Wednesday, January 16, 2013

Boeing 787 Dreamliner Goes 'Boing!'

Japan's two leading airlines grounded all Boeing 787 flights today after one of one of them had to make an emergency landing. The grounding came after a series of problems with the Dreamliner, which has become a nightmareliner. Troubles in the past four months include an oil leak, a fuel leak, engine cracks, and a damaged cockpit window. This follows a difficult development history with a series of production setbacks and delays before the plane entered service in 2011. (http://www.cnn.com/2013/01/15/travel/japan-dreamliner-emergency-landing/index.html)

Boeing hasn't had much to say so far, apparently choosing to ride out the spiraling crisis with white knuckles and teeth gritted. There's nothing on Facebook. (https://www.facebook.com/pages/Boeing/25362251550) In a January 11 statement, CEO Michael P. Huerta announced that the FAA and Boeing will start a review of the 787's recent issues and critical systems. Then he went quiet.
 
"We look forward to participating in the joint review with the FAA, and we believe it will underscore our confidence, and the confidence of our customers and the traveling public, in the reliability, safety and performance of the innovative, new 787 Dreamliner." (http://boeing.mediaroom.com/index.php?s=43&item=2560)

Half of the 50 new planes are in the fleets of two Japanese airlines. United accepted delivery of the first 787 Dreamliner in North America last fall and has orders for 49  more. (http://www.boeing.com/Features/2012/09/bca_united_first_787_09_24_12.html) Those orders could be in trouble if Boeing can't move quickly on alterations and then convince customers, potential customers, and passengers that the planes are safe.

"Shares of Dow component Boeing fell 3.5 percent (yesterday) to $74.25 on concerns about the safety of its new Dreamliner passenger jets.... 'It's certainly going to pull averages down, given Boeing's large market cap, but I don't see it as having broader market implications,'"  said Peter Jankovskis, co-chief investment officer at OakBrook Investments. (http://in.reuters.com/article/2013/01/16/us-markets-stocks-idINBRE90D0CG20130116)

"'A lot of the existing Boeing customers will be looking to see what action is taken in Japan in particular before they decide what action they are going to take with their orders,' said Siva Govindasamy, Asia managing editor at Flightglobal, an industry news service. 'You can be pretty sure that 1-2 of those customers are already in talks with Boeing to see what is going on and to rectify any issues before they get their aircraft. That's going to be very crucial right now, so the onus is on Boeing to take action,' he said."  (http://www.nbcnews.com/business/boeing-787s-grounded-two-japanese-airlines-1B7991426)

Analysts say airlines might look to European manufacturer Airbus if they aren't satisfied with Boeing's next steps. So far, so good. India's aviation regulator said Wednesday that it would decide whether to ground the Dreamliner jets only after Boeing submitted its safety report. State-owned Air India has six Dreamliners in its fleet. Australian carrier Qantas said its orders for 15 Boeing Dreamliners remain on track.

Not everyone is so patient and so confident in 787s. Industry analysts are urging Boeing not to take risks and to move right away to take more steps alleviate safety concerns. "'This problem (with the Dreamliner) looks to be systemic, it looks to be recurring. In that respect, my view is ….that they should consider grounding the entire Dreamliner fleet, not only limited to Japan but globally,' Jonathan Galaviz, managing director & chief economist at Galaviz & Company told CNBC'S 'Capital Connection.'"

This crisis is affecting Boeing's stock and its reputation, but most think history shows that impacts will be only short term. "'From a long-term perspective, I don't think today's (Wednesday's) incident will be a long-term negative for Japanese airlines because historically these kinds of issues tend to resolve themselves in a pretty timely manner, otherwise from a manufacturers' standpoint they are going to lose a lot of business,'" according to analyst Paul Wan.

Ray Conner, the head of Boeing's commercial airplanes unit, said last week that he and his company are convinced of the aircraft's safety and that the airlines that have bought the plane are also confident in its safety as well. "'We welcome any opportunity to further assure people outside the industry.'"  (http://www.cnn.com/2013/01/15/travel/japan-dreamliner-emergency-landing/index.html)
 
But not everyone is convinced. When identifying your key stakeholders in crisis planning, don't forget the end user, when appropriate. If the passengers refuse to fly 787 Dreamliners
 
Atlanta-based businessman Bobby Burns, who takes more than 50 flights a year, said, "'I am wary of a plane model that has fire problems and leaks fuel. I think of it the same as a new car model: Wait a year or two to get all the recalls sorted out.'"

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