Boeing stands by beleaguered Dreamliner
Regulators around the world order the airliner grounded over safety concerns. Carriers are getting nervous.
"We will be taking every necessary step in the coming days to assure our customers and the traveling public of the 787's safety and to return the airplanes to service," said CEO James McNerney in a statement. "Boeing deeply regrets the impact that recent events have had on the operating schedules of our customers and the inconvenience to them and their passengers."
Boeing will need to do more than apologize. As the Associated Press notes, Poland's state-owned LOT Airlines plans to seek compensation from Chicago's Boeing for grounding its two Dreamliners and will only take delivery of the three other 787s that had been scheduled for March if the technical issues have been resolved. LOT is hardly the only airline that feels this way.
"I suspect many carriers are getting a bit nervous, particularly if they're expecting an early-production aircraft," writes Richard Aboulafia, of the Teal Group, an aviation consultancy, in an email to MSN.
The Federal Aviation Administration, which has been conducting a review of the 787, ordered the entire fleet grounded Wednesday amid worries about the safety of its advanced lithium ion batteries that have caught fire. This is a step that regulators haven't undertaken in four decades. Officials in Europe, Japan and India followed the FAA's lead.
Shares of Boeing, which have barely budged over the past year, are trading down in pre-market trading. The stakes for Boeing in the Dreamliner drama couldn't be higher.
"The company has outlined ambitious plans to double its production rate to 10 planes a month by the end of 2013," according to the New York Times. "It is also starting to build a stretch version and considering an even larger one after that."
Airlines had been keen on the 787 because Boeing had argued that the state-of-the-art aircraft could fly passengers further and cheaper because of increased fuel efficiency. Many Wall Street analysts seem to think that Boeing will be able to resolve the never-ending glitches around the 787. The average 52-week price target on the stock is $88.58, about 19% higher than where it currently trades.
Whether investors' faith in Boeing will be rewarded remains to be seen. Another question centers around CEO McNerney. Boeing boosted his 2011 pay by 34% to $18.4 million, in part because the company delivered the 787 after a delay of almost four years. It will be interesting to see if the company tries to claw back this bonus.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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