The 787 has been grounded since Jan. 16 by the Federal Aviation Administration… (Koji Sasahara, Associated…)
Despite numerous incidents and high-profile fires involving lithium-ion batteries on its new 787 Dreamliner passenger jet, aerospace giant Boeing Co. defended installing the technology on the plane and vowed to quickly determine what went wrong.
The 787 has been grounded since Jan. 16 by the Federal Aviation Administration because of problems with onboard lithium-ion batteries. Investigators around the world are looking into the matter.
In a conference call announcing Boeing's fourth-quarter earnings, Chief Executive James McNerney said the company is working with customers and the regulatory agencies to get the matter resolved but is not permitted to comment directly on the ongoing investigations.
"I'm confident we will identify the root cause of these incidents," he said. "When we know the answer, we'll know the answer and we'll act on it."
On Monday, the National Transportation Safety Board released its sixth update on the investigation into the lithium-ion battery systems. It said it has begun analyzing the chemical and elemental makeup of the areas of internal short-circuiting and thermal damage. Work is underway in Washington, D.C., Seattle and Japan.
The agency hasn't reached a conclusion on the cause of the incidents, but McNerney said he didn't doubt Boeing's decision to use the new technology.
"Nothing we've learned has told us yet that we have made the wrong choice on the battery technology," he said. "We feel good about the battery technology and its fit for the airplane. We've just got to get to the root cause of these incidents, and we'll take a look at the data as it unfolds."
Japan's All Nippon Airways disclosed that over the last seven months it had to replace 10 of the batteries on its 17 Dreamliner jets because of an array of issues.
"These replacements included not only battery malfunction cases but also that of charging systems," said Jean Saito, a spokeswoman with the airline. "No flights were canceled or delayed due to these cases."
Boeing's McNerney said the number of battery replacements had been slightly higher than expected, but he did not know the exact number of batteries that had been replaced on the 50 Dreamliners the company had delivered so far.
"What I do know is that batteries are replaced on airplanes every day, every type of battery including these batteries," he said. "What we do know is that the replacement cycle that we've been experiencing there has been for maintenance reasons. There's been no instance that we're aware of where a battery has been replaced due to any kind of safety concerns."
Boeing said in its financial statement that it expected "no significant financial impact" from the 787 grounding this year — even though it will not deliver any new 787s as long as the plane is grounded.
Analysts were less confident. Wayne Plucker, an aerospace analyst with research firm Frost & Sullivan, said Boeing was "painting the rosiest picture" it could, assuming there was one solution for the ongoing problems.
"If there's a quick fix with minimum pain then there shouldn't be much of a problem," he said. "But if it involves a major change in technology it will hit their bottom line in this quarter for sure and next quarter as well."
The 787's battery systems were called into question Jan. 7 when a smoldering fire was discovered on the underbelly of a Dreamliner in Boston operated by Japan Airlines after the 183 passengers and 11 crew members had deplaned at the gate.
In an incident Jan. 16 involving All Nippon Airways in southwestern Japan, smoke was seen swirling from the right side of the cockpit after an emergency landing related to the plane's electrical systems. All 137 passengers and crew members were evacuated from the aircraft and slid down the 787's emergency slides. Video of the event was captured by an onboard passenger and has been broadcast worldwide.
Boeing's lithium-ion batteries are made in Japan by Kyoto-based GS Yuasa Corp. The Japan Transport Safety Board, the country's version of the FAA, is heading the investigation into All Nippon's emergency landing and reported fire.
No one was reported injured in the incidents. But the recent events have become a public relations nightmare for Boeing, which has long heralded the Dreamliner as a representation of 21st century air travel.
The 787, a twin-aisle aircraft that can seat 210 to 290 passengers, is the first large commercial jet with more than half its structure made of composite materials (carbon fibers meshed together with epoxy) rather than aluminum sheets. It's also the first large commercial aircraft that extensively uses electrically powered systems involving lithium-ion batteries.
In the fourth quarter, Boeing earned $978 million, or $1.28 per share, a 30% drop from $1.39 billion, or $1.84 per share, a year earlier, but that period included a tax benefit.
Boeing's fourth-quarter profit topped analyst estimates of $1.19 a share. Fourth-quarter revenue reached $22.3 billion, up 14% from the same period in 2011.
Boeing has taken 848 orders for 787s from airlines and aircraft leasing firms around the world. Depending on the version ordered, the price ranges from $206.8 million to $243.6 million per jet.
The Chicago company has delivered 50 of the 787s to eight airlines worldwide. Six are owned by United Airlines, the only U.S. carrier that currently has 787s in its fleet.
Boeing said it expects earnings this year to be $5 to $5.20 per share, with revenue of $82 billion to $85 billion.
Boeing's shares closed up 94 cents, or more than 1%, at $74.59.