US FAA grounds Boeing 787 over battery concerns

WASHINGTON/SEATTLE - The US Federal Aviation Administration said on Wednesday it would temporarily ground Boeing Co's 787s after a second incident involving battery failures caused one of the Dreamliner passenger jets to make an emergency landing in Japan.

The FAA said airlines would have to demonstrate that the lithium ion batteries involved were safe before they could resume flying Boeing's newest commercial airliner, but gave no details on when that could occur.

Boeing did not immediately respond to requests for comment.

Its shares fell 2 per cent in after-hours trading to US$72.75(S$89.10) after the FAA announcement.

The shares of GS Yuasa Corp, a Japanese company that makes batteries for the Dreamliner, fell sharply in early trading there.

"Ultimately, you can view it as a positive thing if they can resolve what the issues are and give people confidence in the safety of the aircraft.In the near-term, though, it's a negative. It's going to force the company to make significant investments," said Ken Herbert, an analyst at Imperial Capital in San Francisco.

The 787, which has a list price of US$207 million, represents a leap in the way planes are designed and built, but the project has been plagued by cost overruns and years of delays. Some have suggested Boeing's rush to get planes built after those delays resulted in the recent problems, a charge the company denies.

According to flight tracking website FlightAware, some seven Dreamliners were in the air Wednesday night as the FAA order came down, including a United Airlines flight that left Los Angeles for Houston just a few minutes before the order.

United could not be immediately reached for comment.

The use of new battery technology is among the cost-saving features of the 787, which Boeing says burns 20 per cent less fuel than rival jetliners using older technology.

Lithium-ion batteries can catch fire if they are overcharged and, once alight, they are difficult to put out as the chemicals produce oxygen, Boeing's chief engineer for the 787, Mike Sinnett, told reporters last week. He said lithium-ion was not the only battery choice, but "it was the right choice".

In Asia, only the Japanese and Air India have the Dreamliner in service, but other airlines are among those globally to have ordered around 850 of the new aircraft.

Boeing has said it will at least break even on the cost of building the 1,100 new 787s it expects to deliver over the next decade.

Some analysts, however, say Boeing may never make money from the aircraft, given its enormous development cost.

Any additional cost from fixing problems discovered by the string of recent incidents would affect those forecasts and could hit Boeing's bottom line more quickly if it has to stop delivering planes, analysts said.

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