Friday, February 08, 2013

Boeing Warns on Dreamliner Deliveries

Updated February 8, 2013, 10:35 a.m. ET

The Wall Street Journal

LONDON—Boeing Co. on Friday said it had warned customers that near-term deliveries of 787 Dreamliners are at risk of delays as the Chicago jet maker continued to work with regulators to identify the cause of battery problems that have grounded its fleet world-wide.

European carriers Thomson Airways, part of U.K. leisure group TUI Travel, and Norwegian Air Shuttle both said they are working on contingency plans after Boeing told them that deliveries of the jetliner could be delayed.

Thomson, due to take delivery of its first Dreamliner at the end of February, said that the delivery had been postponed and no new date had yet been scheduled. Norwegian, which has ordered a total of eight 787s, and was expecting its first in April, said it hasn't received a new delivery date from Boeing nor a written confirmation of a possible delay.

The delays in 787 deliveries come as U.S. investigators said Thursday that short-circuits inside a battery triggered a fire aboard a parked Boeing Co. 787 Dreamliner last month. The investigators also found the safety-approval process for the power devices was flawed and "must be reconsidered" before the jets return to passenger service.

The consequences of the battery problems are now spreading to those airlines yet to take delivery of the new Boeing plane.

"We have informed our customers expecting 787 deliveries in the near term that those aircraft either have been or are at risk of being delayed," Boeing said.

"We are staying in close communication with our customers as we work towards an approved means of compliance with the FAA Airworthiness Directive and develop a plan for resumption of 787 deliveries," the company said in a statement.

Boeing declined to give details of its delivery schedules.

The U.S. aero-defense giant is currently proposing a series of battery-design changes that it believes would minimize the risks of fire on its 787 Dreamliners and allow the grounded jets to fly again while it continues searching for a longer-term fix, say government and industry officials briefed on the matter.

The company is looking at increasing the separation between cells in the lithium-ion batteries to reduce the potential hazards from heat or fire spreading within the batteries and adding enhanced heat-sensors, these officials said. Boeing also is considering ways to keep cells more rigid, preventing them from shifting under certain conditions and interfering with electronics.

The goal would be a new, safer battery that Boeing could propose for the 50 Dreamliners currently grounded around the world, and on future deliveries, the people said. Any changes would require approval from U.S. and Japanese regulators now investigating two incidents last month in which the batteries burned on 787s owned by Japanese airlines.

The battery problems on the 787 come as European carriers are betting on the aircraft to spearhead international growth.

"As one of Boeing's biggest clients in Europe we expect that the aircraft manufacturer will do everything in their power to get the planes ready for delivery as soon as possible," Norwegian Chief Executive Bjorn Kjos said in a statement.

Kicking off long-distance international service to North America in May and Asia in June is a key initiative for Mr. Kjos. The airline is the third-largest discount carrier by revenue in Europe and has been advertising low-fare trips to New York and Bangkok in recent months.

"In the event that the 787 is not operational in time for Norwegian's services to New York and Bangkok, replacement long-haul aircraft will be leased to ensure flights are operated as scheduled," said Norwegian.

Thomson, whose ultimate parent TUI AG of Germany is one of Europe's biggest tour operators and leisure companies, said it considering alternatives given the prospect of delays in its 787 deliveries.

"Our priority is to ensure our customers go on their holidays and we are, therefore, putting contingency plans in place including using alternative aircraft for our long-haul flights to Mexico and Florida if delivery is delayed beyond the end of March," said Thomson.

LOT Airlines SA, the troubled Polish flag carrier, is also banking on new Dreamliners to help gain more lucrative long-haul travelers.

LOT isn't the largest buyer of the Dreamliner but its managers had relied on the cutting-edge and fuel-efficient jetliner as part of a makeover after years of losses and shrinking market share. It has two Dreamliners and expected to add three more by March—at a cost of nearly $1 billion, based on list prices—to replace the four aging Boeing 767s that make up its intercontinental fleet.

LOT officials said earlier this week that they had developed contingency plans for an extended grounding of the Dreamliner.

"The Dreamliner was one of the fundamental pieces of the restructuring and making the company profitable," said former Chief Executive Marcin Pirog in an earlier interview . Mr. Pirog, LOT's 11th CEO in 10 years, was dismissed in December after requesting a government loan of roughly $127 million.

British Airways, a unit of International Airlines Group, is due to take delivery of the first of 24 787s in May. A company representative said Friday that "delivery is still scheduled for May."

Virgin Atlantic has 16 Dreamliners due for delivery from summer 2014. The U.K.-based airline, which proposed a linkup with Delta Air Lines Inc.  in December, said it hasn't been warned of any risk to delivery.

—Katarina Gustafsson in Stockholm, Jon Ostrower in Chicago, Andy Pasztor in Los Angeles, Dan Michaels in Brussels and Marcin Sobczyk in Warsaw contributed to this article.


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