge advances for decades. To some extent, that's a function of the long-lived nature of plains, which are built to fly for 20 and 30 years, or more. It is also an issue of expense, since the upfront cost of making a new aircraft is massive and can only be recouped by building and selling a lot of planes.
Regardless, modern technology hadn't really entered the airplane market with a splash for a long time. That was until Boeing announced the 787 Dreamliner. It was intended to be built from the ground up, using new and better technology than what underpinned current aircraft. In fact, it was nothing short of revolutionary in the materials it used and the benefits it promised, such as notably reduced fuel consumption.
Airlines Loved it
As with any new airplane model, there was a big media splash around the first order. However, very public production delays were a black eye for Boeing. It took years to work out the kinks, requiring concessions to buyers and a lot of seat squirming for management. Still, the benefits that the new plane would offer were huge and airlines lined up to place orders. There are currently more than 800 such orders.
Nothing New is Flawless
That said, there are few technological advances that don't present problems along the way. The problem that's showing up now is with the high-tech battery. Using lithium-ion batteries, which can be a fire hazard, saves weight and improves performance. However, after a fire on a Japan Airlines 787, luckily while it was on the ground, and a battery related issue on an All Nippon Airways flight shortly thereafter, has brought the new plane under intense scrutiny.
A little extra caution on a new airplane using advanced technology is justified. In fact, with a still relatively small number of the planes in the air, now is probably a good time for Boeing to be experiencing these problems. Indeed, the fix will be a big deal, but much less material than if it had occurred at a time when there were hundreds of the jets in the air.
Batteries are Problematic
Airplanes aren't the only mode of transportation that has battery issues. For example Toyota (NYSE: TM) had to overcome some notable concerns about batteries with its Prius hybrid before coming to market. It's worth noting that several Prius cars caught fire or “smouldered” when salt water flooded storage docks during hurricane Sandy. While clearly an extenuating circumstance, it goes to show the risks that batteries can pose even when they are seen as completely safe.
In fact, lagging battery technology is one of the biggest problems with mobile technology all around. Storing electrical energy isn't easy and requires heavy batteries that often have limited life spans. Some Prius owners trying to save money with aftermarket replacement batteries have found the choice unfortunate as such batteries have been accused of catching fire. Troubled battery maker A123 Systems (AONEQ) is at the heart of that complaint.
Batteries haven't Stopped Autos
That said, battery problems haven't stopped the auto industry from making the step toward hybrid and electric only cars. Indeed, just about every major automaker has such options today, with leading edge company Tesla Motors (NASDAQ: TSLA) making nothing but electric vehicles.
Tesla's first car, the Roadster, seemed to get nothing but rave reviews. Though largely a plaything of the rich, it generated enough buzz that the company is now making a sedan, the Model S, with plans to bring out an SUV next year.
Clearly, the risk of an issue with a high-tech battery is smaller for a car than for an airplane in mid-flight. It is important to note, however, that the auto industry has been able to overcome the concerns and problems that have arisen. Even cell phones and laptop computers have had to deal with battery concerns, specifically related to overheating and fires. Those problems didn't send the world back to rotary phones and slide rules.
The Genie is Out of the Bottle
Thankfully no lives were lost because of the battery issue in the 787. So long as that remains true, Boeing's technological advances shouldn't see a lasting impact from the grounding. However, Boeing is likely to feel a short-term pinch from costs associated with fixing the planes and potential rebates to customers that have been impacted by the grounding.
Not exactly a win/win, but these issues are also not something that should make investors run for the hills. Even the post fire sell off hasn't exactly been all that notable. Moreover, Boeing has a very large business on both the commercial and military sides. So, it will be able to handle the expense without too much difficulty.
Boeing took an important risk with the 787 Dreamliner. It knew that the technology was unproven because it had never been used before. Despite the concerns, and the grounding of the airplane, it is unlikely that the world can go back to the old way ever again. Boeing will come up with a fix and the new technology will be perfected over time. Other manufacturers, meanwhile, will piggyback off of the risks that Boeing took, benefiting airlines and customers the world over.
ReubenGBrewer has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors . The Motley Fool owns shares of Tesla Motors . 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!