FAA grounds Boeing's 787 Dreamliner jets

The U.S. Federal Aviation Administration says it is requiring airlines to stop flying Boeing's 787 Dreamliner until safety concerns can be addressed.

WASHINGTON — The U.S. 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.

On Thursday, the European Aviation Safety Agency said it was endorsing the FAA's action and ordered the Polish airline LOT, which flies the airplane, to ground its Dreamliner.

Earlier in the day, India grounded all six of the Boeing 787 Dreamliner aircraft operated by state-owned carrier Air India.

"The FAA has issued an advisory to ground the Dreamliners. We took a decision after that," Director General of Civil Aviation Arun Mishra told Reuters.

Boeing said in a statement it was confident the 787 was safe and that it stood by the plane's integrity.

"Boeing is committed to supporting the FAA and finding answers as quickly as possible. The company is working around the clock with its customers and the various regulatory and investigative authorities. We will make available the entire resources of The Boeing Company to assist," Chief Executive Jim McNerney said.

Its shares fell 2 percent in after-hours trading to $72.75 after the FAA announcement.

"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 $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.

The use of new battery technology is among the cost-saving features of the 787, which Boeing says burns 20 percent 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.

VIDEO: Dreamliner makes emergency landing

VIDEO: Grounded 787s could hit airlines hard

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.

Boeing Dreamliner incidents: Recent problems with the 787 aircraft are explained. IMAGEMCT

BATTERY PROBLEMS

In the latest incident, All Nippon Airways Co Ltd said instruments aboard a domestic flight indicated a battery error, triggering emergency warnings. The incident was described by a transport ministry official as "highly serious" - language used in international safety circles as indicating there could have been an accident.

That led ANA and Japan Airlines Co Ltd to ground their 24 Dreamliners pending checks. Japanese transportation officials said they could not immediately comment on the FAA decision, as did a spokesman for JAL.

Barring a prolonged grounding or a severe and uncontained crisis, aircraft industry sources say there is no immediate threat of cancellations for the plane, even after the FAA's decision to halt 787 flights.

Among other reasons, they cite the heavy costs of retraining and investing in new infrastructure, as well as a shortage of alternatives in an industry dominated by just two large jet suppliers.

But the Dreamliner's problems could sharpen competition between Boeing and its European rival Airbus, which itself experienced a dip in sales for its A380 superjumbo following problems with wing cracks a year ago. The A380 crisis has since eased and most airlines report the aircraft are flying full.

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