Share “Boeing plans to carry on with 787 production”

Boeing plans to carry on with 787 production

Published on NewsOK Modified: January 17, 2013 at 8:05 pm •  Published: January 17, 2013

Still, Jefferies analyst Howard A. Rubel estimated that re-working the jet to fix electrical problems could cost anywhere from $250 million to $625 million. He emphasized Thursday in a note to investors that little is known about what it will take to fix the problem. He also noted that some of Boeing's suppliers may bear some of that cost.

Fitch Ratings said the grounding will hurt Boeing's profits and cash flow, "but the company has the financial strength to withstand negative developments in the program."

Barclays analyst Carter Copeland predicted "relatively limited" impact on Boeing's finances or production. That might change if the groundings last for weeks or months, "but this isn't yet what we expect," he wrote Thursday in a note.

Payments to airlines for lost revenue are possible but not likely to be big enough to hurt the company, he added.

The grounding will force airlines to swap in a different plane — often, a Boeing 767 or 777. Even though all of those planes are built to carry a large number of passengers on long-haul flights, their seating layouts are different, and last-minute plane switches are a headache for airlines and passengers. As long as they don't have to cancel a flight, though, airlines will still collect their money from the ticket.

For most airlines, the 787 is a minor part of their fleet. United has six of them, versus 151 other large planes that it uses for international flights. ANA's 17 787s are a bigger portion of its fleet of roughly 120 big planes.

Even if Boeing doesn't have to pay airlines cash because of the problems, it may have to offer services to mollify airlines, such as discounted or free pilot training or discounted spare parts, said Carter Leake, an analyst at BB&T who downgraded Boeing quickly after the plane began having trouble.

Those services are worth something to the airline but don't show up as a cash expense for Boeing.

Despite the setbacks, he predicted that future orders would not be hurt. The 787 is the best plane in the 200- to 225-passenger range, he said.

Boeing has said it's 20 percent more fuel efficient than planes of a similar size. The competing Airbus A350 isn't scheduled to make its first test flight until later this year.

"The airlines don't have a choice. That's the truth," Leake said. "The airplane is unique."

The latest problems come just as Boeing is in contract talks with its unionized engineers. On Thursday, the company said it had made its "best-and-final" contract offer, saying it agreed with the union's approach to extend the terms of the previous contract for current employees.

But the Society of Professional Engineering Employees in Aerospace indicated it would reject Boeing's offer because the union believes it would put retirement benefits at risk.

"Boeing's actions reiterate the company's growing disrespect for the engineers and technical workers who are essential to working issues and restoring confidence in the 787," the union said.

Because the 787 problems have arisen this late in the process, they could lead authorities to conclude that even tougher testing is needed.

"If the authorities get more stringent and take more time to certify planes, the first to be affected is going to be Airbus, which happens to be the next major company launching a plane," said Sandy Morris, an aerospace analyst with Jefferies in London.

Boeing Co. shares rose 92 cents Thursday to close at $75.26. Before the first battery problem arose, they closed Jan. 4 at $77.69.


Associated Press writers Carl Piovano in London and Greg Keller in Blagnac, France, contributed to this report, as well as video freelancer Rob Hess in Chicago.