6:09pm

Wed January 30, 2013
Business

Grounding Of 787s Creates Doubts About 'Business As Usual' At Boeing

Originally published on Wed January 30, 2013 7:39 pm

Boeing generated more cash than expected last year and reclaimed the top spot over rival Airbus as the world's biggest airplane maker.

But all that was overshadowed by the fact that its entire fleet of 787s is grounded after batteries on two of its planes either overheated or caught fire.

"For 2013, our first order of business, obviously, is getting the 787 back into service," Boeing CEO James McNerney says.

With the National Transportation Safety Board and the Federal Aviation Administration investigating the incidents, McNerney said repeatedly on a conference call he could not hazard any guesses about how and when the review would turn out. .

"I can't predict an outcome and I'm not going to," he says. "We're in the middle of an investigation. We're making progress on the investigation. We've got every expert in the world looking at this issue."

In the meantime, McNerney says, Boeing plans to keep building the planes on schedule.

"Business as usual, let's keep making planes and then let's ramp up as we've planned," he says.

But some are not so sure about continuing the assembly line.

"I'm skeptical, only because we don't know what we don't know," Scott Hamilton, an aviation industry consultant, says.

Without new information, he says it's impossible to gauge the potential impact of the 787's grounding on Boeing.

"We don't know what the problem is, we don't know what the solution is, we don't know what the design of the fix will be, we don't know how long the planes will be on the ground," Hamilton says.

The investigations have centered on the plane's new lithium-ion batteries — notable for both their power and volatility. Several media reports said airlines had returned large numbers of faulty batteries. In Wednesday's call, however, McNerney dismissed those issues as routine maintenance unrelated to the recent overheating incidents.

"I'm a little surprised that McNerney was so definitive in dismissing the possible connection because I don't think we know," Hamilton says.

Boeing's struggles with the 787 go back in time.

Initial production faced over three years of delays and billions of money in extra costs. The complexities stem in part from the use of new, fuel-efficient technology and materials, and the plane comprises thousands of components made by over 100 manufacturers.

So far, the planes have been grounded for two weeks.

Oppenheimer aviation analyst Yair Reiner says the longer the investigation drags out, the more it's an indication the problem is complicated — perhaps going beyond just battery issues — and therefore more expensive to fix.

"That progress seems to be evolving more slowly than they might have earlier expected," Reiner says.

He says coming off a strong 2012 puts Boeing in a good position heading into difficulties. Still, he says, the company really wants to avoid slowing its manufacturing schedule — which could anger airline customers waiting for their new fleets.

"Boeing still has a leash of several weeks, maybe a couple of months, to resolve this before it will likely have to slow down production," he said.

The company's stock closed up 1 percent today and is down 3 percent since its planes were grounded.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

AUDIE CORNISH, HOST:

Today, Boeing offered its first financial update since the company's recent trouble with its flagship plane, the 787 Dreamliner. The planes have been grounded while investigators try to figure out what's causing battery failures. Boeing says it does not think the problems will have a big effect on its profit forecast. And it still plans to make more than 60 Dreamliners this year.

But as NPR's Yuki Noguchi reports, the real focus remains on the 787's batteries and the prospects for a quick solution.

YUKI NOGUCHI, BYLINE: Boeing generated more cash than expected last year and reclaimed the top spot over rival Airbus as the world's biggest airplane maker. But, of course, all that was overshadowed by the fact that its entire fleet of Dreamliners is grounded after batteries on two of its planes either overheated or caught fire.

James McNerney is CEO of Boeing.

JAMES MCNERNEY: For 2013, our first order of business, obviously, is getting the 787 back into service.

NOGUCHI: With the National Transportation Safety Board and the Federal Aviation Administration investigating the incidents, McNerney said repeatedly on a conference call he could not hazard any guesses about how and when the review might resolve.

MCNERNEY: I can't predict an outcome, and I'm not going to. We're in the middle of an investigation. We're making progress in the investigation. We have got every expert in the world looking at this issue.

NOGUCHI: In the meantime, McNerney said Boeing plans to keep building the planes right on schedule.

MCNERNEY: Business as usual. Let's keep building airplanes, and then let's ramp up as we've planned.

SCOTT HAMILTON: I'm skeptical only because we don't know what we don't know.

NOGUCHI: Scott Hamilton is an aviation industry consultant. With no new information, he says it's impossible to gauge the potential impact of the Dreamliner grounding on Boeing.

HAMILTON: We don't know what the problem is, we don't know what the solution is, we don't know what the design of the fix will be, we don't know how long the airplanes will be on the ground. We don't know more than we do know.

NOGUCHI: The focus of the investigations, however, have centered around the plane's new lithium-ion batteries, notable for both their power and volatility. Several media reports said airlines had returned large numbers of faulty batteries. In today's call, however, Boeing's McNerney dismissed those issues as routine maintenance unrelated to the recent overheating incidents.

Again, Scott Hamilton.

HAMILTON: I'm a little surprised that McNerney was so definitive in dismissing the possible connection because I don't think we know.

NOGUCHI: Boeing's struggles with the Dreamliner go back years. Initial production faced over three years of delays and billions in extra cost. The complexities stem in part from the use of new, more fuel-efficient technology and materials and the fact that the plane is made from thousands of components made by over 100 manufacturers.

So far, the planes have been grounded for two weeks. And Oppenheimer aviation analyst Yair Reiner says the longer the investigation drags out, the more it's an indication the problem is complicated, perhaps going beyond just battery issues and therefore more expensive to fix.

YAIR REINER: That progress seems to be evolving a bit more slowly than they might have earlier expected.

NOGUCHI: Reiner says coming off a strong 2012 puts Boeing in a good position heading into difficulties. Still, he says, the company really wants to avoid slowing its manufacturing schedule, which could anger airline customers waiting for their new fleets.

REINER: Boeing still has a leash of several weeks, maybe a couple of months to resolve this before it will likely have to slow down production.

NOGUCHI: Boeing stock closed up 1 percent today and is down 3 percent since its planes were grounded.

Yuki Noguchi, NPR News, Washington.

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