Two incidents involving Boeing Co.’s 787 Dreamliners have renewed safety concerns about the model following battery malfunctions that grounded the fleet earlier this year.
Boeing’s shares had their biggest drop in two years after a fire on a parked 787 operated by Ethiopian Airlines Enterprise was put out by crews at London’s Heathrow airport. No one was on board and there were no injuries. TUI Travel Plc’s charter arm Thomson Airways Ltd. said one of its 787s turned back to Manchester, U.K., because of an unspecified fault after it left for Orlando Sanford International Airport in Florida.
While the causes aren’t yet known, the events are a blow to Chicago-based Boeing as it tries to restore confidence in the 787, which was grounded worldwide in January after the melting of lithium-ion batteries on two of the planes. Airlines began restoring the twin-engine Dreamliners to commercial flights in April after the U.S. regulators cleared the model for service.
“Another battery-related incident would represent the worst-case scenario for Boeing shares as it might cause investors to revisit financial consequences associated with another grounding of the aircraft, potential production stoppages and any sort of redesign,” Carter Copeland, a New York-based analyst with Barclays Plc who rates the company’s shares overweight, said in a research report. “This is not something that appears to be highly likely based on the information we have so far, but again it’s still early.”
Boeing slid 4.7 percent to $101.87 at the close in New York, the biggest daily decline since Aug. 18, 2011. Earlier in the day, before news of the fire, the stock reached an intraday record high of $108.15. The shares have risen 35 percent this year, as the Standard & Poor’s 500 gained 18 percent.
The stock pared some of its losses after analysts said scorch marks indicated the fire at Heathrow probably wasn’t related to the lithium-ion batteries.
The damage appears to be above the crew rest area and “should have very little connection to electrical systems,” Douglas Harned, a New York-based aerospace analyst with Bernstein Research, wrote in a note to clients. He rates Boeing shares outperform.
“Most importantly, the two key lithium-ion batteries are far away from the location of the fire,” Harned said. He said he doesn’t see the incident as a risk to the 787 program.
Boeing personnel and investigators from the U.K. and U.S. plan to investigate what caused the blaze on the Ethiopian Airlines jet, which had been parked for eight hours. Boeing is working to fully understand and address the incident at Heathrow, said Doug Alder, a company spokesman, in an e-mail.
The Heathrow fire appears to have been in “a very complicated area of the structure that ties together the fuselage barrel, the tail cone and vertical fin loads,” Robert Mann, an aviation consultant in Port Washington, New York, said in an e-mail. “It will be a complicated repair — if it is repairable. I think every current and prospective operator will be looking at the outcome.”
Rick Whittington, a New York-based aerospace analyst with Drexel Hamilton LLC, said that “we think this was a galley fire or perhaps some other piece of electrical equipment.” He said that “this shouldn’t have any measurable impact on earnings.”
“Let’s see what the safety investigators come up with over the weekend,” Whittington, who rates the shares buy, said in a telephone interview. “I’m sure we’ll know by Monday.”
The U.S. Federal Aviation Administration grounded the Dreamliner on Jan. 16 after the lithium-ion batteries overheated on two aircraft, with one catching fire in Boston with no passengers aboard. In that incident, a Japan Airlines Co. 787 experienced what U.S. safety investigators called an uncontrolled chain reaction that charred the battery. The second malfunction occurred on an ANA Holdings Inc. plane that took off from Japan and was forced to make an emergency landing.
The FAA cleared the plastic-composite 787 to fly again after Boeing redesigned the battery to include more protection around individual cells to contain any overheating, a steel case to prevent fire and a tube to vent any vapors outside the fuselage.
Ethiopian Airlines on April 27 made the first Dreamliner flight after the grounding was lifted, traveling from Addis Ababa to Nairobi. The carrier has four 787s.
Through June, Boeing had delivered 66 Dreamliners to 11 airlines and a leasing company, including six to United Continental Holdings Inc. The 787 has a list price of $206.8 million.
The Japanese carrier ANA has taken delivery of 20 Dreamliners, the most of any airline, and was the first to receive the plane, in September 2011, according to Boeing’s website.
While Boeing officials maintain the 787’s reliability is on par with the Boeing 777 at this stage in its development, some industry watchers disagree.
“I’m hard-pressed to find any other aircraft to come into service with this level of conspicuous problems,” said Richard Aboulafia, vice president at Teal Group, an aerospace consultant based in Fairfax, Virginia. The 777 also had operational glitches and teething problems, “but there weren’t flames,” he said.
With assistance from Alan Levin in Washington, Mary Schlangenstein and Thomas Black in Dallas and William Davison in Addis Ababa. Editors: John Lear, Jennifer Sondag. To contact the reporters on this story: Julie Johnsson in Chicago at firstname.lastname@example.org; Robert Wall in London at email@example.com. To contact the editors responsible for this story: Jennifer Sondag at firstname.lastname@example.org; Benedikt Kammel at email@example.com.