Boeing shares bounce back from 787 fire

Boeing Co. shares on Monday recovered most of their July 12 losses after U.K. regulators saw no direct link with last week’s fire on a 787 at London’s Heathrow airport and battery blazes that grounded the fleet this year.

Boeing shares rose 3.1 percent to $105.02 at 12:21 p.m. in New York after reaching $105.25, the biggest intraday gain since April 24. The Air Accidents Investigation Branch said in a July 13 statement there’s “no evidence of a direct causal relationship” with the battery system malfunction and that the probe would take a few days.

“The British authorities have initially indicated that the 787 batteries were not the cause of the fire, which is undoubtedly positive” for Boeing, David Strauss, an analyst at UBS AG in New York, wrote in a note today. “Any connection to the electrical system could be problematic.”

Boeing, whose 787 Dreamliner resumed flying in April after three months of worldwide grounding, has a team on the ground at Heathrow to probe last week’s incident. No one was on board the Ethiopian Airlines 787 at the time of the fire and the airline is still flying its three other 787s while awaiting the results of the probe.

The stock slid 4.7 percent to $101.87 on July 12, the biggest daily decline since Aug. 18, 2011. Boeing rose 35 percent this year through last week, almost twice the 18 percent gain of the Standard &Poor’s 500 index.

A spokesman for Chicago-based Boeing declined to elaborate yesterday on the cause. Spokesmen for the U.K.’s Air Accidents Investigation Branch didn’t respond to messages or e-mails.

Heat Damage

“I’m not sure it’s good news at all,” Robert Mann, an aviation consultant in Port Washington, New York, said in a telephone interview. There’s a risk investigators will find a new malfunction that would trigger a comprehensive review of the 787’s electrical systems. There’s also the possibility that Ethiopian and Boeing would have difficulty fixing heat damage to the plane’s hardened-plastic fuselage.

“It’s not clear how you repair that,” Mann said. While fixing a traditional aluminum alloy fuselage is “relatively well understood, in composites, it’s not.” Other Dreamliner customers will be watching the incident closely, he said.

In addition to Boeing and Ethiopian Airlines, the AAIB said it has invited the participation of the U.S. National Transportation Safety Board, the Federal Aviation Administration, and Ethiopian civil-aviation authorities. The U.K. Civil Aviation Authority and the European Aviation Safety Agency also were invited.

Parked Plane

The Dreamliner, which had been parked for hours before the fire, sustained extensive heat damage in the upper portion of the rear fuselage and is being housed in a hangar at Heathrow, the AAIB said. The damage is in a complex area where the fuselage joins the tail cone, which bears the load for the vertical fin.

Chicago-based United Continental Holdings Inc., the only U.S. carrier to fly the Dreamliner, and Japanese airline All Nippon Airways said after the incident that they are operating their 787s as scheduled. Qantas Airways Ltd., Australia’s largest carrier, said its Jetstar budget airline had been briefed by Boeing on the initial investigation into the fire.

TUI Travel’s charter arm Thomson Airways Ltd. said one of its 787s turned back to Manchester, England, on July 12 because of an unspecified fault after it left for Orlando Sanford International Airport in Florida. That same flight took off on schedule the next day, said John Greenway, an airport official in Manchester.

Through June, Boeing had delivered 66 Dreamliners to 11 airlines and a leasing company, including six to United. The 787 has a list price of $206.8 million.

Charred Battery

The FAA grounded the fleet 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 plane that took off from Japan and was forced to make an emergency landing.

U.S. regulators cleared the Dreamliner to fly again in April 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.

Having the U.K. take the lead on the current investigation has the potential to help further restore confidence in the fleet, according to said Richard Aboulafia, an aerospace analyst with Teal Group, a Fairfax, Virginia-based consultant.

“Getting a foreign professional organization to look at the incident and clear the design would be a real plus,” he said.

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