Dreamliner costs add up for Boeing

The negative publicity surrounding the new plane will haunt the company for years. Still, Wall Street remains confident the safety issues will be resolved.

By Jonathan Berr Jan 21, 2013 12:49PM
Image: Paper airplane made of money (Tetra Images/Corbis)It won't be cheap for Boeing (BA) to end the public relations nightmare around the 787 Dreamliner.

The Chicago company will probably spend several hundred million dollars to redesign the controversial batteries in the plane that have drawn concerns. Regulators around the world have taken the unusual step of ordering the aircraft grounded.

As The New York Times notes, Boeing also may have to pay up to $1.5 million a day in penalties to carriers who have purchased the plane. United Airlines (UAL) is the only U.S carrier that flies the Dreamliner. 

The timing of these safety issues comes as Boeing had planned to ramp up production of the $207 million jetliner. Of course, the damage to the company's reputation may take years to repair.

Meanwhile, regulators still have to figure out why the plane's lithium-ion batteries have malfunctioned. Investigators from the National Transportation Safety Board examined a battery from a plane that recently caught fire in Boston and found that it did not exceed "its designed voltage of 32 volts." That's bad news, because an overcharged battery was blamed for a fire in Japan.  

If there are two separate Dreamliner battery problems, that could "potentially delay Boeing's effort to persuade regulators to allow the planes back into service," the Wall Street Journal says.

Wall Street, though, still has faith that Boeing will solve the Dreamliner's problems eventually. Shares of the aerospace company have not budged much in the wake of the negative publicity. To date, Boeing has just delivered 50 of the 850 Dreamliners that airlines have ordered. The average 52-week price target on the stock is $88.58, about 18% higher than where it currently trades.

Carriers are keen on the 787 because it is far more fuel efficient than more conventional aircraft, enabling them fly passengers farther, faster and cheaper. If Boeing can resolve the safety issues, the Dreamliner stands to be a big money maker.

--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

More on Money Now






1Comment
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The S&P 500 trades higher by 0.4% with all ten sectors sporting gains. The benchmark index has extended this week's gain to 1.6%, while the Dow Jones Industrial Average (+0.4%) is now higher by 2.0% since last Friday.

The Leading Indicators report for August was up 0.2%, while the Briefing.com consensus expected a reading of 0.4%. That followed a revised increase of 1.1% for July (from 0.9%). Nasdaq +13.77 at 4607.2... NYSE Adv/Dec 1867/883... Nasdaq Adv/Dec ... More

MSN MONEY'S