Tuesday, May 22, 2018
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FAA order reportedly irks Boeing leadership

SEATTLE — Boeing Co.’s leadership privately believes the government’s grounding of the company’s flagship 787 Dreamliner was an unnecessarily drastic step. But its defensive attitude does not sit well with some customers, and it risks alienating regulators.

“You’d be hard-pressed to find anyone at Boeing who believes the FAA should have grounded it,” said a former top executive, who asked for anonymity in speaking about his former colleagues. “They all believe the airplane is safe.”

An executive in charge of fleet planning for a major airline that has 787s on order expressed astonishment that Boeing has seemed to minimize what he sees as potentially critical incidents. “At no stage have they appeared to be open to admitting the seriousness of what’s happened,” the executive said. “They are basically still in denial.”

The grounding order is the first such order in more than three decades.

The Federal Aviation Administration first announced a 787 safety review after a battery caught fire on an empty Japan Airlines 787 parked in Boston, shortly after 137 passengers and crew ended a 12-hour flight.

Days after the review’s announcement, an All Nippon Airways 787 was forced to make an emergency landing in western Japan when a battery overheated and spewed hot chemicals and soot into the electronics bay. The next day, the FAA followed Japanese airlines in grounding the Dreamliner, and regulators worldwide followed suit.

Boeing Chief Executive Jim McNerney, in a message to employees Friday, said, “We have high confidence in the safety of the 787 and stand squarely behind its integrity. We are working around the clock to support the FAA, our customers, and others in the investigations."

Gordon Bethune, a former Boeing executive who left to run Continental Airlines — and who in that position bought the grounded Dreamliners now owned by United — is emphatic that the government overreached. He criticized the decision to ground the plane, made by Secretary of Transportation Ray LaHood and FAA chief Michael Huerta. “Neither of those two guys [knows] the front end from the back of an airplane,” Mr. Bethune said. “Obviously, [Boeing’s leaders] are disappointed in this overreaction. But it doesn’t help them to [complain], so they will never say anything publicly that could be disparaging to the government.”

“Don’t think they are making light of this,” Mr. Bethune added. “I’m sure they are chagrined as hell. But they are going to fix it.”

While many airline customers have publicly expressed confidence in Boeing, privately some have reservations. On Friday, the fleet planning executive for a 787 customer airline looked at a photo of the burned-out battery taken from the ANA jet and said he feels “very uneasy” that Boeing minimized the in-flight threat.

Though apparently in that case there was no fire outside the battery, the charred mess visible inside after investigators opened it was startling. The executive noted that when the fire broke out in the battery of the Japan Airlines 787 in Boston, Boeing’s public statements never used the word “fire.”

After that fire, Boeing tried to narrow the scope of the FAA’s safety review, according to a person with knowledge of the situation. Until the announcement that the planes were grounded after the in-flight ANA incident, Boeing argued to the FAA that passengers were never at risk.

A person with knowledge of the deliberations said Boeing maintained that safety controls had worked as designed on that flight to shut down the battery and prevent a fire.

Regulators were not persuaded. Now Boeing, based in Seattle, is struggling to satisfy aviation authorities in both the United States and Japan with an interim fix that includes thorough one-time battery inspections and instructions to pilots to do specific preflight electrical system checks.

The effect of the grounding on Boeing’s business will depend on how long it takes to work out a fix and get the planes flying again.

If the planes are allowed back in the air within the next week or so, the long-term impact will be minimal, industry experts agree.

In that case, the cost to Boeing in financial terms will not be material, said two Wall Street analysts.

Rob Spingarn of Credit Suisse said a significant impact on Boeing will come only if the grounding is extended enough to affect production. He expects 71 Dreamliner deliveries in 2013, bringing in about $7 billion in cash.

At this stage, Boeing is adamant that production will continue on schedule.

United, the only U.S. customer with grounded 787s, will not be harmed too much because it has a big fleet and can substitute 777s, said the former Boeing executive. In addition, the grounding comes during the offseason for travel.

Perhaps the most affected customer will be the Polish airline LOT, which on Wednesday flew its first 787 from Warsaw to Chicago and now cannot fly it back.

LOT is depending on revenue from 787 international flights to climb out of serious financial trouble.

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