DREAMLINER WOES

On September 25, 2011, All Nippon Airways (ANA) became the first airline to receive the Boeing 787 Dreamliner after a 3-year delay in the planned delivery. Some 15 months later on January 16 this year it grounded all 17 aircraft in its fleet with a public apology to its customers. There had been a string of Dreamliner issues – an erroneous computer report of a brake problem on Jan 9 that resulted in a flight being cancelled, an engine oil leak and a cracked cockpit window on Jan 11, and an emergency landing at a domestic airport triggered by a smoke alert on January 15.

But ANA was not alone in its predicament. Rival Japan Airlines (JAL) also grounded its 7 Dreamliner aircraft, following an incident at Boston’s Logan Airport on Jan 7 when a fire started in a lithium ion battery pack. The aircraft’s subsequent take-off was aborted because of a fuel spillage.

Together, the two Japanese carriers operate almost half the number of the world’s 50 Boeing 787 in operation. The other owner airlines – Air India (6 aircraft), United Airlines (UA) (6), Qatar Airways (5), Ethiopian Airlines (4), Chile’s LAN Airlines (3) and LOT Polish Airlines (2) – too have suspended Dreamliner operations. At least two of them had reported problems.

On December 4th last year, a United Airlines Boeing 787 made an emergency landing in New Orleans after electrical problems were detected. Again on December 12th, another Dreamliner aircraft experienced an electrical problem. Then on January 8th this year, faulty wiring to the battery was detected. Electrical power distribution problems also caused a Dreamliner aircraft of Qatar Airways to be grounded on December 12th last year.

Image Courtesy of The Associated Press

It is therefore no surprise that the Federal Aviation Administration (FAA) of the United States has deemed it necessary to issue a directive to ground Dreamliner operations pending safety investigations. The move was quickly supported by its European counterpart. The agencies are concerned that failures of the lithium ion batteries in use could result in the release of flammable electrolytes, heat damage and smoke. According to the FAA, “These conditions, if not corrected, could result in damage to critical systems and structures, and the potential for fire in the electrical compartment.”

Indeed, when problems were first reported, many observers had dismissed them as the expected “teething problems” of any new equipment. After all, Airbus A380 has had its fair share of start-up issues. Even as new reports emerged that FAA’s findings so far have ruled out the battery as the culprit that caused the spark on the JAL aircraft, the various agencies across the globe are not taking chances. US Transportation Secretary Ray LaHood had said earlier that the Dreamliner would not be allowed to fly again unless the authorities were “1,000% sure” it was safe. In fact, questions are now being raised as to whether the FAA had been thorough in its study before approving the aircraft for take-off.

While complying with the FAA directive, Boeing declared its confidence in its product. Boeing chief executive Jim McNerney said: “We will be taking every necessary step in the coming days to assure our customers and the travelling public of the 787′s safety and to return the airplanes to service.” It is of course in Boeing’s interest to resolve the issue as soon as possible, considering how this could affect Dreamliner orders, although understandably the limited choice in the market may well cushion the impact, if any. Boeing has close to 800 Dreamliners on its backlog, with significant numbers from Air Canada (37 aircraft), United Airlines (36), Qatar (30), Air India (27), JAL (25), Aeroflot (22), LAN (22), Delta Air Lines (18) and Gulf Air (16). Boeing needs to sell 1,100 Dreamliners over the next decade to break even.

Interestingly, Australian flag carrier Qantas has cancelled a single order of Boeing 787-8 Dreamliner for budget subsidiary Jetstar. However it is retaining the order for 14 aircraft to be delivered as planned, with the first Dreamliner to be delivered in mid-2013. In a statement issued by the airline, Qantas chief executive Alan Joyce said: “The original 787 order for Jetstar was designed to replace all 11 of its existing A330s that are used for long haul services plus provide another four lines of flying for future growth. While the plan is for Jetstar’s long haul network to keep expanding we are using the flexibility in our agreement with Boeing to cancel a firm order knowing that we can replace it with one of our 50 options for this aircraft down the track, and with a full view of what market conditions are like at the time.”

It is no big deal, just another one of those commercial decisions in the normal course of adjusting to market conditions. Albeit only one aircraft when the airline still retains its order of 14 others, it nonetheless is bad timing for Boeing. Meantime, Boeing has said while it will continue to make the planes to meet committed orders, it has halted deliveries pending outcome of FAA’s investigations.

It certainly was not a dream start for the Dreamliner aircraft as Boeing faces the prospect of compensatory payments. Qatar Airways chief executive Akbar Al Baker told the British Broadcasting Corporation (BBC): “I don’t think there’s any excuse for these problems anymore.” He might not agree with Scoot (a budget offshoot of Singapore Airlines which had recently decided to place an order for 20 Dreamliners) chief executive Campbell Wilson that the problems were “a flash in the pan”. Al Baker said he would expect Boeing to pay compensation for its failure to deliver usable planes.

More than that, Boeing’s relationships with customer airlines have been dealt a severe blow. For the airlines, the opportunity cost can be high, from not just disruptions of scheduled flights but also setback to plans on expansion to new routes and setting up new operations. Take, for example, Air Canada’s plans to launch budget offshoot Rouge: Will the delay of 787 aircraft set it back since the orders were meant to allow the transfer of older aircraft in the parent fleet to the new carrier? Qantas has similar plans to transfer older Airbus A330 aircraft from Jetstar to Qantas Domestic when Jetstar acquired the new Dreamliner aircraft.

Perhaps the biggest task for both Boeing and airlines operating the Dreamliner will be restoring public confidence in the aircraft. While it is not to be doubted that Boeing will fix the problem, it may take longer than that to correct the perception, which can influence a traveller’s decision where there is a choice of airlines operating different equipment.

aspireaviation.com