Boeing working towards Dreamliner fix

January 24th, 2013

Aviation buffs would consider Boeing’s latest airplane as something out of fantasy.  The 787 Dreamliner has features such as a futuristic cabin, unprecedented fuel efficiency and a body comprised of composite materials. Boeing’s creativity produced a revolutionary aircraft, but this innovation can become a double-edged sword.

The mechanical problems that the 787 has experienced in its short life have been an absolute disaster. Within the past couple weeks there have been two emergency landings by Japanese airlines using the 787.

One was forced to land after a battery fire and another due to a battery warning.  These incidents occurring so closely to one another prompted safety regulators to issue a worldwide grounding of all Dreamliners until a solution is found.

But it isn’t the end of the world yet for Boeing. Aerospace Engineering is not a simple science, and it isn’t uncommon for a new aircraft to have problems in its infancy. Many suffer growing pains such as cracked windows and fuel leaks; however  it is crucial to ensure that the plane is reasonably safe and not susceptible to bigger problems in the long run. Though this was an isolated incident, travelers became extremely hesitant to fly the plane, which forced its retirement three years later.

So, how complicated is the fix for the Dreamliner batteries? Japanese and U.S. safety experts are working jointly to discover a solution, and there are a lot of moving parts to sort through.

It is too early to tell if the error is on behalf of Boeing employees or the producers of the battery. The Federal Aviation Administration and Japanese government are currently investigating the production and assembly of batteries.

One other unique challenge is that the Dreamliner relies on electronic controls rather than traditional pneumatics, which could reveal even more problems. Boeing’s shares have slid quickly in the first couple weeks of 2013. In the days before the first  Dreamliner emergency landing, Boeing (BA) was trading at $77.92, but has fallen as low as $73.52 since, a fall of about 5.6 percent from peak to trough.

Boeing’s suffering from the issue will be entirely dependent on how quickly a fix can be found. If a solution is developed in the next week or two, Boeing will likely rebound very easily.

However, if the quandary forces the airplanes to sit on the ground for months, it will severely damage the reputation of Boeing’s product and brand, and the markets will not view BA stock favorably.

Investors may be optimistic on Boeing.  The battery headwinds may be overcome, and roughly six percent of these planes have been delivered out of those ordered. Luckily, this is a small percent that must be recalled and fixed.

This mistake will be solved prior to the delivery of the 848 outstanding orders.  Based on this, smart investors may recommend maintaining or bumping one’s position in the airline company. Investors will closely monitor this situation in the coming weeks and months.

Information from The Associated Press, The Wall Street Journal, The New York Times, and Google Finance was used in this report.